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Stocks for your stocking

As we close the curtain on a financially tough year and head into what promises to be an equally challenging period, it could be time to review your gift-giving habits.
Deck your folio with stocks looking sunny, fa la la la la, la la la la. 'Tis the season to make money, fa la la la la, la la la la. Image: Shutterstock

“Investing in stocks is a great gift idea all year round,” says Craig Gradidge, certified financial planner and co-founder of Gradidge-Mahura Investments.

This applies to birthdays, special occasions and Christmas, and is especially for suitable for children, he adds. 

“Children have a natural long investment term, and they are so busy living life that they don’t watch stock prices daily. Stocks certainly are a gift that keeps on giving.”

While there are a number of stocks Gradidge is buying right now, he tells Moneyweb he would single out Vodacom’s BEE share offer YeboYethu (JSE: YYLBEE) and Satrix Divi Plus.

“YeboYethu trades at a discount to net asset value [NAV], and that discount has narrowed from over 50% last month to around 32% after the Competition Commission’s findings,” he says, referring to the commission’s ultimatum early in December that Vodacom and MTN reduce their prepaid monthly mobile data bundle prices or face prosecution.

Read: ‘Data prices must fall!’ – Competition Commission

“This is a long-term investment with the potential to deliver above-market returns,” says Gradidge. “The NAV of YYLBEE should increase from the settling of the debt in the scheme and does not need any growth in the Vodacom share price for you, the investor, to make a return.”

Gradidge says the Satrix Divi Plus exchange-traded fund, on the other hand, offers diversity across a portfolio of shares from various sectors of the economy including financials, industrials and resources.

“Over time dividends from shares tend to grow at a faster rate than inflation. This will benefit the long-term investor as dividend returns are sticky and tax-efficient,” he notes.

Antoinette Naudé, a wealth manager at PSG Portfolio Management and Stockbroking in Hermanus, points out that the JSE All Share Total Return Index delivered just over 12% for the sector and more specifically gold and platinum miners. “Looking at the year ahead, you might want to consider stocking up on Sasol and Anheuser-Busch,” she says.

Read: My plan to make R1 million on the JSE

Despite significant overspending on the Lake Charles Chemicals Project straining the Sasol balance sheet, she points out that the company took decisive remedial action, removing both its CEOs. “It would seem that the share price has absorbed most of the negative news flow,” she says. “At approximately R270 per share – it has fallen 37% since May 2019 – Sasol offers good long-term growth potential.”

She believes this is also a good time to invest in the world’s largest brewing company, Anheuser-Busch, which has a secondary listing on the JSE. With more than 500 beer brands in its stable – including Castle, Stella Artois, Budweiser and Corona – Anheuser-Busch has a worldwide scale and distribution network that brings in more than R15 billion in sales every year.

“Since 2016, the share price has fallen by just over 37%,” says Naudé. “At approximately R1 150 per share, investors may consider adding this reputable rand-hedge to their share portfolios.”

Tobacco?

Leonard Krüger, portfolio manager at Allan Gray, points out that the market’s faith in the sustainability of the financially attractive business model of large tobacco firms has been shaken by disruptive new alternative tobacco entrants and technology. “Our market research and conversations [however] point to limited evidence of this occurring in the near term,” he says.

“In fact, British American Tobacco [BAT] recently reiterated its medium-term guidance of continued earnings, cash flows and dividend growth. BAT is making substantial investments in its portfolio of next-generation products with promising initial signs in many categories and markets,” he says.

Read: Why British American Tobacco could represent a value opportunity

Krüger adds that shares in BAT offer a dividend yield of more than 7% today in hard currency, and that dividend is likely to grow every year for the foreseeable future.

Local

The other stock that Krüger is bullish on is Remgro, which he describes as the “quintessential South African investment holding company”. He points out that the group has diverse underlying investments in banking, insurance, healthcare, telecommunications and food businesses, among others.

“In an environment of low growth as well as low business and consumer confidence, owning some of South Africa’s strongest businesses and best management teams at below-average prices provides some safety in uncertain times,” he says.

Krüger notes that in addition to its defensive diversification benefits, financial risk is also low since Remgro is in a net cash position.

“The cherry on top for us, however, is that you can buy the above positive attributes at the largest discount – roughly 25% – to the NAV seen in Remgro for over 10 years.”

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Apart from vodacom..this should broadly indicate that offshore rand hedges are the choice of investors. What about some contrarian SA inc stocks…is the ramaphoria and the SA rainbow story dead?

We really need an article which encapsulates the big losers over the year – since there is no such article here’s a list of my worst performers (my holdings have all been held for more than 2 years) Adapt IT; Coronation; Dis-Chem;EOH;Imperial;Long4Life;Rhodes Food; Rolfes Technology: Sygnia; Taste; Truworths and Vodacom. Been a pretty rotten year for these companies so any gains in the future will merely and hopefully correct the losses

Unfortunately it is not in the interests of the Financial industry to advertise losers. They want to make you believe that all is just rosy.
If you disect the JSE performance over the last 5 years it is an appallingly dismal picture that emerges.
Strip out the few winners and you have the REAL story.

Maybe replace “Should” with “Could”.

ITU and GLN might be a hidden gems for 2020.

@TheSpeculator…..ITU, the property co ?

The only stocks I’m buying at the moment are foreign index funds.

2020 might be a cracker of a year.

Growth in China improving,
China lowered tax/duties on over 800 imported items from the US,
Brexit uncertainty fading away,
UK economy will improve with the Conservatives in power,
Property will become more attractive in the UK.

I do not agree with your moment of euphoria for 2020. It is just not brexit alone that is impacting UK markets. It seems there are more structural issues as the case is for SA also. Illegal immigrants, unproductive population and the high cost of labour all adds to to the fact that I will not be buying any stocks anywhere. The US market is anyway too expensive buying with converted rands and the EU markets is going nowhere for many years now. My money is in the bank for 10% interest (and no worries!) for the next few years.

Corporate Governance in SA has deteriorated rapidly of late. One never knows when & where the next Steinhoff will hit…we just know it will and pray that it is not in our holdings.

And then investing in Rand denominated products is extremely high risk from a global perspective given the state of the economy and the neo-communistic direction being pursued by the cANCer together with perpetuating racial laws that are stifling growth.

Our Christmas gifts contained gold savings accounts where our family are now invested in gold and earn interest in gold.

End of comments.

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