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Looking both backward and forward in 2015: David Shapiro – Sasfin

‘The best bets would be to stay with financials and maybe some of the consumer stocks.’

HANNA BARRY: We are talking markets now with David Shapiro of Sasfin. He’s on the line. The all-share index was stronger today, closing at 52 215 points.
    But David, let’s do things a little bit differently this evening. It’s July 2, after all. We’ve just come over the halfway mark for the year, believe it or not. If you could sum up what markets have looked like and done this year, how would you do that?

DAVID SHAPIRO: Very much nothing. I think it’s probably one of those half-year periods where it would have been better to be in cash or even in bonds. It’s been a real struggle. Hanna, I’m saying that from an index point of view. If you look at the actual makeup of some of the movements, there were some spectacular rises and spectacular falls. I think, to sum it up, bad times for resources. Resources continued to lose on the back of a slowing China, worries about how that would affect global growth, and certainly demand for commodities as well as the oversupply in the market.
    So if you look, some of the biggest fallers there were shares like Impala down 29% – I’m talking of the half year – Kumba down 38%, Lonmin down 30%. Those are massive falls.
    And I think the other area that was weak was the infrastructure side of our economy – those associated with building and construction – PPC down 36%, Murray & Roberts down 40%, and so on. Even Grindrod, which is more a shipping company, down 40%. Golds of course all down. I’m talking about the negatives first. The surprising one was Coronation because it’s been an absolute winner for investors, giving high returns – that was also down 30%.
    So where were the gains?

HANNA BARRY: I was going to say, assuming you were invested in equity and not in bonds or cash, where would you have liked to have been?

DAVID SHAPIRO: By far the biggest gainer was Cashbuild. I’m talking big companies here, those that are in excess of R10bn market cap or even higher than that. Cashbuild 86% up, PSG on the back of Capitec, 61%. Brait, on its deals with Pepkor to Steinhoff and of course the other deals that it did, 55%. A perennial favourite, EOH 44%, and we saw a comeback from Mondi after a flat 2014 – Mondi up 40%. Woolies up 28%; I think Steinhoff as well 39%.
    So you have these huge, wide margins where you could have made money. If you would have stuck, let’s call it, at the top end of the market, in our top 10, 15 highest capitalised shares, Naspers was by far the best performer, up about 25%. But your BAT and Breweries and all of those, a kind of moderate performance out of them, nothing much there.
    So Anglos down 17% as well, which was among the top 10 shares as well. It gives you an idea of the vast kind of differences that you could have got on a portfolio. If you avoided construction, avoided resources you would have done pretty well.
    But the index itself was flat. I don’t know whether it was up 3, 4% – in those vicinities.

HANNA BARRY: So, bottom line, I guess you had to pick well, David. I know forecasting is a dangerous thing, but can you give us some kind of indication as to what you expect to see for the next six months?

DAVID SHAPIRO: I think it’s going to be very hard on our market. Commodity shares might have hit a bottom. I was looking at Anglos today. We are back at levels that we were at in 2009. Billiton has also shown weakness. So I think avoid resources, just stay away. There might be some elements or there might be times when it does pick up but I think it’s still going to be a tough six months there and I would imagine you are going to see the same in construction. We haven’t seen enough in this economy to turn those around. So stay away from anything associated with manufacturing, mining.
    The best bets would be to stay with financials and maybe some of the consumer stocks. I still like the top end of the market, I still like our big international shares that have got businesses offshore, so I would still stay with British American Tobacco, Breweries. Naspers I love. Richemont hopefully will come back, MTN has done pretty well. Steinhoff seems to be steady. So those. Aspen looks good, Bidvest looks good. So I think it’s going to be those shares which are good, but don’t hold your breath. Be thankful if you come out just ahead of the bond market, maybe with high single-digits or low teens. I don’t think it’s going to be a knockout year.

HANNA BARRY: There we go. Your six-monthly market review with David Shapiro of Sasfin.



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