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More stock picks for 2015: Maudi Lentsoane – managing director, Lehumo Capital

‘Diversification is obviously key in this challenging economic environment.’

SIKI MGABADELI: It’s 2015, so we are doing our annual stock-pick session, looking at the stocks you should be watching for this year. Maudi Lentsoane of Lehumo Capital is in the studio with us. Maudi, thanks for your time today, and happy new year. Has it been a good start to 2015 on the market?

MAUDI LENTSOANE: Thank you, Siki, and good evening to your listeners and happy new year. It’s been a very volatile start to 2015. I must say I expected a bit of volatility coming into 2015, but nothing like what we’ve seen in the past couple of days, particularly in the oil market, with the oil price dropping by a whopping 10% in two days. It’s unbelievable.

SIKI MGABADELI: Let’s look at your stock picks then for the year. Let’s start with the first one. You’ve picked Sasol and oil, and they have literally been the poster boys of the volatility that you are talking about. Why?

MAUDI LENTSOANE: Indeed. I think if you look at it, what has actually transpired in the oil market is something that I think is an over-reaction. Of course, the whole fundamentals are kind of in a way against the oil market, but I think it’s a little bit overdone.
   On the technicals, the support level was around $60/barrel on the oil price and I think as soon as it broke through that level it just kind of sent panic into the market. And that’s why we saw such aggressive selling – 10% in two days. It tells you that there is a bit of panic taking place. And my pick is obviously going long on Brent and also Sasol. It’s exactly what I’ve just mentioned – that I think it’s overdone and at some point we are going to see the oil price bottoming here and beginning to actually make its way upwards.

SIKI MGABADELI: So Sasol around the R400/share level at the moment. It seems to be holding quite steady.

MAUDI LENTSOANE: As a matter of fact it’s below that level. It is currently trading around R389. So yes, that’s my pick.

SIKI MGABADELI: I’m going to hold you to this at the end of the year. Let’s look at Bidvest. That’s your second pick.

MAUDI LENTSOANE: Bidvest is my second pick. If you look at Bidvest, what I like there – obviously we are still in a very tough trading environment; the economy is still under pressure. But what I like about Bidvest is obviously the diverse nature of their industry. It’s quite nice and diverse, and diversification is obviously key in this challenging economic environment. It’s also a fairly defensive rand-hedge stock to a certain extent. About 30% of their earnings come from outside South Africa. So that gives you a bit of a hedge, particularly against the weakness in the rand.

SIKI MGABADELI: Thanks To Maudi Lentsoane of Lehumo Capital. He also picked Zeder, the agricultural play.

DAVID SHAPIRO: I like Pioneer Foods there. I think Phil Roux is going to do a very good job there. I would probably look at Pioneer Foods.

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