SIKI MGABADELI: It’s time now for our stock picks for 2017. Joining David and me is Maudi Lentsoane of Lehumo Capital.
Maudi, thanks so much for your time this evening. We are going to start with last year, because I like to remind people of what they picked the year before. Last year you chose Mediclinic and you were in luck because they were up close to 12% for the year.
MAUDI LENTSOANE: Certainly Siki. Now my question is: how much are paying me?
SIKI MGABADELI: [Laughing] Nothing. We said “bragging rights”. Have you not heard of austerity measures? We have no money.
MAUDI LENTSOANE: Most Certainly. Last year I went for a safer bet with Mediclinic. It’s one of those stocks that I though going into was always going to be very challenging, I had to be safe, go for a defensive call rather than more of a speculative one. But I could have made more money had I gone into the resources.
SIKI MGABADELI: Aha. If you had picked Kumba Iron Ore, that stock I think was, what, 500% up.
MAUDI LENTSOANE: Yes I just couldn’t remember what the second one was. But I think, yes, Kumba was one of them. There it was a question of – and I like doing this – being a contrarian, particularly right at the bottom. It’s very difficult to try and call the bottom but I think when you look at where the iron ore was, and where the share price of Kumba Iron Ore was, it was almost as if the world was coming to an end. And I’ve learnt over the past couple of years that that’s the perfect time to buy, when everybody is so depressed and they are tanking it all over. That’s the perfect time to buy.
SIKI MGABADELI: Okay. So this year you are going for Sasol and Steinhoff. Let’s start with Sasol – why?
MAUDI LENTSOANE: Sasol – I think I picked it in 2015, I left it last year. It was during that turbulence when I think the oil price was free-falling at that time. I think my worry with not picking the energy stock last year was the fact that we had no idea or there was no commitment, particularly from Opec. We had Saudi Arabia coming through, very determined to push the prices even lower. I think at some point they were saying they were quite happy with a $10 price of oil. So that was scary. It was very difficult for me to actually pick that. But it’s always been the stock that I like, it’s always been the stock that I’ve been investing in. I own it personally and I know many South Africans own it, particularly the black shareholders who bought into that BEE transaction, Sasol Inzalo shares. They haven’t really seen the returns because it has been under pressure for some time. But I think with the Opec meeting that took place late last year there certainly could be a turnaround if they stick to those agreements that they reached in Vienna. Of course, that could be one of the supports that they are bringing to support the oil price, and of course support the share price of Sasol. So I like it from that perspective. I think it’s a very good business.
SIKI MGABADELI: And finally, Steinhoff?
MAUDI LENTSOANE: Steinhoff – very aggressive last year as well in terms of acquiring some businesses, especially out in Europe and also acquiring some nice assets out the US. I like it from that perspective. They came up with results for the third quarter which were very, very strong and announced recently that they are in talks with Shoprite to merge and form one of the biggest retailers in Africa. So I like it from that perspective and I think it’s driven by gentlemen who are very experienced, very, very well respected in that space. I’m mentioning here the likes of Christo Wiese and of course Markus Jooste, who is the CEO. A very, very strong team and I think they’ll definitely deliver on the results.
SIKI MGABADELI: Thanks, Maudi. Maudi Lentsoane is MD of Lehumo Capital. David?
DAVID SHAPIRO: Maudi should actually choose Mediclinic this year. I think he should because it’s been absolutely knocked, and I think it’s going to see a big recovery in there. Probably Aspen as well.
SIKI MGABADELI: Someone picked Aspen yesterday.
DAVID SHAPIRO: Also coming from a very low base and I think the sell-off is overdone.
SIKI MGABADELI: You want Naspers.
DAVID SHAPIRO: I’m going for the top two shares – Naspers and Richemont, which I spoke about earlier.
I love Tencent, and I think Tencent is one of the most exciting businesses to invest in. There is a wide disparity between the actual Tencent price and Naspers. In fact, Tencent has far outperformed Naspers and it’s been better to have been in Tencent. But I like what they are doing. The results that they come out with on a quarterly basis just continue to increase as more and more Chinese youngsters or even young adults use the services – everything from e-commerce to playing games to messaging, etc.
SIKI MGABADELI: And of course with the direction that the Chinese economy is taking now that’s a solid foundation.
DAVID SHAPIRO: I agree. I’m more inclined to back an increase in Chinese consumerism than in commodity prices.
And the other one is Richemont, which I think is turning. It’s a global economic stock. It’s luxury goods, has gone through a rather torrid time, but things are starting to look up – [especially] if the US starts to kick in, and people spend. We always look to China for the sale of watches…China and the US are stabilising, so I think it’s going to be a big year for Richemont as well.
So two big companies, but they don’t scare me off, even if their market caps are huge.
SIKI MGABADELI: We’ll leave it there. Thanks, David.