2011 was a difficult year for South African investors with tumbling markets, soaring volatility and a flailing rand making the investing environment a nerve-wracking one. With this in mind, it is crucial to choose the right stocks, so that the year ahead is perfectly positioned for superior returns. As we head into the New Year, Sanlam Private Investments (SPI) investment team has selected the quality stocks that they believe will carry investors through another difficult year ahead.
Alwyn van der Merwe, director of investments at SPI, says that the team has identified their top stock picks for the year ahead based on valuation and company fundamentals. “Anglo American is our top pick for 2012, with the company on the road to recovery, a balance sheet once again in good health, and a $70-billion 10-year project pipeline. The prospects for ample dividends over the medium term look good and its diversified portfolio of commodity-producing assets means that it is able to withstand the vagaries of the international market better than most mining companies,” he explains. “Most importantly the stock is cheap, with its P/E forecasts to decline to 6.33 times next year.”
Another preferred stock of the team’s is Naspers, which has been an investor favourite for years. Van der Merwe says the team chose Naspers for its exposure to key emerging markets and its attractive internet assets, like Tencent in China. “The share price represents an attractive entry point for exposure to high margin/growth and market-leading internet/Pay TV platforms in relatively under-penetrated markets.” He sees Naspers offering inflation-beating returns over the next three to five years and adds that Naspers currently trades at a discount to net asset value of 33 percent.
Despite the local building and construction sector languishing in the doldrums, Wilson Bayly Holmes-Ovcon (WBHO) also received the thumbs up for the team’s 2012 stock picks. “The order book of R18-billion, and its net cash of R2.8-billion add to the stock’s attractiveness,” says van der Merwe. “Balance sheet strength and an impressive order book, especially in Australian orders, make WBHO one of the premium counters in the construction sector. And it won’t only profit from its Australasian work as the company is also well positioned to benefit from activity north of our borders.”
The team has also identified Chemspec as one to watch for 2012, which van der Merwe and his team expect to be the sprinter for the year. “Since Ivan Clark, previously CEO of Grindrod, came to the rescue, Chemspec has raised R214.3-million via a rights issue and improved the balance sheet. Grindrod shareholders who backed Clark were rewarded with fantastic returns so it’s showing huge promise.”
Topping off the selection of key stock picks is BKB Limited, from the over-the-counter market and one which the team views as a ‘potential jewel’. “We share Jim Rogers’ belief that agricultural land and food will be among the future’s most sought after commodities,” says van der Merwe. “BKB handles and markets agricultural products from wool to livestock, recently adding grain marketing and storage to its repertoire; and with the group trading at a discount net asset value of 69 percent, the share is materially undervalued.”
Comments are closed.