Nedbank's 2015 Christmas stock picks
Nedbank Private Wealth has provided Justmoney with a roundup of stocks that would suit the entire family. But make sure you buy stocks the right way to ensure you don't pay through the nose, says Angelique Ruzicka.
If you are looking to invest in stocks and shares next year you may want to consider Nedbank Private Wealth's recommendations. They've, helpfully, picked stocks to suit every family member's tastes.
Concerned about Nedbank's ability to pick the right stocks?
Well, Nedbank points out that their previous year's stocking selection for the 2013/14 period posted a market-beating performance, returning 23,3% (excluding dividends) over the measurement period against just 4,2% by the All-share index.
The notable performers were Telkom (+86%), Adapt IT (+39%) and Aspen (+27%). The only laggard in the stocking was Old Mutual, which declined by 10%.
So while this is not a guarantee to future performance, we shouldn't knock the bank's experience just yet.
A stock for mom, Safari - recommended at 815 cents per share (cps)
Safari Investments is a newly listed company that develops and manages township shopping centres; currently in Mamelodi, Atteridgeville and Sebokeng.
Outside of South Africa Safari has a development project in progress in Swakopmund, Namibia. The company intends to distribute 85% – 90% of its earnings in any given year, giving Mom access to some cash flow while she waits for the capital gains.
Retained earnings will be used to fund development projects, which will drive net asset value (NAV) growth, says Nedbank.
Safari intends to double the portfolio in the next four years. Management plans to grow the group mainly through adding retail space to its existing portfolio, as there is too little township retail stock available to grow through acquisitions.
"Safari currently trades at a 9,1% forward yield (SAPY: 7,1%); we think Safari is undervalued at this yield given the quality of its assets and management team. At the current price (815 cpu) Safari is also one of the few quality property stocks trading at a discount to NAV (FY 2014: 920 cpu). We expect the share price to rerate and the discount to narrow over time," says Nedbank.
Dad:ARH, recommended at 650 cps
According to Nedbank, ARB Holdings is strategically well positioned to continue benefiting from both organic and acquisitive growth as it looks to expand its presence in the lighting and electrical markets. The bank pointed out that the group remains under-represented in key target markets, particularly in the Gauteng region.
"We view the group's ongoing rollup strategy as a good medium-term growth vector. We think a few shares in ARB will light up Dad's festive cheer," says Nedbank.
For your daughter: MDI, recommended at 1 300 cps
Nedbank explains that Master Drilling is a specialised South African company that has developed a cost-effective method of drilling large-diameter holes for underground mining. This is a requirement to maintain operations across different kinds of mining, such as gold, copper, iron ore and coal. The company started operating in 1986.
Master Drilling is competent in other drilling methods as well and actively promotes its services as being a safer choice than blasting to achieve the relevant objective. About one-third of the company's revenue is domestic, but also generates earnings from Latin America and other African countries.
"The company has a large order book for work during the 2015 financial year and beyond, indicating that it should continue to grow earnings as its technology becomes more sought after in the mining industry," points out Nedbank.
For your uncle: QFH, recommended at 320 cps
Nedbank believes that unknown and unloved Quantum Foods presents an exciting opportunity for Uncle.
"After a rough couple of years for domestic egg and poultry producers such as Quantum, things finally appear to be looking up. Industry consolidation, increased protection against imports and lower raw-material prices all bode well for Quantum's short- to medium-term earnings prospects. While the majority of Quantum's listed peers have already rerated significantly in response to this improved industry outlook Quantum, in our view, still offers value," says Nedbank.
For your aunt: SEP, recommended at 650 cps
Sephaku Holdings, which has been in a start-up phase over the past few years, could look toward a good 2015, says Nebank.
"Its recently commissioned cement plant will be up and running for a full year, the company will benefit from cost savings as a result of using its own clinker raw material and its Gauteng presence, through Métier, will be expanded to four plants.
"The reported numbers will become clearer from 2015 as the company moves to stable-state production, and the pending share issue as part of its payment for the Métier transaction will be something of the past. This is likely to result in a reassessment of this counter by the market and a better appreciation of its potential.
"Early indications are that Sephaku's cement is well received by customers. An experienced management team, the backing of Dangote Cement (Africa's largest cement player owned by Africa's richest person) and a new, more efficient plant all add to the appeal of this counter," adds the Bank.
For your nephew: CLH, recommended at 12 300 cps
The higher-than-usual number of public holidays and strike action saw the occupancies of hotels in the City Lodge Group come under some pressure in 2014. But Nedbank expects to see a recovery in the growth momentum of hotel occupancies over the next year as local trading conditions improve.
"Earnings will be given a further boost by the consolidation of the group's two Kenyan hotels; CLH acquired the remaining 50% share of the hotels earlier in the year. The traction CLH is gaining on its Africa (ex-SA) expansion, together with a pullback in the share price from recent highs, makes the current valuation on CLH attractive," says the bank.
For your little sister: TRU, recommended at 6 900 cps
Nebank explains that Truworths is a good option because there are many people who are able to pay their monthly instalments [on their Truworths account], and as a consequence the bad-debt cycle for credit retailers will improve.
Investors could also benefit from the European influence on the group when Jean-Christophe Garbino, the CEO of the French-based Kiabi retail group, takes over as CEO designate in March 2015.
For your daughter-in-law: NPN, recommended at 138 883 cps
There are various ways in which Daughter-in-law can enjoy the extensive product suite that Naspers offers.
Naspers is a leading broad-based multinational group of e-media, entertainment and e-commerce companies. Most of the businesses are market leaders within their segments.
"We expect Tencent to continue to report robust earnings growth, while the pay TV segment continues to deliver solid financial results and strong cash generation. However, it is the improved financial disclosure on Naspers' e commerce segment that could result in a rerating in Naspers' share price. Naspers has the capital to back and fund its prime e-commerce assets through their loss-making years," says Nebank.
For your grandfather: OCT, recommended at 2 293 cps
Octodec listed on the JSE in 1990 and over the last 10 years has delivered a total compound return to shareholders in excess of 20% a year.
Following the recent successful merger with another performer, Premium Properties, the business is set to achieve favourable returns on the 320 properties it owns in the Pretoria and Johannesburg CBDs and surrounding areas, says Nebank.
"An ongoing strategic focus for the business is its existing large residential portfolio and the continued conversion of office assets into residential units. Management's track record of unlocking the value of properties through development, refurbishment and renewals is unblemished.
"With a high first-year income return and a management team with a proven ability to deliver growth, acquiring these return prospects at a discount to net asset value is enough to get grandfather's heart racing!" adds the bank.
For your niece: ADI, recommended at 810 cps
"Although Adapt IT featured in the previous Christmas stocking, we don't think there is any need for Niece to discard this winner in 2015.
"Following its recent acquisition of cloud-linked business AspiviaUnison, and assuming a reasonable level of performance warranty profitability is achieved over the next 18 months, we believe niece's purchase of ADI at 810 cps should yield at least a 20% return in the year ahead," says Nedbank.
For your son: KEH, recommended at 270 cps
Nebank thinks that with Keaton Energy the best is still to come. Increasing his exposure to the share should continue to generate above-average market returns going forward.
"Although Keaton had a troubled birth during the financial crisis, it has maintained steady-state production throughout 2014. The bulk of production is being supplied to Eskom at favourable rates. Coal currently remains the cheapest source of energy for electrical power generation in South Africa. The company is fast becoming a key mid-tier coal supplier to Eskom, whose demand for coal seems insatiable as it struggles to meet the country's demands for electricity.
"The recently acquired Moabsvelden asset should start production towards the end of 2015 and once the project is fully developed by FY 2016, we expect the group's production of thermal coal to increase by 50%. This should be a catalyst to rerate the share, as the company will no longer be dependent on a single colliery for the majority of its production. Keaton Energy is ideal for growing son, who has a higher-risk profile," explains Nedbank.
There are lots of different options to choose from when thinking of buying stocks in 2015. Before you buy stocks though, you are going to need a place to trade. Check out our article on best online equities traders to help you out, click here.