Gary Booysen’s top three JSE stock picks
Rand Swiss founder and portfolio manager Gary Booysen identified three companies – British American Tabacco, BHP, and FirstRand – as his JSE stock picks.
Booysen is the founder of the investment firm Rand Swiss and works as the lead portfolio manager for the company, where he specialises in bespoke portfolio construction, stockbroking, and trade execution.
With over two decades of experience in the financial markets, he has built a reputation for his keen market insights and strategic investment decisions.
He is an avid market commentator and regularly features on investment talk shows and news segments, sharing his expertise and analysis on current market trends and economic developments.
For his stock picks, Booysen leaned towards larger, more well-established players on the market.
British American Tobacco (BAT), his first stock pick, was founded in 1902 and is a leading, multi-category consumer goods business.
The global group, headquartered in London, is dual-listed on the London and Johannesburg stock exchanges. BAT’s shares are also listed on the New York Stock Exchange in the form of American Depositary Shares.
The company’s diversified product portfolio and strong global presence make it a resilient choice for investors.
His next pick, BHP, is a mining group that produces essential commodities, including iron ore, copper, nickel, metallurgical coal, potash, and petroleum.
Founded in 1851, BHP has a strong international presence, with its headquarters in Australia. BHP’s strategic operations in key markets and commitment to sustainable mining practices position it well for future growth.
For his final pick, he went more local with FirstRand, a South African financial services provider. Founded and listed in 1998, FirstRand is younger than his first two picks, but it is still very established on the stock market.
FirstRand is known for its innovative banking solutions and strong customer base, making it a robust player in the financial sector.
Below is an overview of the three companies Booysen believes offer significant value for consumers.
British American Tabacco
For his first stock pick, Booysen selected BAT. With a market cap of R1.3 trillion, BAT is one of the biggest names on the JSE.
“It’s a really solid dividend player,” Booysen said. “You’re looking at about a 9.5% dividend yield.”
The business is well-established and primarily deals with tobacco and nicotine products.
Some investors may be concerned about whether you should be buying a company that could potentially have declining revenue.
However, he said that the company’s scale and how well it is managed make it a promising option.
In 2023, the company made just over £27 billion, or about R670 billion.
Their forward earnings have been a bit spotty due to a significant cost-cutting initiative, but on a one-year forward basis, the valuation is around 6 to 6.7 times earnings.
“It is really not expensive, and I think that’s also given where it is in the cycle at the moment,” Booysen said.
There are significant opportunities for the business. It can be included in a personal share portfolio or potentially in retirement annuities.
“Is essentially a local stock that gives you a wonderful rand hedge company.”
He added that the technical picture of the company also looks really good.
It is often seen as a competitor to bonds because of BAT’s maturity, high dividend yield, and very stable sales.
In a falling interest rate environment, it becomes even more attractive to investors hunting for yield, which could uplift the share price. Additionally, the industry’s next-generation products, like nicotine pouches and Zyns, have great potential.
BAT has its own version of nicotine pouches called Velo, which are very popular.
Despite increasing health awareness around nicotine, people are still using these products. “An addictive product makes for good shareholder returns,” Booysen said.
While regulatory requirements may pose risks, BAT’s brand, Vuse, is still one of the biggest vaping brands on the market.
He concluded that, at this stage, BAT is likely a good entry point into a solid rand hedge stock.
BHP
Booysen’s second stock pick was BHP, the biggest commodity miner in the world.
Recently, BHP made headlines for considering a takeover of Anglo American. However, the deal did not proceed, which resulted in a 3% uplift in the fair value of BHP’s stock.
This decision was beneficial since BHP was likely going to overpay for Anglo American and under the UK takeover merger regulation code, BHP cannot make an offer for Anglo American for another six months.
BHP is the largest miner by market cap, and Booysen believes it is focused on the correct metals and minerals.
It increased its copper exposure by acquiring different copper producers, such as Oz Minerals, in 2023.
Its proximity to China, the world’s biggest commodity consumer, gives BHP a competitive edge. Unlike companies like Vale, Rio Tinto, or even Kumba, BHP benefits from having many mines in Australia, which are closer to the end consumer, reducing transport costs.
“That is also a little bit of a risk for the company,” Booysen said.
Approximately 60% of BHP’s sales in 2023 were to China. This makes China a very important market for BHP, and there’s always a concern that China might move away from an infrastructure-led economy.
Currently, BHP’s trailing 12-month dividend yield is around 7%, and it is expected to maintain about a 5% yield, “which is pretty decent”, Booysen said.
It’s trading at a one-year forward of only about 10 times earnings, making it reasonably priced.
“I think a big growth is potentially going to come from the mine that they’re building in Saskatchewan in Canada,” Booysen said.
This mine, Jansen, is expected to generate approximately 8.5 million tonnes of potash annually.
Potash is a critical commodity for fertilizer and food security. With the world population expected to approach 10 billion by 2025, potash will be essential for food production at that scale.
The ongoing conflict between Ukraine and Russia has reduced potash production, especially in Belarus and other Eastern Bloc countries.
This makes the Jansen mine an exciting prospect for BHP going forward, Booysen said.
FirstRand
Booysen’s final pick was FirstRand, a holding company, which provides banking, insurance, and investment products and services.
At R448.53 billion, it is South Africa’s largest bank by market cap.
He explained that the reason behind this pick was FirstRand’s impressive return on equity (ROE). Standing at nearly 19%, it is the highest among South African banks, excluding Capitec, which operates a different business model.
The next best ROE among traditional banks is Standard Bank, at around 17.68%.
He explained that South African banks are much less expensive than their international peers. This is due to the big concerns around the country’s growth prospects, such as load-shedding and political uncertainty.
For investors who are not looking to buy a giant overseas commodity miner or another rand-hedged multinational but instead want to capture the optimism returning to South Africa, FirstRand is “the way to go”.
According to Booysen, it is an affordable, large, and innovative digital bank, well known through its brands such as RMB, WesBank, and FNB.
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