Bright Khumalo’s top three stock picks
Bright Khumalo, portfolio manager and analyst at Vestact Asset Management, recently highlighted his top stock picks – ADvTech, Sabvest, and Fairvest – at the JSE SA Stock Picks event.
Since joining Vestact in 2015, Khumalo has focused on both South African and U.S.-listed shares, bringing expertise to clients of Vestact, which was founded by Paul Theron in 2002 and manages approximately R11 billion in assets.
Khumalo is a familiar face on investment shows like Business Day TV’s Stock Watch and The Week That Was.
He was also a Dell Young Leader, a program aimed at supporting first-generation university students from low-income backgrounds.
Khumalo gained attention for his #10cChallenge on Twitter, where he documented his journey to save nearly R7,000 over a year to motivate others to adopt good financial habits.
For his recent stock selections, Khumalo focused on companies with a track record of resilience, especially during challenging times.
ADvTech and Fairvest, for instance, adapted well during the COVID-19 pandemic, with ADvTech proving to be a strong contender in the education sector.
At a previous stock picking event, Khumalo had similarly praised ADvTech for its resilience, saying that investors who bought this stock straight out of the Covid-19 pandemic are “laughing to the bank”.
His chosen companies share a degree of diversification: ADvTech operates in private education across three countries, including South Africa. The company offers a range of strong brands in a sector that is increasingly in demand in South Africa.
Sabvest, his next pick, is a diversified investment holding company with interests across various sectors.
His final pick, Fairvest, is focused on property investments and manages a balanced portfolio of properties across retail, office, and industrial spaces.
Here’s a closer look at Khumalo’s selected stocks and why he considers them valuable additions for investors.
ADvTech
Khumalos’ first pick was ADvTech, a diversified education group based in South Africa with a market cap of R17.68 billion.
He favoured ADvTech for its resilience and quality, proven across various challenges.
“I like this pick because it’s proven time and time again against all odds that it’s a very strong, quality business.”
For instance, during the Covid-19 pandemic, the company quickly adapted to remote learning, which allowed students to continue their education online despite the difficult circumstances.
This experience strengthened ADvTech’s capabilities in distance education.
The company also demonstrated stability during trends like the semigration and emigration of South Africans, particularly to popular destinations like Cape Town.
ADvTech has maintained high returns on investment and consistent dividend payments thanks to its strong brand portfolio.
This includes a network of primary and secondary schools, such as Crawford College and Trinity House, as well as higher education institutions, like Varsity College and Rosebank College, which offer accredited diplomas and degrees.
Additionally, ADvTech operates a recruitment division that supports various industries locally and internationally, even assisting with staffing needs within its own educational facilities.
Khumalo expressed his enthusiasm for ADvTech, calling it a “key ingredient” in his investment selection. He noted that he has chosen it multiple times due to its stability and ability to perform well in various environments.
Sabvest
Bright Khumalo’s second JSE stock pick, Sabvest, is a diversified investment holding company with a market cap of R3.41 billion.
This company was founded by Christopher Stefan Seabrooke, a highly experienced capital allocator who has built a reputation for effectively compounding value by carefully managing capital over decades.
Sabvest’s portfolio includes a range of companies across sectors, some of which were previously listed on the JSE.
For example, ARB Holdings operates in electrical distribution, while Classic Food Brands is known for producing both alcoholic and non-alcoholic beverages, such as Bavaria gin.
The portfolio also contains various businesses, including cybersecurity (Corero Network Security, listed in the UK), document storage (Metrofile), and even vehicle transactions through a stake in WeBuyCars, a well-known player in South Africa.
Khumalo explained that he appreciates Sabvest’s management and long-term focus, which he sees as an advantage since it allows the company to maintain a high degree of flexibility in capital allocation.
This approach is particularly appealing to investors who prefer not to manage their own capital actively.
“It has beaten its peers who are much larger who can’t allocate capital as freely as they like because they would need to do massive deals to actually move the needle,” Khumalo said
Sabvest, on the other hand, is a family-run business that has more flexibility to allocate capital.
With the current discount on the company’s net asset value, Khumalo views this as a favourable time to begin building a position in Sabvest.
Fairvest
Khumalo’s third stock pick was Fairvest, a property-focused investment company managing a diversified portfolio across retail, office, and industrial spaces with a market cap of R7.92 billion.
As of the latest report, retail properties form the bulk (around 68%) of its assets, with office spaces accounting for about 21% and industrial properties for about 11%.
Fairvest’s focus on retail spaces with non-discretionary stores like Shoprite and Checkers, which cater to essential goods that consumers need regularly, has made it resilient.
This positioning has made Fairvest relatively defensive, and it has weathered economic challenges like the Covid-19 pandemic better than many other property investments.
Khumalo said that this is “another company that survived Covid and were forced to fix their balance sheet in terms of making sure that those loan to value numbers make sense.”
An interesting move for Fairvest was its recent merger with Arrowhead Properties, which expanded its property footprint and further diversified its holdings, especially in affordable rental spaces with strong yields.
Khumalo explained that he values Fairvest’s prudent management, particularly regarding loan-to-value ratios, which they keep below 40% for financial health and stability.
He also believes that a low-interest-rate environment could be particularly advantageous for Fairvest, boosting its distributable income and increasing dividend payouts to shareholders.
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