South Africa’s top stock picker shares his secret to investment success

South Africa’s top stock picker, FNB Wealth and Investments’ Nick Crail, said the keys to successfully picking stocks are maintaining a long-term view and having the discipline to stick to a plan.

Crail won Daily Investor’s South African Stock Picker of the Year award for achieving the best performance among analysts and fund managers in 2024.

He has been with the FirstRand group for around 12 years and has served in nearly every investment division at the company, including Ashburton Investments and FNB Wealth and Investments.

The winner of this title is based on analysing the performance of over 100 prominent fund managers and equity analysts.

Daily Investor recorded their stock picks on podcasts, the JSE’s SA Stock Picks show, and Business Day TV’s Stock Watch between January and December 2024.

We then analysed the performance of these stock picks against the performance of the associated market.

For example, when an analyst picked a share listed on the Johannesburg Stock Exchange (JSE), we compared the performance with the JSE Top 40 Index.

Crail emerged as the winner for his performance over the last year. His stock picks focused heavily on international stocks, including Nvidia, Visa, Amazon, and Tencent, with his only local pick being Absa.

His stock picks, which all produced positive results, proved highly successful and helped him to outperform the market by 19%.

Crail told Daily Investor that he makes his picks by first selecting a basket of companies to invest in.

He looks for stocks he believes will perform well over the longer term, aiming for an investment horizon of around three years.

Crail’s philosophy on how to pick stocks means he stays away from “risky” and lower-quality stocks. Rather, he looks for high-quality companies he can hold over a longer period of time.

Once he has this ‘basket’, Crail explained that the individual stocks’ valuation at that point in time will inform the picks he makes on a specific day.

When determining whether a stock is currently at fair value, he considers various factors, including price, macroeconomic conditions, regulatory environment, earnings growth expectations, and historical returns.

Following these considerations, he will determine which stock provides the most upside on that specific day.

Crail specified that his three-year investment horizon means he will not be concerned if the stock he picked on a specific day does not provide strong returns on a day-to-day or even month-to-month basis.

He relies on continuous assessment of the stocks in a portfolio to determine whether they are still worth having a position in.

However, he emphasised the importance of having discipline in deciding when to buy and sell stocks.

Therefore, if he has evaluated a company and found that the stock is worth investing in, he will hold that position until new information that could undermine or contradict his original assessment comes through.

For example, since picking the stocks that led to his victory, Crail said he has reduced his exposure to some but has yet to exit any of them completely.

Despite most of his picks being international companies, Crail told Daily Investor he believes the local market is currently attractive.

He explained that JSE-listed companies performed very well following the local elections in 2024.

However, they took a significant beating after the US election in November 2024, which saw President Donald Trump return to the White House.

Therefore, the market is highly uncertain, and much depends on moves from the United States.

Crail is currently bullish on the local market, saying South African stocks offer attractive valuations.

He highlighted basic materials and classic ‘SA Inc’ stocks, including banks and consumer-facing companies like retailers, as having potential upside this year.

Crail said one of the biggest mistakes he’s made in his stock-picking journey is buying into promises from companies that do not necessarily have what it takes to back those promises up.

In particular, he highlighted promises of a “turnaround” at a company that used to perform well but no longer does.

When confronted with this, Crail said he tries not to get distracted from his original assessments of a company’s potential.

“That’s where you just have to stick to your knitting,” he said, adding that it all comes back to the discipline of when to sell and buy.

Crail said the part of his job he finds most exciting is the market. “It’s all over the place, and you’re not doing the same thing every day,” he said.

While your thinking may stay the same day-to-day, new information constantly circulates that can inform your thinking and keep the job interesting.