Wayne McCurrie has selected three companies as his stock picks in the JSE’s online stock analysis series – Momentum Metropolitan Holdings, AVI, and Impala Platinum Holdings.
Wayne McCurrie is one of South Africa’s best-known market commentators with over 30 years of experience in the investment world.
He currently advises FNB Wealth and Investments clients as part of helping more people invest in improving their financial future.
McCurrie previously served as a senior portfolio manager at Ashburton Investments and executive director and head of specialist investment at Momentum Asset Management.
Commenting on current market conditions at the recent JSE stock pick seminar, McCurrie said the world is experiencing a bear market, where stocks experience prolonged price declines.
“There is nothing strange about the current market conditions. We are going through a normal down cycle after an abnormally strong and prolonged up-cycle,” he said.
“Don’t panic. It is a bear market which happens regularly, and we will all recover from it. I think the whole market is approaching a good buying opportunity.”
McCurrie picked a handful of stocks as part of the JSE stock pick seminar but warned that his picks were not aimed at a quick return.
Instead, he picked stocks which offer value and are likely to produce long-term returns to investors.
Here are Wayne McCurrie’s stock picks, with an explanation of why he finds these companies attractive.
Momentum Metropolitan Holdings
Momentum Metropolitan Holdings’ share price has dropped from over R20 per share at the beginning of the year to around R14, which is low compared to its embedded value of R28.
After a tough 2020, Momentum Metropolitan recovered strongly in 2021, and the present value of its sales is very good.
The present value of sales is a calculation of today’s value of all future profits for policies they have on the books.
The value of new business – a way to predict the business’s future profits – was up 20% in the last year.
The share is trading at a 50% discount to its book value, which creates the potential for the share price to increase substantially.
Impala Platinum Holdings
Impala Platinum Holdings’ share price has dropped from R294 per share in March to current levels of around R158 per share. The share price can decline far more.
Dividends are fantastic – mining companies have never made more profits and have the strongest balance sheets in a very long time.
Although it faces a few small and medium-term headwinds, Impala Platinum’s free cash flow and dividends are looking good.
The long-term prospect on a structural basis looks good for Impala Platinum.
AVI is a quality company which is home to many of South African top fast-moving consumer goods (FMCG) brands, like Bakers, Five Roses, I&J, and Willards.
AVI’s share price declined by 44% over the last four years – down from R119 in March 2018 to current levels of around R66. The price is low for a quality business like AVI.
Shareholders are getting a 7% dividend yield, the company continues to generate large amounts of cash, and they have low debt on its balance sheet.
They face challenges like stagnant demand and rising costs but handle this by sacrificing volumes to maintain margins.