At the end of 2017 I wrote an article on my top 5 stocks to watch in 2018. The results of my predictions have been mixed so far and honestly, I would have liked it to be better. The whole market was led into a false sense of optimism when Ramaphosa was elected, and the subsequent reality has made the market a difficult place to operate in.
Below I evaluate the performance of each one of the five picks and how I think they will perform towards the latter part of 2018.
Anglogold Ashanti [ANG]
Even though Greenbay has performed significantly worse than Angologold, it has been the most disappointing. Anglogold was already trading at a significant discount at the time of writing the original article, and it hasn’t gotten any better. Not even a significantly weaker Rand and a subsequent run in the resources sector have been able to provide the needed boost.
Outlook for the rest of the year: I can’t see how much will change until the end of the year and expect ANG to keep trading in the R105 – R120 channel it’s currently in.
Capitec Bank [CPI]
Despite Viceroy’s best efforts, they haven’t been able to permanently damage Capitec’s reputation. The bank went through a tough period at the beginning of 2018 where the share price dipped to as low as R705.00, but has recovered well to trade above R1’000 as recently as the 4th of September.
Outlook for the rest of the year: I expect it to maintain a price above R900, trading in the R900 – R1’000 range.
Echo Polska [EPP]
After a non-executive director was detained in early December 2017, the share price slid all the way down to R13.15. The allegations were made against him in his personal capacity and did not involve the company. The share price struggled for a while after that, but recovered after the release of their 6-month results.
Outlook for the rest of the year: I expect it to maintain its recent momentum, especially if the Rand keeps on weakening.
Greenbay Properties [GRP]
Greenbay has struggled immensely in 2018 after having a great run in 2017. The share price has essentially halved after allegations against the Resilient stable of companies, of which Greenbay forms part, were made and concern expressed about their accounting policies. This had a severe knock-on effect and the company still hasn’t shown any signs of recovery.
Outlook for the rest of the year: In my opinion, Greenbay will remain under pressure for the next couple of months.
Old Mutual Limited [OMU]
Old Mutual Plc has done well ever since the managed separation started in mid-2017. The price has been steadily increasing, culminating in the unbundling of Old Mutual Plc [OML] into Old Mutual Limited [OMU] and Quilter [QLT]. A special dividend of R1 per OMU has recently been announced, with potentially more value coming from Nedbank’s unbundling at the end of the year.
Outlook for the rest of the year: I believe OMU will steadily increase towards the end of the year as the final steps of the unbundling process takes place.
The market has been characterised by scandals during the last 10 months which has raised questions about the quality of our auditors and corporate governance. What has also been of great concern is the ease with which international investors can manipulate shares in our market if they have sufficient volume. It started with Steinhoff [SNH], Viceroy going after Capitec [CPI], accounting irregularities within the Resilient [RES] stable and lastly Aspen [APN] that was the next supposed target of Viceroy, but turned out to rather be that of an American hedge fund.
Local shares will remain under pressure as long as the political issues and economic problems persist. It is worth having a good mix of local and international shares in order to diversify your portfolio and make it resilient in any market condition.
Contact us today in order to position your portfolio properly for the current market.
Stephan is a portfolio manager and full-time trader. He developed his passion for the markets while working in the Stockbroking division of Standard Bank and is especially passionate about CFD trading. Stephan studied at the University of Stellenbosch and completed a BComm Honours (Business Management) with a focus in Portfolio Management and Bonds. He has also passed the JSE Equity Trader’s Exam, RE5 (Representative) and RE1 (Key individual) Exams as well as the Registered Persons Exams (RPEs) in order to give advice on equities.