“[DATA ADR:Adcorp] are doing a lot right on the educational side of things – it’s a nice story, [DATA EXX:Exxaro], I like [DATA VOD:Vodacom] as a dividend underpin. It’s quite interesting with Verizon being sold out when we’ve heard news now about the extra capitalisation that’s going to be spent – that’s a nice one for the year ahead,” Sharetips.co.za’s Craig Martin told CNBC Africa.
“I like [DATA SGL:Sibanye] as a gold pick. They’re doing some things right, just refinanced their balance sheet, the acquisition of [DATA WGR:Wits Gold] and there’s a good cash flow. If you’re going to have a soft market, you want that underpin of cash flow and cash stream and, perhaps, a dividend underpin which Sibanye offers. [DATA SUI:Sun International] – there’s certainly some growth prospects there on the international side. [DATA AEG:Aveng] in the construction sector, there’s fantastic ratings there.”
The large cap JSE-listed stocks have had a good run in recent times. The opportunities for 2014 however, could lie in the relatively unexposed areas.
“With the weakening rand, the improvement in exports, there’s some of those mid-cap companies that offer some good opportunities. I think we haven’t got the buoyant, small-cap market that we may have had before and some of the small caps have started to develop into mid-caps like your EOH’s, but [there’s] still some opportunities around,” Martin said.
He added that while there are a number of areas that show promise for the year ahead, retail is one of the sectors that he is very weary of.
“One needs to very careful of retail, let’s see what happens when the figures come out. Some of them are on really high multiples and if you look at a company like [DATA WHL:Woolworths], which has been a fantastic story for the last three years or so, they’re now expanding their food footprint and they’re going to move into markets where Truworths and Foschini were there before,” Martin explained.
“Now, Woolworths are playing almost a catch up. A lot of their growth came from purchasing franchises, which is now all in the balance sheet. Some of the shares that were the ‘darlings’ – a lot of that growth is there and you’ve got to ask: Where are they going to get future growth from?”