8 long-term stock picks for 2019 and beyond

FNB Wealth and Investment Solutions spoke to its eight top stockbrokers and investors and asked them to choose the one stock they believed was worth banking on in 2019 and beyond.

Their picks were as follows.

1. Mr Price

FNB Stockbroker, Nicole Wood, chose Mr Price as her pick, saying that the group’s growth in retail sales made it an attractive stock despite share price pressures.

“A healthy balance sheet, strong online presence and expansion into Africa make for an attractive investment opportunity,” she said.

“Festive season shopping is likely to complement sales for the group,” she added.

2. Sasol

Richard Levesque, FNB Securities portfolio manager, said that Sasol had an attractive forward dividend yield and PE ratio, which made it a promising long-term share.

“With the Lake Charles project concluding and set to free up business cash flow, higher oil prices and a weak rand, this could be the big deal worth going for,” he said.

“A forward dividend yield of 3.87% and forward PE of 9.36 times make an attractive investment on both measures.”

3. Woolworths

Woolworths is the stock pick of FNB Securities’ Susie Thompson, who said that the tough economic conditions in the shorter term provide an excellent opportunity to get in on a quality company that will deliver in the long term.

“Woolworths’ primary markets, South Africa and Australia, are currently experiencing tough economic conditions – and the near-term environment is expected to remain tough for consumers,” she said.

“This could be seen as a good opportunity to invest in a quality company with a PE of 13.9 and a dividend yield of 4.93%. Healthy holiday season sales should improve revenue.”

4. Aspen Pharmacare

Aspen had an incredibly difficult 2018, losing over half of its stock value – however, FNB portfolio manager Matt Kretzmann said that the group’s change in tactics make a compelling case for investment.

“The sale of its infant milk business and elevated debt levels saw Aspen’s share price fall from R290 to below R160 in a matter of weeks,” Kretzmann said.

“Company directors Stephen Saad and Gus Attridge, however, have shown significant confidence by recently purchasing a cumulative R110 million of stock.”

According to Kretzmann, a PE of 10 (compared to 40 in 2015) and a short-term end to acquisitive tactics makes Aspen an appealing buy.

5. Naspers

Despite some near-term risks related to Tencent, Craig Freemantle is holding onto Naspers, which is expected to grow 30% in 2019 and 2020.

“Naspers owns 33% of Tencent (and there are) near-term risks regarding China’s gaming monetisation regulations, and this Naspers’ bottom line. Management sees these regulations as ‘when’ not ‘if’ issues,” he said.

“Naspers is expected to grow at 30% in 2019 and 2020, as it shifts more towards margin evolution and profits, rather than only revenue growth.”

6. Hyprop

FNB stockbroker and relationship manager Edgar Mofoko picked Hyprop as his share of choice, saying that the stock offers good value.

Hyprop is a leading specialist shopping centre Real Estate Investment Trust (REIT) in South Africa, sub-Saharan Africa and South Eastern Europe.

“The group reported above-average distribution with a year-on-year net asset value growth of 3.2%,” he said.

This is with a forward dividend yield of 8.5%, which is quite attractive, he said.

“Hyprop is set for 5%-7% growth (above the sector average) in dividends for the 2019 financial year, while the group will also look to list its European property portfolio – which could unlock additional value.”

7. Distell

Distell is a global business with roots in South Africa, producing and marketing a diverse portfolio of alcoholic brands.

FNB’s Michael Richter believes that the group’s growth prospects in the rest of Africa make it an attractive pick in the food and beverages sector.

“Distell has a market cap of R24.5 billion – a 2019 forward PE of about 14 times and a forward yield of 4%,” he said.

“Despite minor challenges, Distell’s diverse portfolio resilience, strong cash generation and bright prospects in Africa make it an attractive pick.”

8. Alphabet

An international share added to the mix, FNB’s Wealth and Investment Solutions CEO, Bheki Mkhize chose Google owner Alphabet as his long-term pick.

“The relatively high PE on Alphabet is supported by strong growth and profitability going forward, together with a strong management team,” he said.

“There are great prospects for Google Cloud, which continues to grow market share and Google’s self-driving Waymo cars.”

According to Mkhize, the company is also investing significantly in artificial intelligence, while continuing to grow the search engine business and online video business through advertising revenues.

Read: How South Africa’s top 40 companies performed in 2018

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8 long-term stock picks for 2019 and beyond