The JSE finished the month and quarter with a very strong rally of 3.3% on Friday, never the less, that rally was not enough to close the All Share Index in the black for the year-to-date. Financials, Small and Mid-cap shares are down while the resources are up 11.2% year to date.
The market still faces several headwinds with the US instigated Trade War becoming more hostile, rising yields and the uncertainty is reducing investor appetite for risk assets.
Recent volatility reflects the uncertainty that the US Trade War is having on markets and has created a “risk-off” mentality. This hurts the performance of emerging markets and although SA is performing better than many, the sentiment is most evident in our currency. The Rand has weakened more than 15% from a USDZAR rate of 11,80 through support / resistance at R12,48 and 13,15 to 13,85 currently.
We have a number of stocks that remain in major oversold territory when looking at Standard Deviations, and several of the typical Rand hedges have yet to react, stocks like Bidcorp, Aspen, MTN, Naspers, Vodacom, Woolies, Zeder, Coronation, Sasfin, Fortress A. etc
As we mentioned last week, investors should be using the sell-offs to accumulate the good quality large caps on the cheap.
The week ahead:
- Local Data: Naamsa Vehicle Sales (02/07); Standard Bank PMI (04/07); Electricity Production, Electricity Consumption (05/07); Gross Reserves, Net Reserves (06/07)
- Results Due: WEA (03/07); TLM (04/07); GBI (06/07)
- LDT (03/07): AOVP, AFH, CTK, CSG, GAI, NTC, RTOP, SCD, SSS and Various Sygnia ETFS
Last week’s movers and shakers…
Best Performers: AMS 8.7%, SOL 7.5%, NPS 5.4%, NHM 5.3%, BIL 4.5%
Worst Performers: TSX -25.3%, SGL -14.1%, TOR 10.1%, FSH -8.4%, SFN -7.6%
Other Economic data releases of interest…
- Tuesday: Interest Rates (AUD); Construction PMI (UK)
- Wednesday: Retail Sales, Trade Balance (AUS); Services PMI (UK)
- Thursday: BOE Gov Carney Speaks (UK); ISM Non-Manufacturing PMI, Crude Oil Inventories, FOMC Meeting Minutes (USA)
- Friday: Trade Balance, Unemployment Rate (CAN); Average Hourly Earnings, Non-Farm Employment Change, Unemployment Rate (USA)
One to Buy…..
Discovery –quality at a reasonable price.
After several years of experimentation in different countries, Discovery’s products have been gaining traction in some key markets. The discontinuation costs of earlier forays are truly out of the system and as a result Discovery’s performance has become more consistent and the outlook more predictable.
Although growth in the core SA Medical Aid product, Discovery Heealth, has been maturing for years, it has been augmented by innovation in other areas. Fundamentally the business looks strong.
Looking at the price; after a run up to R190 in March this year it retreated 26% to R140 in June, where it has turned. It is now offer at R148, this is a reasonable level to pick up one of the quality counters on the JSE.
Buy below R 150 with a medium-term view.
Long Term Ideas
- Coronation: Buy below R60.00 for a move back to R80
- AB InBev: Buy below R1,250 for a move to R1,475.
- ARM: Price is finding support but volatile. Hold
- Dischem: Accumulate below R30.00 for a move above R37.00
- Shoprite: Bulls trying to keep the price above 200-day moving average. Hold.
- Anglo: Closed at R303.30 for 6.8% gain.
- Aspen: Accumulate on weakness below R260.
- Sygnia: Add below R12.50.
- Santova: Maintain stop loss at R3.10. Hold.
- Merafe: Accumulate below R1.55.
- Jubilee: Speculative buy below R0.50.
- MTN: Maintain position, accumulate for long term below R110.00.
- Glencore: Still bullish. Hold
- Wescoal: Long term buy. Add below R1.80
- Naspers: Management focused on reducing share price discount. Buy dips below R3,000.
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