Market headed lower – buy the dip

The JSE is at the whim of global sentiment. And one thing every investor should remember is sentiment drives prices, but company values change much slower. This provides investors with opportunities to accumulate mispriced shares at much lower prices than they previously did or could. 

As the market takes a leg lower, investors should look to accumulate quality companies on the cheap. 

Looking at earnings data for quarter 3from the US, which drives sentiment, provides insight: 

  • 78% of the S&P 500 companies that have reported results have reported positive earnings surprises 
  • Earnings are on average 6.8% higher than estimates, above the 5-year average 
  • 61% of the companies that have reported sales have reported sales surprises. 

Analyst are being conservative in their forecasts, and we’re seeing consistent earnings surprises each quarter. 

 

Look at our ideas below for what you should be accumulating at the moment. 

 

The week ahead: 

  • Local Data:  CPI (14/11) 
  • Results Due WSL, YYLBEEE (13/11); ATL, CTA, GRP, IAP (14/11); BAT, GPA, ING, INL, INP, IPF, INLP, MEI, OCE, SAP (15/11); AWA, RNI, SPP (16/11) 
  • LDT (13/11): AEL, AVV, CAT, CATP, ISB, REM 

 

Other Economic data releases of interest… 

  • Tuesday: Average Earnings Index (UK) 
  • Wednesday: Wage Price Index (AUS); CPI (UK); Core CPI (USA) 
  • Thursday: Unemployment Rate (AUS); Fed Chair Powell Speaks, Retail Sales (USA); Retail Sales (UK) 
  • Friday: ECB President Draghi Speaks (EU) 

 

 Short Term Ideas 

  • Goldfields: 11.55% open gain, Target remains R45.25, stop loss remains a daily close below R38.25 

 

Long Term Ideas 

  • AB InBev:  Buy below R1,100 with a target of R1,500 
  • Richemont: Buy dips below R97.50. Target R130.00 
  • Dischem: Up 10.66%, and target of R37.05 remains in place. 
  • Lewis: Closed for 6.67% gain, will look to re-enter around R28.00 
  • Remgro: LDT today, investors who bought below R185, should trim exposure at these levels. Accumulate below R185.00 
  • Coronation: Buy dips below R50.00 for a move back to R80 
  • Shoprite: Failed to break above R200. Hold. 
  • Aspen: Bottoming out. Add below R165.00, keep exposure appropriate. 
  • Sygnia: Add below R8. Add 
  • MTN: Failed to break above R90. Accumulate on dips below R75.  
  • Glencore: Bounced strongly above R60.00. Hold 
  • Naspers: Tencent still under pressure, but its diversification will pay off. Add below R2,500. 

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