Asset management companies share some of their recommendations on which JSE-listed companies to invest in during 2016. These tips could inspire a new year’s resolution to start investing.
Naspers
This firm favourite has bounced back after sliding from a high of R2029 a share on April 13 to under R1700 in August after it emerged that chairman and former CEO Koos Bekker had offloaded 70% of his stake in the media company when he exercised his share options.
Trading at R2099.31 earlier this week, which is up 39% since the start of 2015, Naspers is pricey for the ordinary investor.
Institutional investors, however, are backing further growth.
The company's global exposure enhances its benefits and means it will benefit from a weak rand, making it a defensive stock, according to Abri du Plessis, CEO of Gryphon Asset Management.
Robust earnings growth for Naspers in 2016 will come from its pay-TV businesses across Africa and its exposure to Chinese social media giant Tencent - of which it holds 34%.
Despite its pricey share, Naspers is still considered a cheap entry to investing in Tencent. Significant value will also begin to be realised from Naspers's investment in e-commerce businesses, according to Old Mutual Equities.
British American Tobacco (BAT)
This company is one of the five largest cigarette distributors globally and controls more than 80% of the tobacco market in South Africa, where its R1.6-trillion market cap makes it the largest company trading on the JSE.
Its cigarette brands include Peter Stuyvesant and Benson & Hedges, which are market leaders.
The stock is favoured for its currency-defensive nature. The weaker rand is expected to boost the company's coffers while a gradual improvement in global economic growth could lift earnings.
BAT is a steady profit generator and pays consistent dividends, according to Old Mutual Equities. This is despite a 6.5% decline in revenue over the nine months to September as a result of currency fluctuations and a 1.8% fall in the volume of tobacco sold.
For shareholders, the total return since January 2015 was 34.38%, compared to a 3.99% return from the FTSE-JSE All Share index.
A cheaper way to get exposure to BAT is via Reinet Investments.
Michele Santangelo, portfolio manager at Vunani Private Clients, said: "The Luxembourg-based specialised investment fund allows investors discounted access to the high-quality stock which makes up 72% of Reinet's net asset value."
He added that the fund, under the chairmanship of Johann Rupert, used the strong cash flows generated to continue to invest in new businesses "that have the potential to add significant growth and diversification".
Reinet shares had risen 26.21% since January 2015 to close at R31.88 on Thursday.
Steinhoff International Holdings
International household retailer Steinhoff swapped its main listing on the JSE for a secondary listing in Germany in December because most of its revenue is derived outside South Africa.
This is expected to raise its international profile.
Steinhoff CEO Markus Jooste has transformed the South African manufacturer into Europe's second-largest discount retailer, which, said Gryphon's Du Plessis, positioned the group to benefit from an expected economic recovery in Europe.
Old Mutual Equities expects the company's enviable property portfolio, which it accumulated through purchases while prices were low, to add to its attractiveness as an investment choice.
Steinhoff bought a majority stake in Pepkor for R62.8-billion in late 2014 to expand into clothing. This was the highest-valued deal in Africa and the Middle East during 2014.
Pepkor, which expanded into Nigeria last year to tap into the country's middle class, will enhance Steinhoff's turnover growth and probably boost its share price, which was trading at R78.51 on Thursday.
Remgro
If you have ever fancied owning a piece of the Blue Bulls rugby franchise, then Remgro offers that as well as a basket of other businesses with defensive characteristics such as fast-moving consumer goods company Unilever and stakes in medical ventures, financial services, shipping and technology.
Remgro's core businesses, Mediclinic, one of the world's largest private hospital groups, and FirstRand Group, a leading financial and banking services provider, were expected to deliver a strong performance in 2016, said Old Mutual Equities.
Johan Strydom, head of South African equities at Sanlam Private Wealth, said the benefits of Mediclinic's international listing and increased exposure to the growing private hospital industry in the United Arab Emirates should lead to attractive earnings growth.
Along with Mediclinic International, Remgro acquired a 29.9% stake in the Spire Healthcare Group in the UK in mid-2015. Spire is one of the UK's largest private hospital companies, with 39 hospitals and 13 clinics .
In October, Remgro CEO Jannie Durand told sister publication Business Day that his company might be interested in increasing its stake in spirits and wine producer Distell from 30%, depending on the outcome of a process by ABInBev to take over SABMiller.
The share price closed at R245.21 on Thursday.
FirstRand
Another potential good buy for 2016 is FirstRand, which has a reputation as an innovative business.
Old Mutual Equities said its attributes included being able to sell to customers across its platforms, which include Wesbank and FNB. The group also has high levels of surplus capital for investment across Africa. Its share has lost 16.22% since the start of 2015.
It continues to expand into Ghana under the FNB brand. In March, it acquired a life insurance licence to offer products such as funeral and risk insurance.
Of South Africa's four largest listed banks - Absa, Standard Bank, Nedbank and FirstRand - FirstRand reported the second-highest headline earnings growth, 22% to R15.4-billion for the six months to June, trailing Standard Bank's 27% rise in headline earnings to R10-billion over the same period.
Correction: An earlier version of the article incorrectly mentioned Outsurance as a subsidiary of FirstRand when in fact it sold the business to RMI Holdings in 2010. The error is regretted.
