We sat down with Daniel Wellingford, a finance industry insider, to discuss his hot stock picks for the Second Quarter of 2022.
Daniel, can you tell us about a few South African stocks that should shine as the world begins its recovery from COVID-19?
That is a good question; when thinking about the recovery, we need to consider what companies have been ravaged by the pandemic, what faired well through it, and what will potentially do well post-recovery. My first pick for the JSE is a reasonably common one, Gold Fields Limited (JSE:GFI). In August of last year, GFI hit a high of nearly 25,000 ZAC. It has fallen back to between 14-15K. GFI is a gold mining farm company with sustainability as a core value. As the USD’s inflation starts to rise from the significant printing the FED has done there during the pandemic, we will likely see the gold price go up, and GFI will benefit significantly from this increase.
What else do you see as a hot play for post-recovery?
Spar Group(JSE:SPP) is a retail giant based here in SA and has business in Switzerland, Ireland, and England. Like other retailers, they took a hit when the pandemic began but have recovered well and reached over 21,000ZAC in February before falling back to the current high 18K level. If the recovery happens quickly, this will be a huge play. SPAR Group’s focus is on two parts their own brands, which include SPAR, SUPERSPAR, KWIKSPAR, TOPS at SPAR, SPAR Express, Build it, TrenDIY by Build it, SaveMor, and Pharmacy at SPAR. Additionally, they have retail merchandising and field marketing services, which include in-store merchandising, merchandising services, new store sets/remodels, audits, in-store events/demos, assembly services, omnichannel/click and rick, quick-turn/crowd merchandising, and their team total retailer services. All of these services will be needed for companies to stay safe and relevant to their consumers post-COVID.
Are there any other companies that you see having strong potential?
One other company with a dual listing on the London Stock exchange is British American Tobacco (JSE:BTI). It has one of the JSE’s highest market caps and has taken quite a few hits over the last few years but stays relevant. BTI had a high of over 70,000 in April 2020 after COVID hit but has fallen back down to its current mid 53,000 level. From 2018 to 2020, their revenues and net income have climbed. In the West traditional cigarette use has gone down, and BTI has really gone all-in on smokeless tobacco and other nicotine products; in the US, smokeless has grown about 25 percent in the past five years, and vaping, is a new way to sell nicotine to a younger audience and does not have the same reputation as traditional cigarettes. Vaping has boomed, growing by over ten times in the last decade. Developing nations like China, India, other Asian nations, and several in Africa are the target for tobacco companies, and BTI will undoubtedly benefit from all of these changes. I see BTI as a great long play.
Thanks for sitting down with us; it is much appreciated.
It’s my pleasure.