BROKERS’ NOTES: Buy TFG, sell AB InBev

Chantal Marx, head of investment research and content at FNB Wealth and Investments

BUY: TFG

We think the discretionary retailers are looking interesting from a valuation perspective, despite weak macro fundamentals. Taking a longer-term view, we see current levels as an attractive entry point into a high-quality retailer with strong fundamentals, and potential short-term support from an uptick in credit sales.

We have seen a bit of a recovery over the past week or so, but technically the share price remains in oversold territory and in a bearish trend that seems too steep. The price recently broke a key resistance level (R93) which has now become support.

SELL: AB InBev

AB InBev has had a 30% run in euro terms off its lows in October. The company delivered better than expected results in the third and fourth quarters of 2022 and the price has now moved the closest to the consensus target price since late 2021. Fundamentally, there are a few issues we are concerned about, including its hard currency debt levels, exposure to emerging-market currencies from a cash flow perspective, input cost volatility, the sheer size of the business, and a difficult regulatory environment.

Technically, the stock is overbought, but momentum is still to the upside, which makes us cautious to call an outright short but comfortable to take profit or sell the stock at current levels.