William Meyer, owner of Fenestra Asset Management, on what the smart money is doing
10 October 2024 - 05:00
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This is a real beaut. Shoprite is a quality retail operation and a great investment proposition. It’s not cheap — but it’s easy to see why. Great management, fantastic execution, clever advertising, an expanding footprint with new store openings and a great delivery service, just to name a few positives.
Over the past five years Shoprite’s share price has doubled and Pick n Pay’s has halved. Can we say that’s overperformance of 150%? I think we can.
Shoprite looks well positioned to gain market share, which is critical in retail, and will continue to severely punish rivals Pick n Pay and Spar. Investors should be adding to holdings in any weakness in the Shoprite share price.
Sell: Sasol
Sasol is one of the best-known shares on the JSE, and a staple for retail investors over several decades. But the share is more dangerous than a wounded buffalo. Sasol, which famously makes fuel from coal and has a sprawling chemicals business, has been a serial underperformer of late. The share price has lost 32% this year and is down more than 50% over three years. Sasol is also politically incorrect and much hated by environmental activists.
The latest financials for the year ended June 30 are a sea of red. The only item that increased was the level of debt.
Adjusted earnings before interest, tax, depreciation and amortisation were down 9%, core headline earnings per share were down 16% and free cash flow was down 60%. The commodity complex is also decidedly weak. This does not bode well for any price increases.
That said, the share is very oversold technically at these levels. Shareholders may be wishing for a bounce or relief rally as a timely opportunity to dump this dog.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
BROKERS’ NOTES: Buy Shoprite, sell Sasol
William Meyer, owner of Fenestra Asset Management, on what the smart money is doing
Buy: Shoprite
This is a real beaut. Shoprite is a quality retail operation and a great investment proposition. It’s not cheap — but it’s easy to see why. Great management, fantastic execution, clever advertising, an expanding footprint with new store openings and a great delivery service, just to name a few positives.
Over the past five years Shoprite’s share price has doubled and Pick n Pay’s has halved. Can we say that’s overperformance of 150%? I think we can.
Shoprite looks well positioned to gain market share, which is critical in retail, and will continue to severely punish rivals Pick n Pay and Spar. Investors should be adding to holdings in any weakness in the Shoprite share price.
Sell: Sasol
Sasol is one of the best-known shares on the JSE, and a staple for retail investors over several decades. But the share is more dangerous than a wounded buffalo. Sasol, which famously makes fuel from coal and has a sprawling chemicals business, has been a serial underperformer of late. The share price has lost 32% this year and is down more than 50% over three years. Sasol is also politically incorrect and much hated by environmental activists.
The latest financials for the year ended June 30 are a sea of red. The only item that increased was the level of debt.
Adjusted earnings before interest, tax, depreciation and amortisation were down 9%, core headline earnings per share were down 16% and free cash flow was down 60%. The commodity complex is also decidedly weak. This does not bode well for any price increases.
That said, the share is very oversold technically at these levels. Shareholders may be wishing for a bounce or relief rally as a timely opportunity to dump this dog.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.