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Resources: Sanlam not biting

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Johannesburg - Despite the generally optimistic outlook for resources companies, Sanlam Private Investments will not become an aggressive buyer of these stocks in the current economic climate.

There is always a risk in such forecasts, says director of investments Alwyn van der Merwe.

In his view, resources shares can fire up a portfolio's performance, but they can also quickly shed much of this value.

He explains that one needs to respect the risks. Local mining companies' rising production costs are one of the main reasons why he is not particularly excited about the earnings growth potential of these companies.

The time to get excited about resources is when commodity prices are low, he says.

Analysts believe the earnings of companies on the JSE's all-share index could climb an average 40% in the coming year, he notes.

This growth is largely spurred on by the anticipation of robust growth in the earnings of resources companies, which analysts estimate could be 82% in the coming year.

Van der Merwe says such a large jump in earnings is quite possible if one looks at the low base from which most companies' earnings are coming.

- Sake24.com

For more business news in Afrikaans, go to Sake24.com.

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