Cape Town - The market last week was characterised by selling across all sectors except for gold, as investors were once again in a risk averse mood and in search of short term safe havens.
Low oil prices, weak worldwide economic data and the fear of a possible South African rating downgrade, has led investors to buy gold as fears of a prolonged bear market continue to grow.
The gold price is currently trading above $1 200 per ounce. With that negative backdrop, Overberg Asset Management's Kirk Swart lists the following 5 shares to watch:
1. Woolworths [JSE:WHL]
On Thursday, 11 February, Woolworths released its interim results for the 6 months ending 27 December 2015. The company managed to increase revenue by 17.1%, headline earnings per share by 30.6% and dividends per share by 37.8%. Woolies managed to deliver a return on equity of 24.6%.
Despite the good results, the Woolworths share price was trading down 9% on Friday at around R85. This is surprising given that a trading update was released in mid-January, after which the share price didn't react so heavily. Expect some investors to start buying at these levels despite the tough trading conditions which retailers currently face. In early trade ion Monday the share price already gained1.68% to R87.89.
2. Grand Parade [JSE:GPL]
Grand Parade recently announced that the board has signed an exclusive franchise agreement with Dunkin' Brands International. This will enable Grand Parade to develop Dunkin' Donuts and Baskin-Robbins in South Africa, with the right of first refusal (ROFR) to develop these brands in Namibia, Botswana, Zambia and Mauritius. More than 250 Dunkin' Donuts and more than 70 Baskin-Robbins shops will be opened in South Africa. Dunkin' Donuts is a coffee and bakery franchise and Baskin-Robbins sells ice cream.
READ: Dunkin' Donuts, Baskin-Robbins coming to SA
This deal increases Grand Parade's investment in its food portfolio which they see as their long term strategy.
3. Quantum Foods [JSE:QFH]
Quantum Foods is an agricultural spin off from Pioneer Foods that specialises in animal feeds, eggs & layer livestock, broilers and related businesses.
Trading at a price to earnings ratio of 5 and with a dividend yield of 3%, the market doesn't seem to be convinced about Quantum's potential. Trying to build a brand around eggs is difficult as eggs are a homogenous commodity.
At these levels, however Quantum seems well priced and on 5 February André Hanekom, the chairperson of the board, bought Quantum shares on the market.
4. Taste Holdings [JSE:TAS]
Taste Holdings owns the Pizza brand rights to the Domino's, Scooters, and St Elmo's Pizza brands. Also in their stable are Maxi's Diner, The Fish & Chips Co and Zebro's. Taste Holdings will have the exclusive rights to the roll-out of the American coffee franchise, Starbucks.
Taste released a trading statement for the year ending 29 February 2016. In the trading statement they are expecting both earnings per share and headline earnings per share to be negative by over 100%. For the period ending 28 February 2015, both earnings per share and headline earnings per share were 6.9 cents and 6.8 cents respectively.
Starbuck could be the future star in their stable.
5. JSE Limited [JSE:JSE]
The JSE Limited has a business that very much resembles a monopoly. Anyone who wished to transact in South-African publicly listed shares, will need to do so on the JSE market platform. With the recent sell-off and share volatility, the JSE keeps on delivering excellent results.
In a trading statement released on 11 February 2016, for the year ending 31 December 2015, the JSE has increased both earnings per share and headline earnings per share by between 35% and 45%. The JSE's trading statement notes that the double digit growth in revenue is driven by higher market activity.
Do you agree with Kirk's stock picks? Tell us why and send us yours.
* Brett Birkenstock is a director at Overberg Asset Management (OAM), an authorised financial services provider (No 783) which specialises in the private management of local and global discretionary portfolios as well as pension products.
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