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Cape Town - Overberg Asset Management analyst Kirk Swart looks at defensive plays in this week's five shares to watch.
1. ABSA New Gold
In times of market uncertainty and volatility, investors sell risky assets and buy traditional safe haven assets. Gold has historically proven to be such a safe haven. Trading at $1 355 per troy ounce, some analysts believe that the gold price is heading to $1 500/oz on the back of the Brexit uncertainty.
The Absa New Gold exchange traded fund (ETF) is a way for investors to get access to gold as an investment. The ETF tracks the rand price of gold and can be bought on the JSE equalling 1/1 000 of a troy ounce of gold bullion.
2. DBXUS
With the June Jobs Report in the United States confirming that the world's largest economy is still on track and improving, the S&P ended Friday 1.5% higher at 2 129 points. The jobs report has managed to ease some Brexit fears.
With the US dollar offering safety in uncertain times, the DBX US tracker offers South African investors access to a tracking fund that tracks the MCSI USA index. Included in the index are companies like Apple, General Electric, etc.
The recent rand strength offers investors a good buy opportunity into DBXUS.
3. Aspen Pharmacare [JSE:APN]
Aspen Pharmaceuticals has seen its share price increase by 21% for the year to date. The market volatility in 2016 has led to a more risk off approach leading to funds flowing into less volatile industries such as medical and pharmaceuticals.
Aspen has been in existence for over a 100 years and their products reach more than 150 countries around the world. Although the share is trading on a lofted price earnings multiple, the defensive qualities outweigh the elevated multiples.
4. Reinet [JSE:REI]
In tough times people will still eat, smoke and drink. Reinet, which has historically been a proxy for British American Tobacco, is diversifying away from cigarettes and are pursuing other worthwhile avenues. The diversification is happening slowly, meaning the bulk of Reinet is still a big holding in British American Tobacco [JSE:BTI]. This offers investors an entry into a safe industry at a discount to NAV.
5. Tsogo Sun [JSE:TSH]
Other than eating and drinking, in tough economic times people will more than likely continue to gamble. With no direct exposure to Europe, Tsogo Sun is somewhat shielded from the events in Europe and Brexit.
Gambling is a relatively inelastic part of Tsogo Sun's business and the hotel and leisure part will benefit from the long term weakening of the currency.
Trading at a price earnings multiple of 14.5 it is at a discount to its rival Sun International which trades at a price earnings multiple of 38.
Do you agree with Kirk's stock picks? Send us yours and tell us why.
* Kirk Swart is an analyst at Overberg Asset Management , 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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