Shares that pay in time

Durban - It's a new week on the JSE but instead of getting carried away by the herd mentality, you might want to consider the benefits of buying-to-hold, shares you can stick away in the drawer for a rainy day.

As a suggestion, we have put together five shares considered top picks by Claude van Cuyck and Ricco Friedrich of Sanlam Investment Management (SIM).

Van Cuyck and Friedrich run SIM's unconstrained equities portfolio, a value-based investment strategy that buys shares trading at what they consider to be a discount to fair value. Below are some of the "best ideas" they hold.

Barloworld

Despite the recent run-up in the price, the SIM team believes the share still holds value. Earnings could go lower, but that's already in the price. Off this base there's reasonable upside to fair value.

Pick 'n Pay.

The group has lost market share the past few years but that's seen as being the ham in the sandwich, squeezed by Woolworths and Spar on top and Shoprite below. The business model has shifted, there's more focus and new products such as ready-to-eat foods.

Mondi

In what's currently a 'demand depressed' paper industry, the share is trading well below net asset value. It is one of the lowest cost producers of paper, a position it smartly earned for itself from a decade ago where it bought paper mills in Eastern Europe rather than the more expensive West. This proved a stumbling block for South Africa's other pulp and paper giant Sappi. Management is highly rated.

Cipla Medpro

This is SIM's favoured small cap pick. It has a controversial history but is seen as offering growth potential and has grown faster than larger rivals Aspen and Adcock Ingram. It's also backed by one of the best generic pharmaceutical groups in India.

Imperial

The share price was pounded by bad news around vehicle sales to a level way below fair value. That side of the business will come back in time, while the logistics business is doing well with attractive margins. Capital management has been good through the downturn and the balance sheet is bolstered by the R1.3bn it received selling Imperial Bank.

Remember though that Van Cuyck and Friedrich take a value investment approach, one of the most important elements of which is patience.

"We would like to see value unlocked on day one. But it doesn't work that way so we take a three to five year view," said Friedrich.

- Fin24.com