Recovery stocks for 2009

Durban - Past performance may be no indicator of what to expect in the future, but there are probably a few points investors could rescue from the list of carnage that's the JSE's top 40 best and worst performers for 2008.

One is the potential for financial shares. The best financials performer and best bank over 2008 was Absa, with a negative share price for the year of 2.57%.

The prospect of declining interest rates, no significant direct subprime concerns and downrated share prices make these look like a possible recovery category.

David Shapiro, a director at Sasfin Securities, agrees that financials, along with local industrial shares, could provide the pick-up to the market.

"The first few months are going to be difficult, but I think we might get better company results than anticipated. I'm looking at Shoprite right now and results are good. They have been written down, but might not be as bad as suggested."

He even sees Old Mutual, down a stomach-churning 66.83% over the year, as possibly being a major recovery stock. "I think Old Mutual is coming right, problems with the Bermuda operations have perhaps being over-compensated for. All the bad news has been priced into the share at these levels."

After a strong performance early in 2008, major steel producer ArcelorMittal SA took a hit towards the end of the year as steel prices came down, losing 35.2%.

But it's cutting back on production to try and balance the supply and demand equation. Even with lower prices steel will remain in demand, both from export markets and locally as infrastructure projects push ahead.

Pulp and paper producer Sappi lost 39.22%, but rival Mondi was an even worse 47.6% down. Both are also possible recovery stocks.

"It's a good time to look at some of our companies. Management is generally good - performance might surprise in the year ahead," Shapiro says.

- Fin24.com