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Cape Town - Bloomberg analysts recently compiled a list of 50 companies to look out for in 2016. The companies they listed are either, according to them, poised to make big gains or are set to face some tough challenges. Listed below are five of these companies that South African investors will recognise as household names.
1. Walt Disney
The Walt Disney Company has come a long way since its start in 1923. According to Bloomberg, the company is getting a big portion of its current revenue from cable television. However, US consumers are moving away from cable television and more towards streaming services such as Netflix. With the price of data and internet becoming cheaper, streaming has become a very popular alternative.
In 2011, just over 3 million American households were using streaming services. In 2018, it is estimated that over 16 million homes will be making use of these services. The Walt Disney Company will have to change its model if it wishes to remain competitive in this area.
Bloomberg analysts estimates The Walt Disney Company to grow their earnings per share by 17.2% in 2016.
2. Microsoft
Microsoft has recently launched the new Windows 10. With more users preferring to use their tablets and smartphones over their desktops, Microsoft made the decision to design Windows 10 to be used on all these devices. Google Play and the Apple App Store are market leaders in providing their users with applications that are suitable to run on all their respective devices, with Microsoft still trying to catch-up. Windows 10 might just be a step in the right direction for Microsoft.
Bloomberg is expecting Microsoft to grow earnings per share in 2016 by 2.6%.
3. Kellogg’s
Kellogg's who has given South Africa household names like Corn Flakes, Frosties and Rice-Krispies is battling with the change in worldwide eating patterns. All over the world, consumers are becoming more health conscious and would rather have scrambled eggs on rye with some salmon than a carb-loaded breakfast with low-fat milk. As a result, packaged and processed foods are becoming less popular.
In the third quarter of 2010, global sales of snacks had double-digit growth rates. Quarter 2 of 2015 has seen negative growth rates as more and more people are moving away from unhealthy snack foods.
The Bloomberg analysts predict a 7.8% drop in Kellogg’s 2016 earnings per share.
4. DreamWorks SKG
The big American film producing company has been trying to tap into the world’s second-largest movie market, China. With the Chinese economy moving towards a consumer driven economy along with the lifting of the one-child policy, China is set to offer enormous earnings potential, especially in the animated movie space.
DreamWorks will be releasing Kung Fu Panda 3 in March 2016, a film they co-produced with Chinese investors and one that will be exempt from the Chinese foreign film quota. Expect more partnerships like this one in the future as the Chinese consumer market continues to grow.
According to the Bloomberg analysts, DreamWorks is expected to grow earnings per share in 2016 by 49.2%.
5. Hewlett-Packard
To the average South African, the name Hewlett-Packard is synonymous with office printers, desktops, laptops and various other computer accessories.
However, according to the Bloomberg analysts the shift away from traditional computing to cloud computing is eroding the demand for the outsourcing of IT infrastructure. It is estimated that Hewlett-Packard will see an estimated drop in earnings per share of 3.1% in 2016.
The global spending on cloud computing is projected to increase from $5bn in 2012 to $25bn in 2018 with worldwide infrastructure outsourcing projected to decrease over the same period.
* Kirk Swart is an analyst 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.
Disclaimer: The above article does not constitute financial advice and is not a recommendation. Investors must always seek the advice of professionals and trade with caution. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
