Silver lining investments to get you through slump time

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They say to make hay while the sun is shining, but what about during overcast conditions?

The current outlook for SA investors is not as stormy as it was two years ago, but it certainly isn’t clear skies.

While we started the year filled with new optimism in a new president and the looming threat of state capture vanishing, other problems have remained. Thanks to Eskom, plummeting business confidence scores, policy uncertainty and a host of other factors, we haven’t quite seen the economic rally we hoped we would in 2019… 

Luckily, the best thing about markets is that when one thing slumps, another soars. Thanks to some rather unexpected material de-rating, lucrative equity options that were previously high-priced are now more affordable. This is not to say that you should jump ship, not at all! It’s merely evidence of how we can find alternatives in a market that may have us feeling a little confounded.

Mr Price Holdings

In the face of equivalents like Truworths, Mr Price Holdings has shown ongoing rallying in the face of tough conditions – and, right now, the price is appealing to many investors. According to Cannon Asset ManagersChief Investment Officer, Samantha Steyn, “the current valuation is attractive, with a P/E multiple of 13.3 times and dividend yield of 4.6 percent – as compared to its historical five- and ten-year average P/E multiples of 21 and 20 respectively.

Multichoice

Despite competitive rumblings from the likes of Netflix muscling in on DStv’s territory, MultiChoice is going strong. “The current price (around R120 per share) offers an attractive entry point into this high-quality investment. The group has operational leverage thanks to several cost-optimisation strategies, as well as the ability to grow market share in the middle and mass markets,” says Steyn.

And with sports being MultiChoice’s main drawcard still and the Rugby World Cup having received a lot of viewers, this quarter’s figures will likely be even better.

RMB Holdings

Arguably the most exciting opportunity right now is FirstRand giant RMH, normally well out of reach individual investors. Steyn says that “RMH’s discount to net asset value (NAV) is currently around 11 percent, thus offering an attractive investment into FirstRand. This compares to the three- and seven-year average discounts to intrinsic value of 6.8 percent and 3.3 percent respectively.”

Unlike MRP Holdings and MultiChoice, there have been no big uncertainties shaking the price here, and FirstRand has had a cracker of a year so far, well in line with a recent track record of several stable, good years in a very unstable time. The current price-earnings (P/E) multiple is 12.8 times, with an attractive dividend yield of 4.6 percent. And with FirstRand’s ROE projected to be around 22 percent, this promises to be a very good deal indeed.

These are just three examples and far more exist for us to consider in the face of restlessness or looking for new opportunities. It just goes to show that you don’t have to wait for the sun to be shining to make some hay.

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