JSE's World Cup winners named by Absa
You may fancy Bafana Bafana, Brazil or England for World Cup glory, but the smart money may be going instead on SABMiller, Sun International and Bidvest.
JSE investors are already looking to score from the World Cup by taking a close look at stocks like these that appear well placed to boost the bottom line during the FIFA event.
Demand for share-market insights into likely corporate winners has prompted a leading unit trust and asset management company like Absa Investments to alert clients to well positioned JSE performers such as these.
An analysis by Absa Asset Management, Private Clients, not only covers obvious sectors like hotel and travel services but companies providing washroom services, clean bed linen and even toothpicks.
Many listed Groups own subsidiaries that could boost sales during the World Cup, says Craig Pheiffer, General Manager, Investments, at Absa Asset Management, Private Clients.
A company like Barloworld owns car rental company Avis, while diversified services group Bidvest owns numerous companies that could benefit from tourist inflows, from travel firms to laundries and washroom service providers.
Other heavyweights of the JSE ‘big board’ have their core business in key growth areas, says Pheiffer. These include beverages giant SABMiller and hotel chain Sun International.
Other potential winners are listed on the JSE’s AltX board.
Among challenges, says Pheiffer, is deciding how much World Cup ‘upside’ is already priced into a share price and the extent to which big businesses will benefit from gains at subsidiaries that have traditionally made relatively small contributions to overall earnings.
Pheiffer explains: “Many companies identified in the Absa Investments analysis will boost top-line revenues from additional sales, but that is not going to be a sufficient condition to buy any share.
“You have to consider whether or not additional revenue will make its way down to the bottom line of the income statement as additional profit. Some companies may spend too much in generating that additional revenue or over-estimate demand.”
The scope of potential economic benefits also creates a problem for investors looking to isolate one or two big winners.
Beneficiaries include steakhouses, foodservices, alcoholic and non-alcoholic beverages, hotel linen and hotel room soap suppliers, leisure and entertainment, chauffeur services, aircraft cabin cleaning and ground handling, foreign exchange and banking services, mobile services and many more.
Even small everyday items that are taken for granted could surge up the sales graph, perhaps with positive impact on a specific share price, perhaps not.
Says Pheiffer: “When the vuvuzelas have just been too much or the beers too many, our tourist friends could reach for a couple of Panados, but that in itself is no reason to run out and buy up Adcock Ingram.
“At least, not without proper scrutiny of other stock selection criteria while considering key questions such as long-term investment objectives and the overall balance of a portfolio.
“Getting a big win in the World Cup is not going to be easy, but we fancy team ‘Corporate South Africa’ to have a good run and do rather well.”
