Print head: My top 9 stock picks for 2024
Subhead: Last year my picks outperformed the small- and mid-cap indices — hopefully my luck lasts
When I was thinking about my first IM column for 2024, I realised I had to comment, as an institutional analyst, on my top nine stock picks for 2024, which I revealed in a webinar in January.
Last year, my top nine selection outperformed, with my basket gaining 11.49% vs 5.49% for the small-cap index and 4.31% for the mid-cap index.
In selecting the 2024 list, I was aware of the enormity of the year ahead — national elections, a fragile and stagnant economy with rising national debt levels and little wiggle room due to the government’s mismanagement of pretty much everything.
Then factor in the Russia-Ukraine war, growing tension in the Middle East and deteriorating relations between China and Taiwan, as well as the November US election — neither Joe Biden nor Donald Trump is a stellar candidate — and my selection had to be more considered and robust for 2024.
I chose more liquid, quality JSE mid-cap shares that I believe have resilience and fair earnings growth prospects. These were Afrimat, Astral Foods, Curro Holdings, KAL Group, Premier and Reunert. Most will be familiar to IM readers as I’ve written about them all. They’re all solid and fairly large stocks within my wide universe.
I added Argent Industrial and Novus Holdings as my small caps (see the Novus company review on page 26).
My “wild card” was Libstar, the down-on-its-luck food producer; I believe it has a special situation quality as a takeout or breakup situation.
As I write, the top nine selection of 2024 is ahead 7.63% vs a modest 1.19% for the JSE small-cap index and a negative return of 2.20% in the mid-cap index. My luck from 2023 continues to hold into 2024; the portfolio is cast in stone until the end of the year and cannot be changed.
I chose more liquid, quality JSE mid-cap shares that I believe have resilience and fair earnings growth prospects
Some stocks have had memorable starts to the year. The star performer is the smallest one, Argent, which now has a market value of R1.04bn. The counter has been a perpetual recommendation of this column and at the time of writing, the stock was trading at R18 — my target for the year — and has gained 18%. I see more to come as March year-end results are ahead. I revised my target to R22 in my normal works. It’s still looks cheap on my forecast p:e of 3.6 on a headline earnings per share (HEPS) forecast of 500c a share.
Premier, the milling and baking company well known for its bread, chosen at R62, has had a wild rise, racing to an intraday high of R82 in late January with a close at R72. Again, Premier made my target, but it has been volatile in modest volume. With the March year-end results ahead and solid numbers at the interim, I have faith it will rise again.
KAL, formerly Kaap Agri, is a carryover from 2023 like Curro and Novus, as I believe they all have continued solid prospects in 2024.
KAL has proven a hit, rising 10.4% with a dividend also paid. I attended the February AGM and thought first-quarter trading was fair, if modest. I believe that quarter is not a proxy for what the counter could attain for earnings to its September year-end. I have targets of R44, then R48 and R54. The p:e, for a quality retailer, is seven.
Briefly on Curro: the private education stock was a star for me in 2023, rising 33%. This year started well but the market did not like the tone of the 2023 year-end trading update. HEPS guidance of 70c-76c was in line with my standing forecast of 72c.
However, learner growth was flat like on like and there was an impairment of 28 underperforming schools. This hit sentiment and the stock is down 8.6% from its recent R12.04 peak. I believe the market has not fully understood the prospects, and results in March should clarify. I maintain my buy and R16 target.
This is just a snapshot in time of the top nine. Let’s see how the rest of the year goes. To date, my luck is holding, as is my outperformance of the market.
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