Rowan Williams, director of Nitrogen Fund Managers
BUY: FirstRand
South African banks remain a compelling investment opportunity and FirstRand screens as attractive at current entry levels, offering a consistent best-in-class return on equity among the big four. Its recent trading update highlighted strong underlying fundamentals. While headline earnings will drop 4%-9% due to an additional one-off £510m provision related to the UK auto loan commission judgment, the bank’s core business continues to perform strongly. Stripping out the additional provision, underlying profits actually jumped 15%. This growth is powered by strong retail loan growth at FNB and better than expected profit margins, pushing net interest income up over 10% and exceeding previously guided company targets.
Non-interest revenue growth also remains strong, largely in line with previous guidance of around 13%. Financial health remains robust, with fewer bad loans than expected and guidance of the credit loss ratio at the bottom end of the 80bp-110bp range. The bank also eased investor fears by promising a strong dividend payout based on its core earnings before the UK provision, translating to a highly attractive yield for shareholders.
SELL: Bitcoin
The case for selling bitcoin is driven by a fundamental structural shift regarding where “risk capital” wants to be. Currently trading at around $62,000 — less than half its recent record high — the premier cryptocurrency is struggling with a series of structural weaknesses that are causing institutional and retail investors to re-evaluate it as a store of value. Trust within the ecosystem is faltering, evidenced by Michael Saylor’s company, Strategy, recently selling a portion of its bitcoin holdings despite public promises never to do so.
The retail story has also stalled, with US adoption topping out at just 10% for several years. The lack of fresh retail buyers is compounded by major institutional flight, highlighted by bitcoin ETFs net selling roughly $6bn of bitcoin in just six weeks. The selloff is being driven by the massive structural demand from the AI boom. Bitcoin mining facilities have the exact power and location layouts required for heavy AI data centres, making them prime targets for conversion. With the tech industry pulling its capital towards AI and a cryptographic countdown ticking in the background, bitcoin is looking less like digital gold and more like a legacy asset to rotate out of.
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