Building a list of stocks that are cheap, very cheap, and could give good return n the next year or three. Criteria;
Using Koyfin I get 46 stocks including REITs and detail them in the podcast. I'll create a watchlist on Google docs and share that link in time.
What about just the mid cap ETF from FNB? FNBMID. Sixty stocks but problem is the top holdings are; Sibanye-Stillwater*, Discovery*, Nedbank, Bidvest and Remgro. That's already ±25% of the ETF and none really for my requirements as above.
Local CPI 6.3% for May (lowest since April 2022) from 6.8% in April and vs expected 6.5%. A very good number and we should see June below 6% as June last year was the first +7% in this cycle at 7.4%. Simple base effect should put some serious pressure on inflation over the next few months.
So is inflation largely over locally? Probably.
Can we start talking about when the MPC starts cutting rates? The next MPC rate announcement is July, the day after we get June inflation and we'll see that the governor says. But cuts are maybe fourth quarter fo this year, at soonest. Standard Bank thinks another 0.25% hike later this year and consensus is cuts only starting next year.
Just this week Spar (JSE code: SPP), MultiChoice (JSE code: MCG) and Telkom (JSE code:TKG) have all cut dividend to zero.
We had big dividend payer Coronation (JSE code: CML) drop theirs to provision for the SARS fine and historically good dividend payer Pick n Pay (JSE code: PIK) reduce theirs.
This shows the pain that companies are experiencing, not all, but certainly some, It perhaps also shows quality, for example Shoprite* (JSE code: SHP) increased their dividend.
The problem is we love dividends for cash flow and they tend to grow ahead of inflation, sometimes well ahead of inflation. They're also taxed better than traditional income from bonds or cash (albeit not as low as CGT). But the downside is that any dividend can disappear at any time.
For investors such as myself, reduced dividend is not a big problem. I like the cash flow but don't need the income for expenses. For those living on dividends the pain is real. If the income is required you need a good amount of bond and cash investments and REITs that aside from the pandemic pay consistently, albeit REITs reduced over the last 5 or 6 years.
Another option is something like dividend aristocrats (we have a local and offshore ETF for these). Here we have companies with decade long track record of paying dividends, but remember Steinhoff (JSE code: SNH) was in the local dividend aristocrat ETF, so even this is not guaranteed. But a basket or ETF works well.
Sun City visit. Excellent resort, but very quiet which many commentators suggest is because it's a random weekend in June?
I sent this past weekend at Sun City, vacation club. Some thoughts.
The resort is world class, well maintained with a ton to do for kids and adults.
— Simon Brown (@SimonPB) June 5, 2023
Not yet but building a watch list with the plan being to buy 10-15 stocks over the months ahead.