Arqaam Capital portfolio manager Ashraf Mohamed chose Bidvest as his stock pick of the day and Jean Pierre Verster from Fairtree Capital chose Intercontinental Exchange (ICE).
Mohamed said local banks have come out with their results showing a rather dull South African economy and that will have an impact on Bidvest’s top line, “but they are very aggressive in managing their cost and they’ll be close to maintaining their margin for the second half of their financial year, which is to the end of June. At these price levels the bad news has been priced in, so have it as a two-year buy, especially given that there’s upside in the South African economy from this point onwards.”
Verster says that ICE is an exchange but it actually owns 23% of exchanges, mostly futures exchanges and a few clearing houses, which are the “plumbing” of exchanges — what happens in the background.
“There’s more and more algorithmic trading, electronic trading, happening, which is good for volumes … and like we saw with the JSE locally, these exchanges have got very good pricing power and can increase their fees just a little bit plus with volume growth added to that your revenue can grow and grow very strongly. If you keep a lid on costs, you get very strong profit growth…. I think Intercontinental Exchanges looks like a decent investment proposition.”