WATCH: Stock picks — Rolls Royce and Naspers

Nic Norman-Smith from Lentus Asset Management chose Rolls-Royce as his stock pick of the day and Deryck Janse van Rensburg from Anchor Securities chose Naspers.

Norman-Smith said the car business was sold off to BMW some time ago, and most of the business now makes wide-body engines, and the company is one of only two manufacturers in this space.

“Their business model is to sell the engines at a loss but then gain revenue for services over the next 20 years, but what has happened now is that they have sold too many engines and have not had enough time to recoup the cash flow in services. They have moved up their market share and in the future you will see a lot of cash flows that will be generated off of their current sales.

In choosing Naspers, Janse van Rensburg took a look at where the global tech involvement was taking place, and how Tencent underpins to the share price.

“Understanding Tencent is critical when evaluating whether you should buy Naspers or not. There are also other companies within Naspers that are moving out of the J-curve, are generating cash flow and their possibility to list is significant. Looking at their forward multiple of 32 times, it may seem expensive but Tencent is set to grow by around 20%.”