How To Pick Stocks In A Lacklustre Market

Bear markets and recessionary times in fact offer great buy opportunities for investors. But it is important to pick stocks that will withstand the bad times. Trader Petri Redelinghuys explains his methodology to find local winners.

- Petri Redelinghuys

It is no secret that the South African economy is in trouble. After a brief bout of Ramaphoria, markets once again realised that we had had ten years of Zuma – and now four years of sideways market action with no real return.

This could no longer be ignored as SA has decaying economic conditions and wilting confidence, both domestically and from the international investment community.

SA has a monumental task before it and the changes needed within governmental structures and in the broader socio-economic landscape will take a lot of effort and a lot of time to affect. It may feel like time passes quickly, but the reality is that things change slowly.

Optimism is not ill-founded. But we must stay cognisant of the current state of our economy and how the current economic backdrop can either perpetuate current market themes or perhaps ignite new ones.

THEME 1: Times of uncertainty

The theme dominating the SA investment landscape at present is probably that of uncertainty. No doubt something that many are tired of hearing about by now, as financial media has made countless references to uncertainty being the driver behind the poor market performance locally.

But to contextualise: Investors base their decisions to either invest directly into an economy or via financial markets on a set of long-term objectives unique to them. They have an almost infinite number of investment options from which they can choose and therefore endeavour to choose the investment that they believe will best balance their appetite for risk with their expectation for return.

Going through five finance ministers in six years does not exactly communicate a message of stability and low risk.