David Shapiro: Why the JSE is poised to boom in 2015 (with video)

South Africa’s favourite stockbroker, David Shapiro of Sasfin, came to the Biznews.com studio today to talk about stock market booms and his favourite shares.  The result as always, was entertaining and insightful. In the short video below, South Africa’s favourite stockbroker explains why he is excited about prospects for share prices this year. His logic is unimpeachable – a collapsed oil price will feed trillions of dollars into the pockets of people around the world, lifting global economies and company profits. The longer, in-depth audio interview has been transcribed for your convenience and follows below the video. You can listen to the audio by clicking on the link to Soundcloud.com below the transcript. – AH 

[youtube http://www.youtube.com/watch?v=I9sSaxraNHw]

ALEC HOGG:  In this Undictated Special Podcast, David Shapiro is with us in the studio.  Well Dave, 2015 is just around the corner.  You have some pretty strong views that it could be a good year for shares on the JSE.

DAVID SHAPIRO:  I think so and I think it’s the oil price that’s going to be the big driver of consumerism – globally.  We may only feel it a little later in the year but I think that markets have reacted to the falling oil price from a production point of view and is very worried about producers. But we haven’t seen the benefit that it’s going to bring to consumers’ wallets and to companies as well.  It’s a big factor of production, and so I think that will filter through in the rest of the year and give global markets a huge boost.  I say that because if we look at who the big oil importing nations are; it’s China, its India, it’s Europe – the whole of Europe – and certainly, even America, Japan, as well.

ALEC HOGG:  But people seem to be focusing on other things for the moment – Europe and Grexit, as they call it now, the possible Greek exit from the EU.  Is it because they haven’t really done their homework yet on the impact of the lower oil price?

DAVID SHAPIRO:  I think so.  I think that whether Greece goes or not, we’re automatically assuming that the Syrzia party is actually going to win the Greek election and they’re going to opt for an exit.  That’s not right.  Firstly, we’re not sure whether they will win it and secondly, if they do win it, it doesn’t mean that they’re going to go out.  Also, their view is that Angela Merkel will actually not welcome it, but won’t oppose it so I think there’ve been knee-jerk reactions to Europe.

ALEC HOGG:  Do you remember what Charlie Munger said about Greece at the Berkshire Hathaway AGM?

DAVID SHAPIRO:  Repeat.

ALEC HOGG:  “It reminds you of your brother-in-law who’s in the family business, but he prefers to spend his day in the country club with the company’s credit card”.

DAVID SHAPIRO:  You know what’s ironic is that Greece was actually starting to look better.  Their economy was improving.  It was going in the right direction.  Maybe that’s too strong a way to describe it, but it was moving in the right direction.  Bond yields there were coming down.  People were feeling more sanguine about Europe and all of a sudden, it’s raised issues about Italy, France, Portugal, and Spain.  I think there are enough good companies in Europe that are export-orientated.  What we haven’t factored in, in the companies themselves, is that the Euro has fallen dramatically, which means that a lot of companies like BMW, Daimler, LVMH the luxury goods company and the pharmaceutical companies are now producing at significantly lower levels so that becomes a big theme for European companies.

ALEC HOGG:  So investing-wise, you don’t really have to worry too much about Greece.  This stock market boom, though – and we have spoken about it before, the surges in 1987. 1997, 2007…  Do we have to wait for 2017 to see that again?

DAVID SHAPIRO:  Remember with those booms…you started to see the early stages a long time before. I think that’s what we’re going to start see now is the early stages of a major boom.  Again, it’s coming from the consumers’ side.

ALEC HOGG:  How much do share prices go up in a major boom like that?

DAVID SHAPIRO:  We talk dramatic: 30/40/50 percent.  Who knows?  I think this is the one leg that we’re still missing from the turnaround that we saw in 2009.

ALEC HOGG:  So the smart money….

DAVID SHAPIRO:  We haven’t seen them…  The smart money will start to get out later on , but you have to go for the ride.  This will be the blow-off of the boom that started in 2009.

ALEC HOGG:  Is the smart money still getting into the market?

DAVID SHAPIRO:  It’s been in for a long time.  It’s the other money that hasn’t come in, that comes in, and that gives it this kind of boost.

ALEC HOGG:  So it’s almost like the dumb money comes in late, pushes it to the stratosphere and then…

DAVID SHAPIRO:  The sceptics – the cynics who’ve been worried about things like inflation, American debt and all those things that we heard around 2010/2011.  Suddenly, you turn around and say ‘things are not that bad, particularly in the U.S.’, so I’m quite positive on the global economy.  South Africa remains another issue.  We have electricity issues here.  We have structural issues here.  If you looked at the matric results, I think those are all worrying factors but it doesn’t mean that the boom will pass us by.

ALEC HOGG:  Because our companies are exposed to what happens in the rest of the world?

DAVID SHAPIRO:  Dead right.  We have wonderful companies here on the JSE – seriously, big, good companies.  If you look at Tencent and Naspers which I think as we talk now, is trading at an all-time high.  Why?  Because Tencent is starting a bank, so you have those kinds of companies.  Aspen, British American Tobacco, SAB, and Bidvest…you have a whole host of companies that I think, will benefit from the global turnaround.

ALEC HOGG:  So what’s your pick for 2015, if there was one pick you could make?

DAVID SHAPIRO:  On the local market, it’s hard to say.  I’m still going – and you’re going to kill me for this – with Naspers.  I don’t think we’ve seen…  I think Chinese Internet companies are going to run…

ALEC HOGG:  I like Naspers.  Remember, last year I said to you after Davos  – in fact, two years ago – I said this is a company that the rest of the world knows and there aren’t too many South African companies that are held in such high esteem as Naspers is globally. So I would go with you, Dave.

DAVID SHAPIRO:  Don’t be scared of it.  Alibaba is another one that I would take offshore.  I think we haven’t built in China as an economy and some of the Chinese companies – I can’t pronounce the name of the Smartphone that they produce (Xiaomi).  It’s huge.  They’ve doubled their sales.  I wish I knew it, but you’ll pick it up.

ALEC HOGG:  We’ll pick it up and we’ll put it onto the transcript.  That was David Shapiro from Sasfin.

 

[soundcloud url=”https://api.soundcloud.com/tracks/184736698″]

 

 

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