Veteran stockbroker David Shapiro, chief investment strategist at Sasfin Wealth, issued a light-hearted challenge last week when he posted a tweet of 10 shares to “make you rich” next year.

“Take on any challengers for a bottle of Aberlour Single Malt,” he chirped.

Read: 50 years of trading on the JSE

Shapiro mentions a paddle and a creek to illustrate that the stock market hasn’t been kind to investors lately, and it comes as no surprise that his choice of shares are mostly companies that have experienced problems lately.

“Paddling up Schitt’s Creek – 10 stocks to make you rich next year (comes with a health warning). Six months to end April,” he posted on X.

His list includes Amplats, African Rainbow Minerals, Growthpoint, the JSE, Kap, MTN, Metair, Nedbank, Pick n Pay and Tiger Brands.

“These companies were all hit hard. They are good companies, not rubbish companies,” he told Moneyweb when asked about the unusual challenge.

He quoted Pick n Pay and MTN as examples.

“Pick n Pay suffered because of a few bad moves, but its fortunes are likely to improve under new management. It is a good company, it’s not going to evaporate.

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“The Nigeria issue [sudden tax demand] hit MTN, but it is always the same story. They fight, make up and become friends again,” says Shapiro.

Both shares have taken a big knock. Pick n Pay has fallen from above R62 at the start of the year to below R25 and MTN from above R140 to the current price of barely R95. It was trading at above R200 early in 2022.

“When I look at the investment environment I start to hear good news,” says Shapiro.

“Listening to the Reserve Bank, I get the idea that nothing is going to happen with interest rates and that the rate cycle is about to turn. Inflation is moderating and interest rates will start to come down.

“Company results are actually quite good. The US economy is doing well. I do not expect a major downturn in markets or a financial meltdown.

“The Russia/Ukraine war is bad news, but the war is not spreading, and the same goes for the Israeli conflict. As far as markets are concerned, the downside is limited,” says Shapiro, adding that the local market is offering good value.

He says his challenge is “for fun” and his stock picks are not a model portfolio, nor properly balanced and weighted.

“That’s why I said that it comes with a health warning,” he adds.

“But I did think properly about my picks. I am sticking my neck out. They are all shares that can recover. There are many more, but I chose these companies that I believe in.

“There is a bit of a balance too,” he adds. “I included shares in different sectors – for instance, only one bank. I could have picked five banks, but did not want to end up with 20 shares.”

He picked Nedbank, at the current price of R201 on a price-earnings (PE) ratio of only 5.9 times, much lower than that of the other banks.

Challenge accepted

One should not accept a challenge from one of the most respected figures on the stock exchange, a man with more than 50 years of experience. Nevertheless, a challenge is a challenge.

Here are another 10 shares that look cheap. It also comes with a health warning: I am not a stockbroker or a financial advisor of any sort, and I am not allowed to give investment advice.

Taking a page from Shapiro’s playbook, I have selected from the many shares that have been hard-hit lately and have the potential to recover.

My selection is less balanced than Shapiro’s, with a strong bias towards mining and commodity shares. Shapiro picked Amplats (which fell from a high of nearly R2 500 early in 2022 to the current R630) and African Rainbow Minerals (down from above R300 in January 2023 to the current R158).

Commodity prices have been declining on the back of slowing economic growth, with prices of commodity shares taking a proper beating as a result. An argument can be made that they can jump if commodity prices recover a bit. For local investors, a weak rand can add a few percent to the prices too.

Read: Five key charts to watch in global commodities

Looking at PEs, my picks include Sasol (with the hope that those US assets start to deliver properly), ArcelorMittal, Implats and Thungela. Implats is facing the same problems as Amplats, but is trading on a lower PE. (There is probably a more risk.)

ArcelorMittal and Thungela are also two very risky punts, but they are totally bombed out and can recover.

AngloGold is included because the gold price has been increasing and the company recently moved its primary listing to the New York Stock Exchange, which may improve its rating over the next few months.

Combined Motor Holdings (CMH) seems solid on a PE of 3.5 and can recover if interest rates fall and people start looking at new cars again. However, the share is always very much a value play and doesn’t really run hard.

Nedbank looks good, but choosing the same banking share won’t work in this challenge. Absa will have to do here, as well as Momentum Metropolitan for a second financial share.

If interest rates fall and consumer confidence increases, consumer stocks such as Spur Holdings, TFG and Italtile – all quite cheap – might look good over the longer term. Hopefully the latter two jump a bit before the end of April when we will check the results.

Listen to Ryk van Niekerk’s Be a Better Investor interview with David Shapiro (or read the transcript here):

You can also listen to this podcast on iono.fm here.