Are These The Three Best South African Stocks to Buy Right Now?

To Investors,

Yesterday I did something a little unusual, I asked Perplexity to give me the three South African stocks that it thinks are the most attractive to buy right now. I also told the model to optimise for companies that can be resilient in any market condition, but that also have significant future upside.

The first stock that Perplexity recommended is The Foschini Group (TFG). The reasons where:

* Why it stands out: Forecast to grow earnings by 13.6% and revenue by 7.9% per annum, with EPS growth expected at 17.5% annually; strategic acquisitions like White Stuff and leveraging the Bash platform are set to boost market share and profitability across multiple regions and product categories.

* Resilience: Established retail group with a diversified brand portfolio and strong cash flow generation, enabling it to navigate economic cycles and invest in growth opportunities.

* Upside: Future return on equity is forecast at 14.9% in three years, indicating efficient capital use and potential for sustained profitability gains; revenue growth outpaces the South African market average, signalling competitive strength.

The second South African stock that Perplexity picked was Prosus, majority owned by Naspers. According to Perplexity:

* Why it stands out: Prosus is rapidly scaling its e-commerce business, with adjusted EBIT expected to jump from $38 million in FY2024 to $400 million in FY2025, reflecting strong operational improvements and strategic focus under new leadership.

* Resilience: Diversified global portfolio with significant stakes in high-growth Indian tech companies like Swiggy, PayU, Meesho, and BYJU’S, which provide exposure to fast-growing emerging markets and digital economy trends.

* Upside: Potential for substantial value creation through upcoming IPOs of portfolio companies and continued investments in profitable, fast-growing businesses, aiming to double its valuation by building new growth engines.

That brings us to the third stock that Perplexity picked: Southern Sun. The reasons were:

* Why it stands out: Forecast earnings growth of 19.1% and EPS growth of 52.9% per annum, driven by recovery in hospitality and gaming sectors with improving tourism and occupancy rates.

* Resilience: Debt-free balance sheet and its improving free cash flow generation support stability and dividend payments even in uncertain economic conditions.

* Upside: Revenue growth forecast at 8.3% per year, exceeding the South African market average, combined with a future return on equity of 12.5%, signals strong operational leverage and growth potential as travel demand rebounds.

Those are the top three South African stocks to buy right now according to Perplexity. Maybe the model is going to be right, maybe not. What do you think? Do you think that these three stocks are going to outperform?

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great long weekend

-Mansa

Thanks for reading Self-Taught MBA! Subscribe for free to receive new posts and support my work.

To hear more, visit selftaughtmba.substack.com