If you are wondering what stocks to buy in this economy, you need to be looking at agriculture and consumer stocks, according to securities firm Morgan & Co.
Stock market investors should watch these factors; government spending in farming, the next agricultural season, the distribution of US$961 million in IMF money and risks around the exchange rate, says the broker in a September 15 note to clients.
“As much as we hold a bullish view on the entire market, we do expect some industries to benefit from positive stimuli than others,” Morgan & Co says.
“A combination of the SDR allocation alongside above average expected rainfall for the coming season look to be positive signals for players in the agricultural sector. The government of Zimbabwe clearly has high expectations for the industry and has vowed to continue its support for the sector.”
So, which stocks exactly are good to buy?
Morgan & Co says: “Based on our assessment of the economic trajectory and our index research, we think that any efficient portfolio looking to benefit from the economic resurgence in the 2021-22 period should be overweight in the food and agriculture and consumer sectors. Top picks include Seed Co Zimbabwe Limited, Simbisa, Delta and Afdis.”
In the year to March this year, Seed Co reported a 61% jump in maize seed sales. This was driven mostly by government input schemes. The seed company has recently commissioned a new plant meant to deliver seed faster to farmers.
Despite pressure on pockets, consumer spending has been resilient for companies such as Simbisa, Delta and Afdis.
However, Morgan & Co still sees some risk. Inflation, fueled by exchange rate instability, continues to dim prospects. The auction has remained inefficient, with companies facing delays of up to nine weeks to get their forex allotments from the system.
“Exchange rates have a direct pass-through effect to price levels in Zimbabwe,” the firm says.