Which shares would you like in your Christmas stocking?

Alwyn van der Merwe, director of investments at Sanlam Private Investments chooses five shares he would like in his Christmas stocking and Malcolm Steward, portfolio manager at Sanlam Private Investments chooses three shares. The shares have been listed in random order and not in order of preference.

The eight shares below were selected by Alwyn van der Merwe (first five) and Malcolm Steward Cape Town (next three) of Sanlam Private Investments (SPI), which is the second largest private investment manager in South Africa. Both fund managers defensive shares and warned that the macro outlook in 2009 is likely to remain gloomy while the world digests the implications of the global financial meltdown.

British American Tobacco
British American Tobacco has an international footprint of established brands, with an increased focus on emerging economies. More than 60 percent of pre-tax earnings is generated in emerging economies. Although these economies are also affected by the global woes, they have arguably weathered the storm better than most. At current levels, BAT offers an attractive dividend yield in sterling terms. This company offers bigger earnings and more visibility than most, does not trade at a premium to its peers, and remains a core pick.

Reinet
This is an investment holding company that holds approximately 350 million euros in cash and BAT shares. It currently trades at a steep discount to its underlying value. The SPI team doesn't believe the material discount is justified. The decline in global share prices should present this management team with a number of attractive investment opportunities. Corporate action is likely to drive the discount down to the benefit of the shareholders.

MTN
The SPI team believes the investment thesis for African and Middle Eastern mobile growth remains positive in the longer term. MTN remains a cash-generative company. While the sector is capital intensive, SPI believes MTN will be able to maintain spending on infrastructure, increase dividend payouts and still be left with excess cash. Although the share trades at a premium to local industrial companies and to some of its international peers, the SPI team believes it is justified given the nature of its business and the growth potential of the sector.

Standard Bank
Given the slowdown in economic activity, scarcity of funding opportunities and some question marks regarding their balance sheets, banks are operating in a tough environment. SPI believes that the current share price largely reflects these concerns. Despite expectations of pedestrian earnings growth, an attractive dividend yield and a low price-to-earnings ratio offers an inviting entry value. In addition, this bank has a wonderful track record of growing its dividends. It is exceptionally well capitalised after the Chinese purchased 20 percent of its capital.

BHP Billiton
Mining shares were annihilated following a collapse in commodity prices. Billiton was one of the victims. Although SPI doesn't have a significant exposure to mining shares, Billiton remains a preferred counter. This share has quality assets, is cash generative, and has a track record of operational excellence. The withdrawal of the offer for Rio Tinto strengthens the investment case.

SA Corporate
This is a property trust with Old Mutual, with PIC being the largest shareholder. Its properties are spread throughout the country, mostly in retail spaces. At current prices it offers a yield in excess of 11 percent. This will become increasingly attractive as rates decline.

Metlife
This insurance group focuses on the emerging black middle class in South Africa. Its portfolio of equities and bonds will ultimately benefit from lower domestic interest rates. The share offers an attractive dividend yield of almost 10 percent, which should continue to grow over both the medium and long term.

Woolworths
The company underwent a major restructuring during 2008. It has sold 50 percent of its finance book to ABSA, thus releasing large amounts of capital, which will be distributed to shareholders in the form of a special dividend and a buy-back programme. Declining interest rates support both its food and household/ clothing divisions. The development of its garage convenience stores and its ability to deliver ready-made meals, secures it going forward in the retail environment.

A few of the funds that include these investments are the following: Sasfin Equity, Coronation Equity, Coronation Top 20, Nedbank Rainmaker, Stanlib Value, Coronation Absolute Fund, Cadiz Equity Ladder Fund and of course some of the Sanlam funds.