Petri Redelinghuys from Herenya Capital Advisors revisits Sasol and discusses one of his 2025 picks, after a volatile year, and explains Sasol’s strong long-term potential, and asks whether it still earns a place in his portfolio.
Sasol’s strong long-term potential
We have talked about Sasol’s strong long-term potential extensively, typically about buying in at weak points and selling at strong ones. Our views are very much the same as Sasol is one of the core investments in our long-term portfolios that we manage for clients. Earlier this week we were talking about it with BusinessDayTV, where we noted that it was trading below the 200-day moving average and presented an attractive entry point.
Our view is that the long-term trend changed last year around May/June. It managed to break out of that decline and started what we think is a long-term rally. Sasol has been in a sideways consolidation pattern since August, where it is trading between R127 and R93. However, it has managed to get above the 200-day moving average and that is a strong longer-term trend indicator. From the perspective of a fundamentalist, we don’t really see any change. Yes, JPMorgan downgraded the stock a couple of days ago, which resulted in a dip, but we are still bullish on the energy sector.
We understand the excitement around Venezuelan oil hitting the market, but that is going to take a while because it needs to go through additional refining processes before it can become useful to us. Venezuelan oil is not a quick fix just because there is now an additional supply of oil on the world stage. There will be some changes, but we ultimately think that this is something we have seen before over the long run.
When new energy types become available, they are added to the energy mix and do not replace what is already established. Looking at coal, for example, we used it as one of our early energy sources, then we added oil to the equation, and then uranium came along. With each of these new additions, we never replaced what came before. The energy demands of the modern world are only growing with each passing day, especially so with the innovation that is Artificial Intelligence and its integration.
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