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This is the Sharenet company blog where we will bring you the latest news and events on the go at Sharenet, together with tips on using our site and our products.

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    Daily Market Update

    The JSE closed up 0.34% at 28171 with value traded at R8.43 billion. Advances led declines 203 to 162. Mining closed down 0.18% at 33717, while Industrials were up 0.99% at 24485 and financials ended the day up 0.12% at 25732.

    The best performing sectors of the day were Development Capital up 4.2% at 1191, Diamonds Mining up 2.7% at 631 and Beverages Index up 2% at 57515, while the worst were Platinum Mining down 2.5% at 104, Gold Mining down 0.9% at 2867 and Automobiles & Parts Index down 0.7% at 2957.

    There were 24 new 12 month highs today, including Petmin which closed up 10.4% at 170, PSG up 8.2% at 3050 and Sycom up 5% at 2204.

    Of the major stocks Goldfields ended down 0.95% at 12801, Sasol was up just 0.05% at 24411, Anglo was up 1.12% at 37697, MTN ended up 0.92% at 10375, while Angloplat lost 3.78% at 114501.

    Biggest gainers of the day where Petmin up 10.39% at 170, PSG up 8.16% at 3050 and Eland up 6,7% to R110, while some of the losing shares included Village down 15.44% at 115 and Telemastr off 14.29% at 300

    The Dow was up 0.1% at 13138.90 and the S&P 500 unchanged 0% at 1494.77 a few moments ago.

    Gold was up 1% at $ 679.75/oz

    The rand was last trading at R 7.03 to the dollar, R 14.05 to the pound and R 9.60 to the Euro.

    Permalink2007-04-30, 18:30:24, by ian Email , Leave a comment

    Private equity buyers start to sell

    One market commentator noted today that PE used to stand for price earnings ratio, now, it’s also standing for private equity. So what is this private equity and what is the reason for it getting so big in recent years.

    In its simplest form, private equity is a consortium of capital that instead of buying say 5% of the share capital of a company, it buys out 100% of the shares. In this way they own it privatively (i.e. not together with other shareholders, on a listed exchange).

    The boom in recent years has been driven by 2 things. Firstly the liquidity bubble, which needs to find a home, and secondly the low cost of debt, which allows private equity capital the ability to gear up, in itself further boosting liquidity.

    Global investors have sustained a very high appetite for risk in a global market where yields and hence expected returns low.

    Private equity firms have benefited from investor appetite for riskier and riskier deals. They have had no problem raising fresh capital and like a man with a hammer, where every problem looks like a nail, a private equity firm has plenty of capital that needs a home.

    Just a month ago however the large US private equity firm, Blackstone announced that it was looking at a listing on the New York Stock Exchange. This will take it from a limited partnership structure to a listed company.

    Now why would one of the world’s largest private equity firms, want to take itself public. Its somewhat ironic, but speaks to the state of the market. I think it’s the smart money looking to make the best deal. The principals that currently own the business know the appetite for their type of business, and if there is such appetite, why not take full advantage.

    A figure of $25 billion as a valuation of this business has been bandied around, but this could be on the low side given the appetite. Remember whenever a company is listed, despite all the fantastic reasons for doing so put forward, the current owners are selling out a chunk.

    In a case like this, where Blackstone’s business is to do valuations, a potential buyer must understand that it’s the sellers that know a lot more than he does. It may be a case of the smart money getting out while it can and the dumb money overpaying.

    That’s all for now.

    Have a great long weekend

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-26, 20:04:37, by ian Email , Leave a comment

    JSE Higher Ahead Of Long Weekend

    LOCAL MARKETS

    Strong Asian markets and the Dow breaching the 13 000 level yesterday has boosted the JSE today. "It's starting to get quiet in terms of volume as the long weekend approaches."

    The rand hasn't reacted to worse-than-expected local producer inflation data after drifting below the R7/$ late on Wednesday. Demands by importers and profit taking has weakened the local unit slightly this morning.

    OVERSEAS MARKETS

    The Dow reached a record high yesterday and is set to continue it's good run today. A strong earnings report from Apple should lift stocks further at the opening later today.

    European markets have opened higher this morning thanks to a strong close on Wall Street. The Royal Bank of Scotland and Barclays are still in the spotlight over their battle for ABN Amro.

    Asian markets have closed higher today. Positive earnings reports from Japanese blue chips boosted the market and investor sentiment.

    COMPANY NEWS

    DRDGold has reported a 21% decline in gold production in the quarter ending March. This loss reflects declines in Australasian and South African production since the December quarter.

    Aquarius Platinum's third-quarter net profit has increased by 158% to $47.9 million. This is largely due to higher precious metal prices.

    Anglo American has plans to expand their energy operations through their activities in clean coal. Possible acquisitions or a joint venture are options for them at this stage.

    Permalink2007-04-26, 13:22:29, by Marika Email , Leave a comment

    The Yale Endowment model continued

    I briefly touched on the Yale Endowment model yesterday. It’s an interesting model and I will discuss more aspects today.

    The endowment only has an allocation of 11,6% to domestic (i.e. US) equities, but it says “The need to provide resources for current operations as well as preserve purchasing power of assets dictates investing for higher returns, causing the Endowment to be biased toward equity.

    It goes on to say “In addition, the University’s vulnerability to inflation further directs the endowment away from fixed income and toward equity instruments.”

    So despite the fact that it only owns 11,6% in US equities it has a low tolerance for fixed income assets, i.e. bonds and wants the real returns that equity provides.

    To lower volatility and downside risk though it diversifies and this is where its model has deviates from a traditional balanced pension fund.

    It goes on to say, “Hence 96% of the Endowment is targeted for investment in assets expected to produce equity like returns, through holdings in domestic and international securities, real assets and private equity.”

    At the end of its last financial year it had the following asset allocation:

    Absolute return --- 23,3%
    Domestic Equity --- 11,6%
    Fixed income ---3,8%
    Foreign equity --- 14,6%
    Private equity --- 16,4%
    Real Assets --- 27,8%
    Cash --- 2,5%

    So it’s really an allocation to 5 main distinct asset classes. Bonds and cash have very low weightings.

    The absolute return is interesting. It says that it 1990 it became the first institutional investor to pursuer absolute return strategies as a distinct asset class. It began with an allocation of 15%. Now the strategic weighting is 25%.

    These are allocations to hedge fund managers with different investment styles looking to produce returns irrespective of the market returns. Half is event driven strategies and half is value driven strategies which involves hedged positions.

    Another interesting point on its local equities allocation is that despite the fact that they recognise the US equity market to be highly efficient, they don’t invest into tracking funds but elect to pursue active management strategies, aspiring to outperform the market index by a few percentage points annually. To this end they favour value driven bottom up stock pickers.

    Well that’s all for today. We still have a few more places left at our seminar next week in Jhb and Pta. Please mail me on ian@seedinvestments.co.za for more details.

    I won’t even mention the cric…..

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-25, 18:06:06, by ian Email , Leave a comment

    Investors Confident as JSE Drifts Higher

    LOCAL MARKETS

    Solid gains in Europe and resource stocks have led the JSE higher today.

    The rand is steady as consumer inflation data released today was in line with what the market expected. The local unit has been enjoying a strong run lately, led by positive sentiment in emerging markets and a stronger euro.

    OVERSEAS MARKETS

    Wall Street is set to continue it's good run in recent days with another predicted stronger opening. The Dow is still looking to hit the 13 000 mark as the market awaits positive earnings reports today.

    European markets are higher thanks to a boost in financial stocks.

    Asian markets have closed lower after data was released suggesting that economic growth will keep slowing in the United States - affecting Asia's exporters.

    COMPANY NEWS

    Harmony Gold has posted a 31.8% rise in third-quarter headline earnings per share. The world's fifth-largest gold producer has benefited from a higher gold price and various development activities.

    Lonmin plc's first-half refined metal sales has fallen by 28% year-on-year to 513 278 ounces of platinum group metals (PGM). A closed furnace has affected production but they expect things to be back on track by the end of the month.

    The South African medicine control authority has approved Aspen's (Africa's biggest generic drug maker) production of two key anti-retroviral (ARV) products.

    Permalink2007-04-25, 14:03:36, by Marika Email , Leave a comment

    The Yale Endowment investment model

    The Yale Endowment investment model makes for a fascinating study. I have just started perusing their 2006 annual report, which goes into some detail on the benefits of its diversified investment policy. This is a large investor by any means with $18 billion under management.

    The Yale Endowment contains thousands of funds from donors over the years. We will just start to touch on the investment policy that this endowment fund started to take some 20 years ago.

    The fund has had a very good 3 years returning 19,4% in 2004, 22,3% in 2005 and 22,9% in 2006.

    Its investment construction is described as being one that is structured using a combination of academic theory and informed market judgement. The theory uses statistics to look at the estimated returns and risk profiles from the various asset classes.

    Because investment management involves as much art as science, qualitative considerations also play a big role in portfolio decisions.

    The result of this process saw a dramatic shift some 20 years ago when 75% of the endowment was allocated to US stocks, bonds and cash. Today the target allocation to US specific equities is only 16%. The balance is directed at foreign equity, private equity, absolute return strategies, and real assets.

    The main reason for the very different asset allocation? Their return potential and diversifying power. The report makes the points that the new allocation model (now some 20 years old) has significantly higher expected returns with lower volatility.

    I will go into more detail on this model in future reports.

    For those investors seeking a defined investment strategy for their personal investments that takes many of the Yale endowment investment policies into account, please don’t hesitate to contact me. We will send further information on our approach. E-mail ian@seedinvestments.co.za

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-24, 20:35:54, by ian Email , Leave a comment

    Weaker Rand Leads Resources Higher

    LOCAL MARKETS

    A weaker rand has led resources stocks higher, resulting in a positive opening for the JSE this morning. Positive earnings reports are also boosting the market while overseas markets remain mixed.

    The rand is slightly weaker today. The local unit is still eyeing important economic data due out tomorrow and Thursday ahead of the long weekend. Traders believe it should remain in the R7.00-R7.15/$ range.

    OVERSEAS MARKETS

    US markets should open slightly higher today as investors await the latest earnings report on the real estate market. The Dow is looking to reach the 13 000 mark thanks to a spate of positive earnings reports released this morning.

    European markets have drifted weaker today on the back of falls in the property and construction sectors.

    Asian markets have closed flat as investors remain cautious ahead of annual earnings reports to be released later today.

    COMPANY NEWS

    Jay Naidoo has been appointed as the non-executive director of Old Mutual Life Assurance Company of South Africa (OMLACSA).

    PSG Fund Management has acquired m Cubed's existing business in Guernsey. This expands their Channel Island interests.

    First National Bank has scrapped 15 fees and reduced 10. Daily electronic banking transactions and cellphone banking will be free and annual fees on credit cards will be reduced to R99 per year.

    Permalink2007-04-24, 12:59:53, by Marika Email , Leave a comment

    Predicting future returns

    Predicting returns from asset classes has a theoretical mathematical formula, but actual events often have a way of making a mockery of such theory – in the shorter term at least. Over the longer term there is a lot of merit in reversion the mean, and investors should be aware of some of the science.

    Looking back, one well known asset management firm detailed a useful rule for evaluating longer term investment prospects as follows:

    Expected return = initial yield plus long term growth rate.

    At the time, December 2001, the dividend yield was 2,8% and the long term real growth rate of listed company earnings was 2,6% per annum. The sum of these 2 was at that stage the prospective real return from local equities. This assumed no other changes.

    Again in 2005, the firm produced a chart showing rolling starting price to earnings from 1960 and subsequent 5 year returns. The trend is very clear, the higher the price paid (in the form of higher price to earnings multiples), the lower the subsequent 5 year return.

    The prognosis proved to be FAR too conservative.

    But still there is merit in the arguments. Today another well known boutique manger put up in a presentation the prognosis for low prospective returns based on current high prices. Again because the current dividend yield at 2,2% is far lower than the long term average the expected long term real return is a low 1,8%.

    In a paper titled, “return predictability and asset allocation strategy” in 2004, HSBC made the point that the dividend yield displays remarkably strong long term mean reverting properties.

    Again their assessment of UK equity returns from 1900 – 2002 was that lower starting dividend yields generally led to lower 5 year prospective returns and vice versa.

    Their view was that 2 main factors affect the returns, starting valuations and economic environment.

    History, albeit only a few years after these concerns has made a mockery of these low return expectations. Especially in South Africa, where the five year return from the local market has been 23,8% with the inflation around 6%. The returns over the last 3 and 4 years have been around 40% with inflation around 5%. This should actually just make an investor even more nervous, not less so.

    The ridiculously low expectations have been ridiculed, but when it comes to investing, always remember that it’s a marathon and not a sprint. Never judge short term outcomes.

    That’s all for now. We still have a few places for our investment seminar in Jhb and Pta. Please mail me on ian@seedinvestments.co.za

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-23, 17:39:13, by ian Email , Leave a comment

    Delayed Start to Futures Market

    LOCAL MARKETS

    Technical problems delayed the opening of the futures market this morning, resulting in a flat opening for the JSE. "It's a quiet day on the market which is likely to look towards overseas markets for some kind of direction" remarked a Cape Town based dealer.

    The rand is unchanged from last week's levels and is looking towards producer and consumer inflation figures due out on Wednesday and Thursday this week.

    OVERSEAS MARKETS

    Investors and traders believe this could be another big week for the Dow which reached record levels last week. Strong earnings reports and positive investor sentiment are driving the market at the moment.

    European markets have risen early this morning on the back of strong earnings and acquisition reports.

    Asian markets pulled back a large portion of their gains to end slightly higher today.

    COMPANY NEWS

    Shoprite's shares rose 14.5% above the R28/share bid by Brait Private Equity. Investors are awaiting either a higher bid or the collapse of the deal. There are doubts that the deal will go ahead as investors believe the offer is undervaluing the company.

    First National Bank ( FNB ) has launched a cellphone banking offering in Namibia - heralding a new era in the country's electronic banking system.

    Paul O'Flaherty, deputy CEO and CFO of the construction company Group Five, is leaving the group at the end of June.

    Permalink2007-04-23, 11:22:20, by Marika Email , Leave a comment

    The value of Strategic Focus

    Strategic focus. Its worth a lot of money for any business. For Tiger Brands its strategic focus today was worth around R2,5 billion. That’s the increase in market cap after announcing a strategic review of its healthcare – not too bad at all, and should get some other companies looking at their own focus. Because it’s worth such a lot I think private investors should also look at this thing called strategy.

    Today Tiger brands announced that it had completed a strategic review of its healthcare business. When one thinks of Tiger Brands you don’t typically think healthcare, but the company owns Adcock Ingram, which has various pharmaceutical and hospital products in its range.

    The conclusion of the strategic review is for Tiger to concentrate on its core fast moving consumer goods (FMCG) operations and divest of most of its healthcare business. Although the Adcock Ingram business is well positioned for growth it’s a different business to the FMCG and Tiger Brands recognises that it wants to be a focused FMCG business.

    Tiger brands was originally known as Tiger Oats and it itself was unbundled from CG Smith in the Barloworld stable.

    In 1999 Tiger Oats bought out minorities in the business that it now wants to separate out.

    In 2000 it changed its name to Tiger Brands to reflect its core business of owning and managing top brands. These include such staples as Tastic rice, All Gold, Fattis and Monis etc.

    Over the years Tiger brands has been focusing and divesting. In the past it owned Oceana Fishing, now Oceana Group.

    Until a couple of years ago, Tiger Brands owned Spar, which it unbundled to shareholders. This has risen from around R20 in 2004 to its current R51.

    Tiger Brands shareholders gained an additional R2,5 billion today as the price jumped over the R200 level to 20040c, giving it a market cap of R34 billion.

    Over the years the increasing focus has been worth millions.

    With companies, as with so many things in life, focus is very important. Businesses that are focused on a core, develop the necessary expertise and economies of scale to offer customers better value. Customers that receive better value tend to remain loyal. A company with loyal customers providing a valuable service or product at the right price in itself becomes more valuable to the owners. This is exactly what we have seen with Tiger Brands over the years.

    This focus comes about by taking the time out and looking at the strategy, not by being busy in the trenches. The role of the board of directors is to do define the strategy and then to ensure that the strategy is implemented. Over time they will be measured by how successful they are in defining and implementing a strategy.

    Because strategy is potentially worth such a lot, we at Seed have been spending a lot of time on this as well. Our focus though is setting out the investment strategy for private clients and then ensuring that this is implemented properly. Strategy is defining the long term objective. While ALL investors need it and some believe that they have one, most don’t. Again it’s a matter of setting aside the time and making sure that its done properly and systematically.

    We are in Jhb and Pta at the beginning of May for a couple of one-hour seminars and will have a top rated fund manager speaking. We have a few places left. Please mail me for details if you would like to make this.

    Have a great weekend

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-20, 18:23:49, by ian Email , Leave a comment

    Positive Sentiment On JSE

    LOCAL MARKETS

    The JSE opened higher this morning after a strong close on both Wall Street and Asian markets. Investors are optimistic about equities, shrugging off recent losses in the Chinese market.

    The rand is higher and is looking to break through the R7/$ mark. The deciding factor is if the gold price firms later today.

    OVERSEAS MARKETS

    Upbeat earnings news led the Dow Jones to a record high yesterday and is looking to extend this rally today.

    European markets have opened higher this morning, following Asian markets up and shifting focus onto corporate results.

    Asian markets recovered after yesterday's slump, ending higher today. Investors panicked after hearing that China's economy grew by 11.1% in the first quarter - raising concern that China would raise interest rates to slow this figure down. The markets rallied today, following overseas markets and their reaction to this report.

    COMPANY NEWS

    Exclusive Books has acquired Van Schaik Bookstore, a division of VIA Afrika Limited for an undisclosed sum. This acquisition is subject to certain conditions as well as the Competition Commission's approval.

    Harmony Gold is planning on creating a new unit headed by former London analyst, Georges Lequime. He will assist the company by selling off some less-profitable mines and collecting royalties from new owners.

    Allied Technologies (Altech) has sold part of their tracking system business, Altech Alcom Matomo, to Platina Venture Holdings, a black investment firm.

    Permalink2007-04-20, 13:02:56, by Marika Email , Leave a comment

    don't interrupt the person doing

    On my way home I spotted the billboard with the Bernard Shaw quote or was it the Chinese proverb saying, “The person who says that it cannot be done should not interrupt the person doing it.” I got to thinking that this is very relevant for those who believe that it’s impossible for investors to beat a benchmark such as the JSE All Share index.

    There are those portfolio managers that can and do beat this benchmark and on a consistent basis. Let’s be clear it’s not very easy. The reason that it’s not easy is that by and large the market is fairly efficient. By that information is quickly and efficiently factored into valuations.

    But this is not always true and it’s not true for selected shares and selected markets at various times. Astute investors have a process to always weigh up the valuations against the prices, and committing when they have higher conviction levels.

    Over the last few years the South African stock market benchmark, the FTSE/JSE All Share Index has been on an absolute tear. The bar has been set extremely high and only the best have been able to clear the hurdle.

    For the 12 months to the end of March the index gained 37,4% and over the last 3 years the annual total return was 40,6%. Taking into account some of the market dip to March 2003, the 5 years return is dragged down to an annualised 23,6%. Still not too shabby at all.

    Because the index has a high exposure to the resource heavyweights like Anglos and Billiton, when they move up sharply, like they have, their effect on the index is material, making it very difficult for a portfolio to outperform. Over any longer period, this weighting is neutralised.

    So those doing the interrupting should look to see who is doing it.

    Well looking at the Alexander Forbes Manager Watch to the end of March, it is clear that some managers are beating the index. Depending on the period of measurement. The last 12 months have been tough, the average manager has underperformed that hurdle by 1%.

    Over 3 years, despite the 40,6%, the average manager outperformed by 2% per annum, with that sector not hugging the benchmark outperforming by 3,1%. Over the longer more normalised period, the average manager outperformed by 6%, with those not benchmark hugging outperforming by almost 10% per annum.

    So is it possible? Yes. Is it easy? No. The question I always ask to any private investor is this "Are you tracking your performance monthly, quarterly, annually every five years?" No one should lose out even on 3% per annum compounded. As I have mentioned, it can amount to a massive difference at retirement.

    I am coming up to Jhb and Pta in the first week in May. We are having a one hour seminar with a top rated fund manager chatting and then a discussion on investment strategy. We have some spaces left. Please let me know if you would like to make this, and I will mail you details. You can mail me on ian@seedinvestments.co.za

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-19, 20:17:37, by ian Email , Leave a comment

    Mining Stocks Lead JSE Lower

    LOCAL MARKETS

    The JSE has opened lower this morning as mining shares took a tumble on the back of weaker Asian markets. Losses in the resources sector led the market to a weaker close yesterday.

    A weaker gold price has led the rand almost 2% lower today. Profit taking and concern in Asian markets has affected the local unit.

    OVERSEAS MARKETS

    The Dow soared to a record high yesterday but the futures market point to a lower opening today thanks to jittery Asian markets.

    European markets have opened lower this morning, following the slump in Asian markets.

    Asian markets have dropped further at the close today over worries of an increased interest rate.

    COMPANY NEWS

    Absa has launched their senior bond programme through an inaugural auction of R250 million ABS5 bonds. These bonds have been over-subscribed and the entire auction was cleared at a yield to maturity of 8.44%.

    Sekunjalo (SKJ) are expecting a 100% increase in earnings for the half year ending February 2007. Improved earnings in the fishing sector positively impacted on these results.

    Peermont Global, the casino and hotel operator, has sold just over €600m worth of high-yield bonds to finance their buyout by a black investor consortium.

    Permalink2007-04-19, 13:26:49, by Marika Email , Leave a comment

    Is there a bias in your investment process?

    I noted one of the most common mistakes mentioned by US fund manager, Ken Fisher, is that of overconfidence in one’s investing skills. For most pursuits, confidence in a vital ingredient. This common mistake for many self directed investors is natural, but is the result of an emotional attachment to the process, which often introduces a biased approach.

    Because no one is immune to bias, it’s vital to create an environment that removes the emotional element.

    “What do you mean Ian?. Its good to be close to your investments.” I hear you say.

    Well let me put it this way. How many investors hold onto a share for one of the following reasons?

    . their grandfather bought it for them when they were born, and there is just no way that they can sell the share.

    . “Sell my AA shares. No way. I put in 35 years of blood and tears into the company. I know it inside out. I will NEVER sell these shares that I have accumulated.”

    . “But I bought these at R35, I can’t sell them now at R30 and incur a loss. I must wait until they recover first.”

    . “I will have a CGT liability if I sell. I just hate paying SARS any more than I have to.”

    I continue to be surprised how many investors have such an emotional attachment to a particular share or portfolio of shares.

    Do they monthly, quarterly or even annually assess their holdings against the total universe of investments. Very very seldom. More often than not this type of process is not comfortable. Perhaps they would rather not know that they can achieve better results.

    These are the types of biases that set in. It’s very understandable and we all suffer from, but I am more and more convinced that each investor MUST maximise the potential outcome for the portfolio that they have. The compounding effect of additional gains could possibly mean the difference between drawing down R45 000 or R55 000 a month in retirement.

    The only solution, whether you do it yourself or whether you use an investment consultant, is to get rid of those biases and working on a defined investment process. This is not a once off exercise, but a systematic process.

    I am up in Jhb and Pretoria at the beginning of May. We are having a seminar with a top fund manager and then also briefly running through defining an investment strategy. Please mail me for more details if you are interested in attending.

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-18, 20:14:46, by ian Email , Leave a comment

    Write On The Marketviews Blog!

    Do you have an opinion or expertise in the world of investing and want everyone to know? How about submitting me an article or comment about anything you wish to discuss - and see it published here on the Marketviews blog!

    Email me at editor@marketviews.co.za and make yourself heard...

    Permalink2007-04-18, 16:32:18, by Marika Email , Leave a comment

    Rand Likely To Break Below R7/$

    LOCAL MARKETS

    The JSE has opened significantly lower this morning as the market pulls back from the last few day's gains. A strong rand and profit-taking has led the market into the red.

    The dollar is still under pressure from the rand which looks to break below the R7/$ level. No data is due out today so traders believe the local unit should remain range-bound (R7.00-R7.08/$).

    OVERSEAS MARKETS

    Wall Street is set to open slightly lower today after mixed earnings reports in the previous session. US shares ended up yesterday after news that inflation is easing.

    European shares opened lower this morning on the back of fears of an interest rate hike soon.

    Asian markets ended moderately higher today. Positive earnings estimates boosted the property sector, contributing to the markets' gains.

    COMPANY NEWS

    The PSG Group has reported record headline earnings - rising almost 48% - in the financial year ending February 2007.

    Nedbank will introduce an overdraft facility fee ahead of the National Credit Act coming into force in June.

    Permalink2007-04-18, 13:47:36, by Marika Email , Leave a comment

    Don't be fooled

    Are investors being fooled by randomness? Do they pay far too little attention to consequences of decisions? Do they underestimate the effect of a random event? This is the contention of author Nassim Taleb, in his book “Fooled by Randomness”. It’s a very interesting concept and one which ALL investors should pay attention to.

    Trying to understand random events, their probability and importantly their effect is crucial for investors and traders alike. As he notes, most times investors don’t pay attention to it – until it’s too late.

    What he’s talking about is nothing more than risk management. I remember reading interview after interview that Jack Schwagger had in his best seller books – Interviews with top Traders. Time and time again the one constant that came through from each successful trader, was that of risk management. Each one had risk management tools and they knew never to deviate from them.

    These included strict stop losses, money management, diversification of portfolio etc. These top traders understood the impact of a random type event, even though the probability may be low. Preserving their capital, they could continue to trade - ignoring risks they stood the chance of completely wiping out.

    Its interesting how risk can increase following a good period. Taleb makes the point that some people who have succeeded, may have succeeded due to luck or lucky events. Now they deem themselves skilled as investors, and while they focus more and more on returns, they increasingly underestimate the potential volatility or risk.

    Some of his tips are useful:

    . Don’t only concentrate on highly visible success examples. There may be many examples of failure that you have not or don’t see.

    . Don’t let survivorship bias fool you into giving a survivor too much credit. For example looking at the universe of current small and mid caps on the JSE’s, don’t forget how many slipped off the radar screen from say 1998.

    . It isn’t always the estimate or forecast that matters as much as the level of confidence in that opinion.

    Hmm, you say. All very well, but how do I really achieve this with my investments. Yes, a complete strategy that looks at and defines risk is vital. More and more I am seeing that investors are NOT truly maximising their investments. Too often it’s a bit here and a bit there, hoping for the best with no benchmarking and constant tracking etc. It is my belief that its crucial to absolutely maximise every single aspect at all times.

    Oh and while I was going on about risk management, the JSE climbed another 127 points to a new high at ………….. 28 506.

    Contact me if you want to discuss your strategy.

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-17, 17:38:32, by ian Email , Leave a comment

    JSE Lower On Profit-Taking

    LOCAL MARKETS

    "The JSE has opened slightly lower today on the back of profit-taking" a Cape Town based dealer remarked this morning. "The market is quiet and is awaiting direction from inflation data due out this afternoon."

    The rand is slightly firmer after news that Edcon shareholders voted in favour of Bain Capital's takeover bid. The local unit should remain range-bound (R7.08-R7.15/$) today.

    OVERSEAS MARKETS

    Wall Street is set to open lower today as investors are wary ahead of a spate of earnings and economic readings (Consumer Price Index and housing starts report) due later this afternoon.

    European markets have opened lower this morning thanks to profit taking after a sharp rise in inflation indicated that there will be an interest rate hike in May.

    Asian markets have closed lower today. Japanese markets fell on the back of pessimism about corporate earnings.

    COMPANY NEWS

    80% of the C units held by ApexHi BEE Trust has been acquired by Clearwater Capital. This transaction sees four beneficiaries share R748 million in profit, six months after the trust's inception.

    Jan Potgieter has been appointed managing director of Massmart's Massdiscounters unit.

    Trevor Munday is the new independent non-executive director on the boards of both the Absa Group and Absa Bank.

    Xstrata has received an Advance Ruling Certificate from the Canadian Competition Bureau regarding their cash offer for LionOre Mining International Ltd.

    Permalink2007-04-17, 13:16:17, by Marika Email , Leave a comment

    Are there now fewer opportunities for investors?

    There is a lot of money chasing selected companies on the JSE. And when some of these well known, well respected companies are bought out, the available cash moves to the other limited opportunity set. This is what happened on Monday. There was some speculation that shareholders would win a vote against the Edcon buyout.

    But just over 80% voted for the sale of the company to a consortium led by Bain Capital. The buyout was pitched at R46/ share.

    The foreigners were the most outspoken against the price, saying that it was far too low. And perhaps they may be right. Judging by the level of interest by foreigners in local shares, they have clearly seen value.

    The level of interest can be seen from one of the very popular index tracking funds, the iShares range. Foreigners can easily buy into the selected emerging market countries, or indeed into the basket of emerging markets by buying into the iShares Emerging Markets index fund.

    This fund is large at $15,7 billion, and with just over 10% allocated to SA, that’s $1,5 billion into SA companies from one fund.

    As shareholders of Edcon today voted in favour of the buyout, so other retailing shares moved up in tandem with the firmer market. We saw R1,3 billion traded in Edcon as the share price traded up to 4545c

    Foschini gained 2,1% to 7251c

    Mr Price up 1,35% to R30

    Truworths up 4,3% to R39

    Global markets were strong, and the JSE up on very good volumes to a new high. These are not easy times for investors. Excellent where you have been invested, but very difficult for those investors that are close to, or just into retirement and largely in cash. Although such investors should have had an appropriate asset allocation plan, this very seldom happens. Retirees now have the investment risk and that is why it’s very important to have the correct investment strategy in place.

    Yes I know its far easier discussing these issues than putting them into practice. But with the correct tools, a clearly defined investment strategy is not only possible, but very achievable for ALL investors.

    For investors in JHB or PTA. If you are close to or even into retirement, and want to ensure that you have a clearly defined investment strategy, then e-mail me. We are having a small seminar at the beginning of May to discuss exactly this.

    e-mail me on ian@seedinvestments.co.za

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-16, 17:57:48, by ian Email , Leave a comment

    Weekly market Wrap

    What has become almost customary now, is the JSE All Share index powering up to new highs. The 4 year run in terms of both duration and quantum has been almost unsurpassed. Coming from a low base, momentum picked up speed as the underlying economy changed gears.

    Interest rates were kept unchanged which is positive for consumers. The Reserve bank remains concerned with credit extension but sees some slowdown. Inflation remains in check for the time being, but higher food and oil prices could impact this into the next couple of months

    Reuters reported that the PIC, the Public Investment Corporation, will vote against the proposed buyout offer for Edcon on Monday. Bain Capital is heading the buyout offer.

    A 75% vote for the buyout is required from shareholders. It’s a widely held share, with the PIC holding almost 3%. Another 3% is held by Templeton Asset Management and they are also not wild about the offer at R46 a share.

    The price fell but recovered and ended down 1% to 4440c.

    The possibility of shareholders voting against this bid also saw the rand fall back. No bid means no foreign capital coming in to buy the shares. The rand was last trading at R7,20/dollar, R14,28/pound and R9,72/euro.

    The week also saw a buyout offer for Goldfields, which turned out to be a hoax. US news and financial information service, Bloomberg ran a story on an imminent buyout form US financier. It pushed the price up dramatically, but quickly turned out to be a hoax.

    Goldfields released a sens announcement clearly denying any possible buyout. But the damage was done as some insiders clearly used the hoax for advantage. The price spiked up to over R150, falling back again and now closing at R142. This is a R92,5 billion company and so this type of price spike would have dearly cost some buyers.

    The oil price hovered up to around $70/barrel. It’s moved up steadily on increases in demand and refinery problems. The higher

    The JSE All Share index gained 1,1% to 28132. All the main indices closed up on excellent volumes of R11,5 billion. At this level the historical price to earnings is 16 times and the Dividend Yield is 2,2%.

    That’s all for now. Have a great weekend.

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-13, 17:48:25, by ian Email , Leave a comment

    Unchanged Interest Rates

    LOCAL MARKETS

    The JSE opened firmer this morning on the back of the Monetary Policy Committee's decision to leave interest rates unchanged yesterday, boosting banks and the industrial sectors. "It's a quiet day with sporadic bursts of buying based on the good news regarding the unchanged interest rates" said a Cape Town based dealer.

    The rand is weaker today amid concerns over the impending vote on the Edcon buyout bid. The Public Investment Corporation (PIC) has reportedly said that they are planning to vote against this takeover.

    OVERSEAS MARKETS

    US markets should open flat today as investors await the release of a series of economic readings.

    European markets have opened higher today. The euro has hit a fresh high against the dollar thanks to unchanged interest rates announced by the European Central Bank.

    Most Asian markets have closed lower today. A stronger yen against the dollar resulted in a drop in the Nikkei.

    COMPANY NEWS

    IBM South Africa has been awarded a six-year multi-million rand IT services contract from South African Breweries. The value of the deal is not yet known.

    Allied Technologies (Altech) has concluded a BEE deal by entering into an empowerment agreement related to the fleet management division of Altech Netstar.

    The government and Transnet are facing a R8 billion legal claim from businessman Sandile Zungu. A deal involving the sale of 80 million shares in MTN reportedly soured between the groups, resulting in this claim.

    Permalink2007-04-13, 13:04:01, by Marika Email , Leave a comment

    Do interest rate announcements make any difference?

    Thursday afternoon saw the always much anticipated Reserve Bank announcement on interest rates. Institutional investors always try and look ahead to what the likely outcome will be, so as not to get caught off guard. In the US, the forewarning process is so advanced that on the given day of the announcement it’s almost a non event.

    As was widely expected they left rates unchanged at 9%

    Unlike the US Federal reserve, the local Reserve Bank does not have a mandate to target a growth rate. They only have a mandate to target a certain inflation and keep within a relative tight band of 3% - 6%.

    Inflation has been relatively tame, with the CPI-X (i.e. inflation stripping out interest cost of mortgage bonds) dipping down to 4,9% in February from 5,3% in February. Food cost and energy cost increases remain the biggest culprit to inflation, because if these had been excluded says the governor, then inflation would be running at 4%.

    The higher inflation for food (mostly due to the higher maize and wheat prices) and the higher inflation on petrol, was offset by deflation in clothing by 7,9%, footwear by 11% and furniture by 2,8%.

    The outlook sees inflation hitting over 6% this year due to the much larger recent price hikes in petrol. Thereafter it will come down, but not by much.

    Despite the governor’s earlier concerns on credit spending by SA consumers, where 12 months growth in bank loans and advances has grown by around 27% since Nov 2006 and which he describes as “uncomfortably high levels”, he does not feel that this is justification enough for a rate hike.

    Finweek reported that today’s decision was probably already sealed by Mbeki in February at the State of the Nation speech. The report noted Mbeki’s support for a possible increase in raising banks cash reserve requirements. This is an effective way of reducing liquidity in the economy without having to raise rates, which is less political palatable.

    The Reserve Bank governor’s conclusion was very tame compared to his far more concerned remarks in February, where he was ready to push up rates as and when required.

    So as noted in our quarterly newsletter, most governments around the world are peaking with their interest rate cycle. Some like Japan are still behind, but that’s an altogether different case.

    Remember while we watch interest rates together with many other economic factors, we know that these are not the issues that have the importance so many believe them to have.

    In fact one of the most impressive things to come from the Reserve Bank is the quality and detail of their quarterly bulletin.

    Irrespective of interest rates being hiked up or pushed down, investors need to get back into control of their own investments and longer term strategic plan. It’s understandable that most don’t like to do this – often procrastinating on the mundane issues. But in the longer term having a well documented investment strategy, together with systemised monthly and quarterly reports summarising all your investments, will go a long way to helping achieve financial goals.

    If you have a plethora of investments all over the place and need to get back into control, please mail me. We can advise on an appropriate investment strategy.

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-12, 17:16:21, by ian Email , Leave a comment

    Banks Post Solid Gains

    LOCAL MARKETS

    The JSE opened flat today after closing slightly lower yesterday. Bank shares rose ahead of the interest rate decision later this afternoon. Most investors believe that there won't be another interest rate hike but are still trading cautiously.

    The rand is slightly weaker against the dollar but is still range-bound.

    OVERSEAS MARKETS

    Wall Street is set to open slightly lower today after sliding lower yesterday. Investors are awaiting March sales data from major retailers.

    European markets opened lower this morning. The FTSE was lower at midday due to fading deal making activity. The euro has hit a two year high against the dollar on the back of expectations that the European Central Bank will raise interest rates later.

    Japanese shares ended lower amid concerns over the US economy and a rise in oil prices.

    COMPANY NEWS

    SABMiller has announced that they are not looking to make acquisitions in western Europe. This comes after there were rumours circulating that they may bid for Britain's biggest brewer, Scottish & Newcastle.

    Peter Gardener and Rod Mitchell, former LeisureNet joint chief executives, have agreed to a forfeiture order on the R6 million they received in an underhand gym deal.

    Neotel will purchase Transtel Telecoms, the commercial telecommunications arm of Transnet. This transaction is valued at R230 million.

    Permalink2007-04-12, 13:35:50, by Marika Email , Leave a comment

    Assets in buckets

    “But Ian, you’re telling me that your view is underweight local equities, but if I look at your recommended asset allocation, its 45% into local equities. Surely I can’t buy at these levels. The market has risen so steeply. I can’t afford to put money into the stockmarket now. What if I lose money?”

    This is sometimes the comment from a new client. The missing point is that many investors look at tranches of funds in isolation, and not at the bigger picture of their total asset allocation. By compartmentalising their funds, naturally a certain portion of funds by itself will be far more risky than other portions.

    In this case the client may require or only need a lower risk portfolio structure, but already have 80% of total wealth invested into property and bonds etc, necessitating a higher allocation to equities bringing it up to say 25% of total as an example.

    So then is there a place for buckets of investments? Irrepressible web site, The Motley Fool thinks so.

    Their view which makes a lot of sense is:

    Bucket A is your emergency fund, which is cash set aside in a money market account or similar type of account.

    Bucket B is your savings that you will need within the next three to five years for extraordinary, but foreseeable, expenses. University fees, new car etc.

    Bucket C is your long-term savings (money you won't need for at least three years, preferably much longer).

    It’s the total of your long term savings that must be looked at holistically. This is where it’s important to set an appropriate strategy and make sure that your asset allocation is appropriate for expected returns and importantly for the risks. If this is done properly, then you don’t need to be too concerned that on Tuesday the market rose to a new high, but on Wednesday it was down 0,85%.

    This is part of the process of moving back into the control seat with your investments.

    All the very best

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-11, 20:23:31, by ian Email , Leave a comment

    Nervous Market Ahead of Interest Rate Decision

    LOCAL MARKETS

    The JSE is flat today after closing at a record high last night. Johncom (who revealed their strategic plans for the year) and Gold Fields (whose shares leapt by as much as 10% after a report that an American financier might bid for the company) has lifted the market which is jittery ahead of the interest rate decision tomorrow.

    The rand is still range-bound, remaining steady against major currencies today.

    OVERSEAS MARKETS

    Wall Street is set to open slightly lower today over consumer worries about the economy. Investors are awaiting ET Fed Chairman Ben Bernanke's speech at the Global Economic Policy Forum.

    European markets have opened higher this morning after posting solid gains yesterday. The FTSE Eurofirst 300 has reached a new six-year high.

    Most Asian markets closed flat today after investor sentiment was dampened after the release of various economic data.

    COMPANY NEWS

    Africon Engineering International Ltd has announced an empowerment deal that puts 30% of the company's entire global equity in black hands.

    Datatec has conditionally agreed to acquire UK-based Crane Telecommunications Group. This resulted in their share price soaring over 6% in early trade.

    Johnnic Communications (Johncom) has reported plans to spin off and separately list their media and entertainment assets. The new firm will be called OpCo and will be unbundled to shareholders and listed on the JSE.

    Permalink2007-04-11, 14:10:10, by Marika Email , Leave a comment

    The place where buyers and sellers meet

    It looks like investors came back on Tuesday after the long Easter weekend all fired up. It definitely was not the cricket that got them going. Maybe it’s just the traditional up leg to May. Whatever it was buyers were again stronger than sellers and were happy to pay up for companies.

    Remember a stockmarket is nothing more than exactly that - a market where stocks are bought or sold. Buyers and sellers come together and meet at certain prices where both feel comfortable.

    The seller of shares must be satisfied that he received the best price that he could; while the buyer is clearly happy to part with cash at the price he paid. The electronic version now is just a far more efficient method of bringing buyers and sellers together. A physical floor, on which the JSE and all other bourses traded, was not as efficient at price discovery as the electronic systems. In theory it also levels the playing field for all investors.

    The New York Stock Exchange is the last major stock exchange in the world that is still floor based, all others have moved to electronic trading. The floor system is known as open outcry, and while it has some advantages for large orders, the inevitable move has been to electronic trading.

    While the frenzy on floor trading was palpable and at times possibly led to markets overheating, this does not necessarily mean that the electronic bourses result in cold, calculating investors who will never take prices to beyond the true value. Perhaps even more so now, with availability so widespread and the sheer “noise” factor that I spoke about, everyone was a piece of the action.

    Looking at the list of shares trading up to new high today, most of them are large cap solid companies, and not your small caps. It gives an indication of the type of buyer.

    Included were Anglo at R394, Billiton at 16750c, Implats at 23824c, Bell at 3795c, Abil at 3385c, Basil Read at 2350c, PPC at 47350c, Telkom at R179 and Sanlam at 2139c etc.


    We have produced our updated quarterly report, and look at emerging markets. If you would like a copy of this, please e-mail me on ian@seedinvestments.co.za

    Kind regards

    Ian
    ian@seedinvestments.co.za

    Permalink2007-04-10, 18:25:56, by ian Email , Leave a comment

    JSE Positive After Easter Weekend

    LOCAL MARKETS

    It's been a slow start to the market this morning as investors return after the 4 day weekend. Volumes are light and the market is still looking for direction.

    The rand is slightly weaker against major currencies today in quiet trade. The local unit should remain range-bound (R7.10-R7.20/$) ahead of the Monetary Policy Committee's decision on local interest rates on Thursday.

    OVERSEAS MARKETS

    Wall Street is set to open marginally higher today on the back of stronger world markets and the start of earnings season.

    European markets have opened higher today thanks to a flurry of corporate activity.

    Most Asian markets have closed higher today with Australia, Singapore and South Korea hitting record highs. However, Japanese stocks fell on the back of a stronger yen against the dollar.

    COMPANY NEWS

    Telkom's shares surged by a further 2.2% today following the resignation of CEO Papi Molotsane.

    The deal between Mvelaphanda Resources Limited and Afripalm Resources (Proprietary) will go ahead as planned.

    Eland Platinum has been given R800 million in project finance from Nedbank Capital to complete their development of the Elandsfontein platinum mine near Brits.

    Permalink2007-04-10, 13:10:09, by Marika Email , Leave a comment

    Is a process necessary?

    Yesterday I mentioned investor and entrepreneur, William ‘O Neil. He advocates an investment process for investors, and this is something that I fully endorse. It’s also something that Jack Schwager, author of Interviews with Top Traders discovered. Each successful trader had a different system, but the commonality was defining it and sticking to it.

    ‘O Neil advocates 12 main points when buying a share and it struck me how many of his points – just solid fundamental aspects – are currently present on the JSE with many shares.

    Some of these main characteristics that he looks for in an investment include:

    . faster earnings growth in recent quarter (half yearly results in the case SA shares)
    . yearly earnings increases of at least 25% in each of the past 3 years.
    . profit margins at new highs.
    . a return on equity (ROE) of at least 15% (possibly 20% in SA)
    . cash flow increasing more than reported earnings.
    . relative strength of at least 90%. This is share price strength against the market
    . shares being acquired by the institutions.
    . the company making share buy backs.

    Many local shares have these and other solid fundamental and technical characteristics. This is why local and offshore funds continue to buy and support the upward price trends.

    The ability to stick to an investment process is that element that will be tested at some point. Most investors will not have the ability to follow through in the tough times.

    For traders part of the process must be risk management, which is typically some form of stop loss system.

    Longer term investors may not need a stop loss strategy, but a defined asset allocation plan.

    Think about your process and work on defining it.

    I trust that you have a blessed Easter. Enjoy the cricket.

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-05, 17:57:21, by ian Email , Leave a comment

    Quiet Day Expected

    LOCAL MARKETS

    Dealers are expecting a quiet day on the JSE today as the market opened slightly weaker. Investors are looking to square their positions before the long weekend.

    The rand is also quiet, remaining stable against major currencies in morning trade. The local unit should remain in the R7.13-R7.16/$ range.

    OVERSEAS MARKETS

    US markets should open slightly lower today as investors are cautious ahead of the Labour Department's March employment report.

    European markets opened mixed this morning. Investors are awaiting economic data on interest rates later today.

    Tokyo's shares closed lower today after profit-taking following the last two days rally.

    COMPANY NEWS

    The purchase of steelmaker Highveld by the Russian Evraz Group has been approved by the Competition Commission.

    The Absa group has awarded a R1.1 billion three-year contract for the supply of technology services to IBM.

    Edgars Consolidated Stores (Edcon) has announced that Bain Capital LLC's $3.5 billion takeover bid for the firm will not increase unless it has to match a higher bid.

    Permalink2007-04-05, 13:07:56, by Marika Email , Leave a comment

    All stocks are bad

    All stocks are bad unless they go up. This is one of the views taken by US money manager, William O Neil. He founded Investors Business Daily, a rival newspaper to the Wall Street Journal in the US. Like almost all successful money managers, he has a set of rules for investing.

    What is very important for all investors is that they have a defined set of rules or a defined investment process. The set of rules and processes more than often not differs from investor to investor, and from manager to manager. So it’s not necessarily the actual rules or processes that are important, it’s having the rules in the first place and adhering to these rules.

    Then even more importantly, is when markets suddenly display some volatility, that investors have the fortitude not to second guess their own rules. In his book, The Successful Investor, ‘O Neil makes it clear that to be an investor you must have enormous dedication, discipline, emotional fortitude and humility, together with a strategy.

    Over the last few years it’s just been too easy. What dedication, what discipline what emotional fortitude you will ask. Humility, it’s not for us. But it’s when least expected, that the market will buck its trend, and shake out the “this is too easy” investor. The ones with the discipline of a defined process will have greater fortitude.

    ‘O Neil has 7 factors that he looks for, which he gave the acronym CANSLIM.

    These are:

    • Current quarterly earnings. Strong increases
    • Annual earnings. Strong over 3 years
    • New. Something new that will get investors excited
    • Supply and Demand. Look at changes in volumes
    • Leader or laggard. Invest in the best in a sector.
    • Institutions. Penny shares are fine, but the larger cap shares will have institutional following
    • Market direction. The price trend should be up, not down.

    He is somewhat of a momentum investor, but looks at the fundamentals, including companies with strong cash flows. Tomorrow I will discuss some of the characteristics that he looks for in shares, and the similarity to many JSE shares currently.

    We come across many investors who have been investing without a plan. Sure plenty will do well, but it’s the “investors” that have taken too big a bet on one sector or one share, or those with funds, endowments, RA’s etc all over the place. Many times they would rather make no decision than some decision to consolidate, but mostly they don’t have an overriding plan and process for their investment habits.

    We would sincerely like to see this change in as many investors’ lives as possible - whether you use us at Seed or not to help you with this. You can define your own investment process, or make sure that your advisor is doing this for you – you are paying remember. Importantly get it done, because investing is not always going to be as easy as it has been over the last 4 years.

    For a summary on how we approach planning, please mail me on ian@seedinvestments.co.za

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Seed Investment Consultants is a registered FSP

    Permalink2007-04-04, 17:42:09, by ian Email , Leave a comment

    Market Mixed Ahead Of Easter Weekend

    LOCAL MARKETS

    The JSE has opened mixed this morning after closing on a fourth consequtive high yesterday. "There are no major players in the market this morning and it should drift ahead of the Easter weekend," a dealer remarked.

    The rand is firm against major currencies thanks to the market's strong performance lately.
    The local unit should remain range-bound (R7.13-R7.23/$) ahead of the long weekend.

    OVERSEAS MARKETS

    Wall Street is set to continue it's rally when it opens later today. Lower oil prices boosted US markets yesterday.

    European markets have also opened mixed this morning. The FTSE 100 is lower over ongoing bid talks between ICI and Scottish & Newcastle.

    Asian markets closed higher today with various records set in Sydney, Taiwan, China and Singapore. Investor sentiment is on the up as the markets track the general strengthening in overseas markets.

    COMPANY NEWS

    Exxaro Resources has raised R1.216 billion from the placement of 19 million shares at R64 per share. The company is looking to place a further 4.5 million shares to meet market demand.

    BankBoston Argentina's acquisition has been finalised by Standard Bank. The newly merged bank opened for business yesterday.

    The South African government has warned SAA that they will not support them in any way after SAA announced that they were planning on splitting up the company and slashing costs to return them to profit.

    Permalink2007-04-04, 12:37:14, by Marika Email , Leave a comment

    Private Equity bringing a company onto the market?

    In a booming market one tell tale sign is new companies listing. And this is exactly what we are seeing, each week is brining new companies to the bourse. The combination of liquidity looking for places to invest and the high prices that investors are prepared to pay, is an absolute paradise for sellers (promoters) of these companies. Today Kelly Group listed.

    Now here is a company that is being brought to the market by Brait, the largest private equity player in South Africa. But wait aren’t they supposed to be the ones buying out companies from the market?

    This group is the parent of a number of subsidiaries, previously known as Logical Options Staffing, the assets of which were acquired by Brait in April 2001 for R616m according to the prospectus.

    Brait was instrumental in re-strategising the group, introducing BEE and selling a stake to management.

    As a whole the group operates in various segments of the employment market from flexible staffing, permanent recruitment, executive search, outsourced and managed staffing, contact centre (call centres), response handling, to consulting and payroll administration.

    Kelly owns a number of brands including PAG. It’s interesting that PAG itself was listed on the JSE. This is the entity that Jannie Mouton bought into and restyled it into the PSG group.

    The placement was hugely successful with the group placing some 38,6m shares at R9 a share for R347m Brait also sold out 3,9m of its shareholding. This brings the market cap to over R900.

    In an interesting move, the directors acquired shares on the market or part of the placing, ranging from R151 000, to R18m, with ceo, Granville Wilson acquiring R18 worth and chairman Moss Ngoasheng also R18m.

    The listing cost R10,8m.

    2006 profit on a consolidated basis before interest and tax was R78,2m. The company was heavily geared when Brait took it over (that’s what private equity does) and so gearing costs came in at R52m and tax at R11,5m leaving a profit of R14,7m. Capital raised will be used to retire loans. It’s a strong cash flow generating company.

    It’s going to interesting to see how this develops. Some companies are being taken off the market, but with many more looking to list at this favourable time. We saw it all in 1998/1999. So far the quality has been better, but should the market continue up, quality of new companies will decline.

    That’s all for today. Remember as investment consultants we try to keep an eye on key developments like new listings and what this conveys to us of the level of value.

    Kind regards

    Ian de Lange
    ian@seedinvestments.co.za

    Permalink2007-04-03, 19:56:53, by ian Email , Leave a comment

    JSE Boosted By Metal Prices

    LOCAL MARKETS

    Strong overseas markets and higher metal prices have led the JSE higher at the opening this morning. Copper, platinum and gold prices have all risen. The JSE closed over the 27 000 mark yesterday thanks to renewed optimism and interest by overseas investors in our market.

    The rand is steady against major currencies this morning. The upcoming Easter holiday has resulted in thin trade with analysts predicting that the local unit will remain range-bound (R7.18-R7.29/$) until then.

    OVERSEAS MARKETS

    US markets should open higher today as tension eases between Britain and Iran, bringing oil prices down.

    European markets are up this morning after closing mixed yesterday.

    Tokyo's shares closed higher today due to a weakness in the yen and various technical issues after yesterday's fall in the markets.

    COMPANY NEWS

    The Kelly Group (Kelly), the South African employment services provider, listed on the JSE today with an initial market capitalisation of R347.4 million.

    Michiel le Roux is succeeding Jannie Mouton as the non-executive chairperson of the boards of Capitec and Capitec Bank at the end of March.

    The International Financial Corp (IFC) has invested $15 million in new shares in South African platinum producer Lonmin plc. This is the first step in a bigger planned investment.

    Permalink2007-04-03, 13:06:20, by Marika Email , Leave a comment

    Benjamin Graham on Asset Allocation

    Benjamin Graham, known as the father of value investing advocated a minimum of 25% and a maximum allocation of 75% to equities, with the balance in bonds. This was a simple asset allocation strategy. His basis for increasing or decreasing the allocation to equities was based on an assessment of value.

    He articulated in his book, the Intelligent Investor, that sound practice would be to reduce exposure to common stocks (shares) below 50% when in the judgement of the investor, the market has become dangerously high.

    He then went on to say, “These copybook maxims have always been easy to enunciate and always difficult to follow – because they go against that very human nature which produces the excesses of bull and bear markets. It is almost a contradiction in terms to suggest as a feasible policy for the average stockowner that he lighten his holdings when the market advances beyond a certain point and add to them after a corresponding decline.

    At the time of the update to his book in 1972, following the 1969 crash, he was advocating not more than 50%, but definitely not less than 50% for the defensive investor (at that time based on valuations).

    A traditional rule of thumb, to which we do not subscribe to, looks at age to determine asset allocation, but this is far too simplistic. A young investor may have a high savings rate and therefore in a position to allocate 100% to equities (probably advisable), but looking to allocate a 15% down payment on a new house in 8 months time when he marries. Most investors would understand that it’s probably best to reduce risk dramatically with this portion of funds, lest the marriage start off on some rocky ground.

    His grandfather, 15 years into retirement, with an income requirement of R20 000 per month, no debt and a R23m total asset base, could possibly afford to retain all in the equity market, disregarding any volatility that the market threw at him.

    What has not been tested for a long time is investors’ ability to tolerate downside volatility. Risk premiums have reduced and as investors have gotten more and more comfortable taking on risk, so their expectation is that the probability of future risk is low.

    This is where asset allocation comes in. For most investors, though it’s somewhere between 25% and 100%. This starts to become more important for those heading into maximum capital accumulation years – 40 / 45 years plus ahead of retirement.

    Astute investors watch the stampede of the herd to ascertain the opposite direction that they should be moving int. As I said on Friday, now is the time for more calculated planning. We have a value proposition for you if you are heading into your maximum accumulation years or heading into retirement.

    Mail me on ian@seedinvestments.co.za and we will mail you a copy.

    Kind regards

    Ian
    ian@seedinvestments.co.za

    Permalink2007-04-02, 20:23:38, by ian Email , Leave a comment

    Quiet Trade

    LOCAL MARKETS

    The JSE has opened flat today with analysts believing that the market should give in to some profit taking following last week's quarter-end rally.

    The rand is steady against major currencies today. The local unit is range-bound and should remain stable ahead of the upcoming easter holidays.

    OVERSEAS MARKETS

    Wall Street is set to open higher today after news of a $29 billion buyout of First Data, the credit card and payment processor.

    European markets have opened higher this morning thanks to various merger-related gains. This comes despite several losses in the financial sector.

    Asian markets closed lower today on the back of worsening business confidence among Japanese companies after the first trading day of the new fiscal year.

    COMPANY NEWS

    Sappi's shares rose by 5% today after analysts reported that the company is likely to raise their US paper prices.

    The second public offer to black economic empowerment individuals in MultiChoice South Africa's black economic empowerment scheme (spearheaded by Naspers) has been "overwhelmingly" oversubscribed by almost 2.5 times.

    Andrew Nissen, the director of Randgold and Exploration Company Limited, has resigned. This comes after the announcement made on March 15 that the company might merge with the Johannesburg Consolidated Investment (JCI) Company Limited.

    Permalink2007-04-02, 12:40:07, by Marika Email , Leave a comment