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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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    2013 increase notice

    Dear Clients

    As of 1 January 2013, the JSE will be instituting an increase across their data products of approximately 8%. Due to these and other rising costs, Sharenet, as from 1 January 2013 will similarly be initiating an increase of 8% across its products and services.

    Please note that monthly PowerStocks subscriptions will be increased on 1 January 2013 as follows:
    1) Monthly PowerStocks subscribers at R499 per month
    2) Monthly Ultra subscribers at R949 per month

    At Sharenet, we are continually working hard at maintaining excellence in our service and are always looking at improving and enhancing our product offerings, adding more data and features where we can. 2012 was particularly busy as we managed the JSE's trading platform migration but swiftly dealt with the few minor issues that this created and we wish to thank all our clients for their help and especially your patience during the switch over.

    We also continued to add to our free mobile app offerings and launched our Twitter account for even more free updates. If you haven't yet added us, simply go to https://twitter.com/SharenetSA or find us on Facebook at http://www.facebook.com/sharenetsa

    Our Sharenet CFDs service (www.sharenetcfds.co.za) has continued to grow, in no small way due to the excellent platform and rates we can offer clients there.

    We welcome any and all suggestions which could help us improve our service and encourage you to send these through to support@sharenet.co.za

    Thank you for your continued support and business.

    The Sharenet team

    Permalink2012-11-30, 13:09:33, by Natalie Email , Leave a comment

    Discrepancy of Returns in the Local Market

    Last week we looked at the value of the market across the 3 main sectors, namely resources, industrials and financials. This week we look at the divergence in returns across both the super sectors and the main sectors of the JSE for 2012.

    The JSE, as with all markets, is not made up of a homogenous group of companies, but in fact a very diverse group of companies. As a composite these listed companies made a new price high last week as the index of shares, the FTSE/JSE All Share Index, closed at 37865, up 18.4% for the year to date, excluding dividends.

    Over this last year there has been a major discrepancy of returns across the main sectors of the JSE. The positioning of an asset manager’s portfolio has therefore played a major part in determining their 2012 performance.

    Drilling down beyond the 3 main super sectors, the JSE has 9 industry sectors. Half of these are in turn comprised of sub groupings. The table below indicates these sectors and their weights in the FTSE/JSE All Share Index.

    Clearly the 2 big outliers within the JSE in 2012 have been Oil and gas and Basic Materials sectors. Basic Materials is in turn made up of chemicals, forestry and paper, industrial metal, general mining, gold mining, and platinum. Most of these except for forestry and paper, have struggled in 2012.

    While these two sectors are just on one third of the weight of the FTSE/JSE All Share Index, they have only returned 0.6% and 3.4% respectively to the end of October. If we look at the shares that comprise the top 40, Mondi and Assore had excellent performance, however the likes of Arcelor Mittal, Angloplatinum, Harmony, Anglogold, Anglo American, and Goldfields etc. have fallen sharply in 2012. Portfolios weighted more heavily in resources have suffered the consequences in 2012.

    Conversely, with a weight of just 2.6% in the JSE All Share, Aspen is up 64%, Life Healthcare 53%, Netcare 29%, and Mediclinic 45%.

    Both Consumer Services and Consumer Goods have had a fantastic run in 2012. In these two sectors, Richemont is up 61%, SAB Miller 42%, Naspers 53%, and Shoprite 33%.

    There has also been some discrepancy in the Financial sector where Firstrand is up 42% and Sanlam 40%, while Absa is down 1.3% and African Bank down 5% for the year to date.

    So while allocation between various investment assets is an important factor to generate superior returns, almost even more important is particular stock selection.

    Kind regards,

    Ian de Lange

    www.seedinvestments.co.za
    info@seedinvestments.co.za
    021 914 4966

    Permalink2012-11-27, 09:01:08, by Mike Email , Leave a comment

    Value in the Local Market

    Long term value investors will appreciate the importance of the starting PE ratio when making an investment. Low PE investments typically outperform high PE investments when looking over a 5 year period. While the relationship is true on an individual stock level, the same also holds when looking at the market as a whole and also different market sectors.

    The charts below show how this relationship holds over various periods. We have taken market data over the past 15 years or so, and for each starting PE have looked at the subsequent 5 year return (annualised) that an investor would have received from the relevant index. For example in the first chart (looking at the ALSI – overall market) we can see that when the starting PE was around 20, the subsequent 5 year return was just short of 5% pa, while starting PE’s of under 10 have delivered in excess of 30% pa over the following 5 years. The market’s current PE is just above 14, and by this measure the ALSI should deliver just over 15% pa over the next 5 years, which is a bit below the long term average.

    On average the market looks fairly valued, but when looking a bit closer we can see some major discrepancies between the various sectors. The Resource sector has been hard hit in relation to the Industrials and Financials; particularly this year as the global economy (and especially China) has slowed and locally has been exacerbated by the numerous strikes across the industry costing not only production, but also lives. On the other side, Industrials have been driven by the ‘flight to quality’ both locally and abroad, where investors have bid up the prices of those companies with stable earning profiles. Locally the retailers have been major beneficiaries and also ‘sin’ companies like British American Tobacco and SABMiller.

    While the performance of the Resource index has been poor, the sector is now showing good value with a PE of just over 10, and a dividend yield in excess of 3%. This is compared to the Industrial index’s PE of nearly 20, and dividend yield of 2.5%.

    The three charts below show the history of starting PE versus subsequent 5 year return (annualised). The large yellow dots indicate the current PE and expected 5 year return from here for the three sectors.

    This method is by no means full proof. There will always be anomalies, but if this approach is consistently applied investors should be able to generate above average returns over rolling 5 year periods. Another caveat is that returns never come in a straight line. Investors must realise that while Industrial companies are expensive, they can continue getting more expensive (i.e. continue to go up). At the same time, while Resource companies are cheap, this doesn’t mean they’re going to instantly deliver returns to investors, they could even continue to fall over the short term. Investors need to be patient and have a time horizon of at least 5 years for this strategy to work.

    Investing is neither an art, nor a science, but by consistently using valuations to assist in the investment process investors will increase their probability of generating satisfying returns.

    Take care,

    Mike Browne

    www.seedinvestments.co.za
    info@seedinvestments.co.za
    021 914 4966

    Permalink2012-11-21, 11:44:59, by Mike Email , Leave a comment

    Blackberry App enhancement, twitter and our annual sale!

    Dear Sharenet users

    Our Sharenet mobile app has been getting great reviews from our users and we are excited to announce that the news feed is now available to our Blackberry users (already available to Android and iPhone users) so you can receive international breaking news straight to your mobile.

    We have also recently launched our Twitter page, @SharenetSA, where Sharenet users can receive trading information such as LDT dates, Dividend Due dates, Results Due dates and information regarding our seminars, products and specials. You’ll always hear it first on our social media channels.

    If that wasn't enough, our annual sale has just begun and you can save up to R2,000 on purchases! The sale is limited for a short period of time, so do not miss out on these great festive savings.

    Start shopping now: http://www.sharenet.co.za/v3/mailers/Sharenet_EndOfYear_Sale.html

    The Sharenet Team

    Permalink2012-11-20, 16:53:10, by Natalie Email , Leave a comment

    Market Cycles

    The late Sir John Templeton was quoted as saying, “Bull-markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.”

    The chart below reflects a typical market cycle moving from pessimism through to euphoria, before falling back again to pessimism.

    Market Sentiment Life Cycle

    Source: Fisher Investments

    Pessimism, scepticism, optimism, and euphoria are all human emotions which, when applied to given facts, can produce vastly different results. For example a company may produce earnings of say R500 million - in a pessimistic environment investors may be willing to only value the business at 7 times earnings (i.e. R3.5 billion), but in an optimistic and euphoric environment the same investors may be willing to value up to 20 times earnings (i.e. R10 billion).

    Over extended periods of time valuations normalise, but through an investment cycle it can, and does, have a huge impact on investor returns.

    When markets are pessimistic very few investors perceive of a time when euphoria will once again reign and vice versa. Ideally investors want to be buying in times of pessimism and scepticism and selling when the prevailing mood is euphoric, but this is not an exact science.

    Globally while there is still a general prevailing mood of scepticism and very little optimism, there may well be a lot of runway left for the bull market in global equities, which began in pessimism around March 2009. Global market prices firmed 75% to April 2010, but have since traded in a large sideways pattern. For sure there will be a lot more volatility before we reach another euphoric stage.

    Some of the indications of the current lack of enthusiasm for global equities are the very high equity risk premium (i.e. yields on shares are trading at a very wide gap compared to the yields on bonds), and net flows which continues to favour bonds over equities.

    Given the general lack of optimism for risk assets, there is quite possibly still a long way to go for global markets before we see the top of the next bull market. Fisher Investments make the point that mega cap shares typically take over leadership about mid-way through a bull market and lead by a wide margin for the remaining duration and early into a subsequent bear market.

    Kind regards,

    Ian de Lange

    www.seedinvestments.co.za
    info@seedinvestments.co.za
    021 914 4966

    Permalink2012-11-13, 13:25:36, by Mike Email , Leave a comment

    Golden Decade

    We at Seed Investments write weekly newsletters and also compile a monthly market overview. Please click here to sign up on our mailing list to receive the emails directly to your mailbox.

    We have recently compiled a brief overview on the Seed Absolute Return Fund, taking a look at the strategies implemented in the fund, who should invest in this fund and why. Click here to go to Seed's Articles and Research and feel free download the review and some of our fund fact sheets.

    South African investors have experienced a golden decade. All asset classes have delivered high real returns over the past 10 years. The table below shows the annualised return of the different asset classes in South Africa over different periods.

    From the table above we can see that over the last 10 years South Africa markets did very well, even when taking the market crash in 2008 into account. If you were invested into property you would have doubled your investment every 3 years on average.

    The graph below shows how our market fared against its global counterparts. The values are all in rand terms.

    From the graph above we can see that an investor would have been better off locally than abroad. The table below shows the cumulative and annualised returns for the different indices.

    Over the past 10 years a few things worked in South Africa’s favour:

    • The rand strengthened over the period from a very weak base
    • Our economy was able to defy the naysayers
    • Corporate earnings increased
    • Ratings of South African companies increased (i.e. PE ratio’s increased)
    • Bonds and properties re-rated
    • Offshore assets performed badly due to high starting valuations and not due to poor earnings growth

    Going forward can we expect another golden decade?

    Unfortunately the picture is not as rosy. While some factors are improving, other factors are deteriorating. The rand is currently very strong and our local assets are expensive relative to their starting point 10 years ago. South Africa’s competitiveness has also been declining due to:

    • High real wage increases
    • Decreases in productivity
    • Rigid labour laws
    • Failing education system

    It is very unlikely that we will be spoiled with similar returns over the next decade. This doesn’t mean that one should disinvest from the markets, as an investment into cash will guarantee that one loses capital on a purchasing power basis. Everyone needs to adjust their expected returns going forward and relook their investment plan to ensure that there’s enough saved up for the future.

    Kind regards,

    Gerbrandt Kruger

    www.seedinvestments.co.za
    info@seedinvestments.co.za
    021 914 4966

    Permalink2012-11-12, 15:36:43, by Mike Email , Leave a comment

    Golden Decade

    We at Seed Investments write weekly newsletters and also compile a monthly market overview. Please click here to sign up on our mailing list to receive the emails directly to your mailbox.

    We have recently compiled a brief overview on the Seed Absolute Return Fund, taking a look at the strategies implemented in the fund, who should invest in this fund and why. Click here to go to Seed's Articles and Research and feel free download the review and some of our fund fact sheets.

    South African investors have experienced a golden decade. All asset classes have delivered high real returns over the past 10 years. The table below shows the annualised return of the different asset classes in South Africa over different periods.

    From the table above we can see that over the last 10 years South Africa markets did very well, even when taking the market crash in 2008 into account. If you were invested into property you would have doubled your investment every 3 years on average.

    The graph below shows how our market fared against its global counterparts. The values are all in rand terms.

    From the graph above we can see that an investor would have been better off locally than abroad. The table below shows the cumulative and annualised returns for the different indices.

    Over the past 10 years a few things worked in South Africa’s favour:

    • The rand strengthened over the period from a very weak base
    • Our economy was able to defy the naysayers
    • Corporate earnings increased
    • Ratings of South African companies increased (i.e. PE ratio’s increased)
    • Bonds and properties re-rated
    • Offshore assets performed badly due to high starting valuations and not due to poor earnings growth

    Going forward can we expect another golden decade?

    Unfortunately the picture is not as rosy. While some factors are improving, other factors are deteriorating. The rand is currently very strong and our local assets are expensive relative to their starting point 10 years ago. South Africa’s competitiveness has also been declining due to:

    • High real wage increases
    • Decreases in productivity
    • Rigid labour laws
    • Failing education system

    It is very unlikely that we will be spoiled with similar returns over the next decade. This doesn’t mean that one should disinvest from the markets, as an investment into cash will guarantee that one loses capital on a purchasing power basis. Everyone needs to adjust their expected returns going forward and relook their investment plan to ensure that there’s enough saved up for the future.

    Kind regards,

    Gerbrandt Kruger

    www.seedinvestments.co.za
    info@seedinvestments.co.za
    021 914 4966

    Permalink2012-11-07, 09:42:44, by Mike Email , Leave a comment