XML Feeds

What is RSS?


Top Rated

    The Day's Summary

    The JSE ALSI ended the day down 0.13% at 25448, after hitting a new all time high earlier in the day at 25654. Value traded was over R10 billion. Advances led declines 202 to 186 with 83 shares unchanged out of 471 active. Mining closed up 0.03% at 29642, while Industrials were up 0.09% at 22303 and Financials ended the day off 0.86% at 23460.

    The best performing sectors of the day were Industrial Metals Index up 3.7%, Electronic & Electrical Equipment Index up 3.4% and Gold Mining up 2.1% at 2794, while the worst were Beverages Index down 1.5%, Life Insurance Index down 1.3% and Diamonds Mining down 1.3%.

    There were 26 new 12 month highs today, including Masonite which closed up 5.8%, Taste up 4.8%, and Kumba Iron Ore up 3.9% at R118.50.

    Of the major stocks Gold Fields was up 3.6% at R121.21, Billiton lost 0.29% at R135.40, Anglos also ended down, off 0.81% at R336.50, MTN gained 2.13% and Sasol gained 0.18% to close the month at R245.45.

    The Dow was unchanged at 12527.96 and the S&P 500 was off 0.3% at 1424.99 a few moments ago.

    Gold was up 0.5% at $648.50/oz and Platinum was at $1181/oz.

    The rand was last trading at R 7.27 to the dollar, R 14.20 to the pound and R 9.43 to the Euro.

    Kind regards,


    Permalink2007-01-31, 17:19:05, by ian Email , Leave a comment

    Another Positive Day

    After a couple days of closing in the red, the JSE moved up today, with the ALSI closing at 25 481, up 0.55% for the day. The broad market measure (advances vs. declines) showed positive market breadth, with 219 shares up compared with 143 which ended the day down. Value traded was fairly brisk. The market was driven by Large Cap Industrials (up 1.04%) and Financials (up 0.79%), while Resources ended up only 0.14%.

    Telkom surged another 2.5% today, after the release yesterday of Vodacom’s subscriber numbers, while MTN was up by 2.77%, last trading at R84.89. Other shares that performed well were PSG up 3.5% at R28.10, RMB up 2.87% and Remgro at R178.80 up 2.87% for the day.

    Old Mutual moved up just over 1.5% for the day, after reports in the media yesterday that they are bankrolling Robert Mugabe’s regime. This bankrolling is through the purchase of Zimbabwean treasury bills and government bonds. Old Mutual ended the day at R24.98.

    Pick n Pay Stores (PIK) ended the day up 1.04% and Pick n Pay Holdings (PWK) ended up 0.34% on the day that current CEO Sean Summers sold over R 22 million worth of shares held in the two companies. There shouldn’t be much read into to this, other than the fact that Mr Summers is stepping down as CEO at the end of February, and he obviously wants to start reducing his exposure to Pick n Pay. This is common practice among executives that are leaving.

    News that hit SENS at the market close (5pm) was that Implats expects headline and basic earnings per share to be between 120% and 140% higher for the half year ended 31 December 2006, when compared to the half year ending 31 December 2005. This is mainly as a result of stronger US dollar prices received. Their financial statements are expected to be published on 15 February 2007. We will see what effect this announcement has on its share price tomorrow. Implats ended the day down 1.90% at R 206, Angloplat was flat.

    Many shares are reaching new highs, with 25 on the list today. Among those hitting new highs are: Peermont, Peregrine, Santam, Bell, Cadiz, Naspers, CBS Property, Astral and Tongaat.

    Have a good evening.

    Kind regards,


    Permalink2007-01-30, 18:11:16, by ian Email , Leave a comment

    Vodacom Numbers

    Telkom released a SENS announcement this morning with regards to Vodacom’s results to the end of December 2006. Telkom owns 50% of Vodacom, and with 30% of Telkom’s operating profit coming from their mobile phone interests (Vodacom) the movement in Vodacom’s customer base is therefore of material importance to Telkom’s bottom line. With number portability also finally going through in this quarter (10 November) it is interesting to note what effect this has had on Vodacom’s client base.

    As of 31 December 2006, Vodacom has a total of 28.2 million customers, of which 21.8 million are South African, with 18.8 million of these South Africans on prepaid deals. The South African subscriber base is up 7.8% over the quarter to 31 December, although Vodacom’s estimated market share has decreased from 59% to 58%. Average Revenue Per User (APRU) is down slightly on contract phones, but up by almost 5% for prepaid customers.

    With South African SIM card penetration up to 80%, growth locally will be hard to achieve (although European countries do have penetration rates of above 100%). It is therefore imperative that operations in the rest of Africa provide a larger proportion of subscribers. In this regard numbers are up by 15.7% in the quarter to 6.4 million customers (22.7% of total subscriber base), with the most growth coming from Mozambique (up 23.3%) albeit off a fairly low base. Vodacom Tanzania (just short of 3 million) and Vodacom Congo (2.3 million) are their two largest non South African operations. Estimated market share in African operations has remained static with the exception of Mozambique, which is up 2% for the quarter.

    To date porting has been immaterial to Vodacom’s subscriber numbers, with the cellphone giant being a net gainer on contract customers, and a net loser on prepaid customers. Vodacom has been affected by 20 000 porting requests (both ways) which is less than an average day of new connections, and porting has thus had a negligible effect on their operations. This lack of porting action (either gains or losses) probably comes down the high cost of cancelling an existing contract and signing up a new one. Contract customers are probably waiting for their existing contracts to expire before they port their number.

    If existing trends are anything to read into though, and porting does pick up, then Vodacom (and Telkom) could be net winners as they are receiving the more lucrative contract customers (APRU of R524), compared to prepaid customer's APRU of R64.

    The market obviously liked these results, as Telkom moved up by 2.97% to end the day at R154.10 compared to MTN which was flat (up 0.12%), Large Cap Industrials which were flat (down 0.04%), and the ALSI, which ended down 0.14% for the day, last trading at 25 342.

    That’s all for today.

    Kind regards,


    Permalink2007-01-29, 17:48:43, by ian Email , Leave a comment

    The Opportunity Cost of being in Cash

    When the market is continually reaching new highs, like the JSE has been doing over the last couple years, investors often get wary about investing their hard earned (after tax) money into the market, or into equity unit trusts. They worry that the market is getting too high, and as such decide to park their money in cash, until levels are “more reasonable” or once “the market has corrected”.

    These investors are then typically too scared to invest at the market bottom (which in itself is extremely difficult to pinpoint) and miss out on the following bull market. They convince themselves that their money is safe as cash is pretty much guaranteed to track inflation. Even worse, these ‘nervous’ investors sometimes wait so long in a bull market until eventually they just can’t stay out of the frenzy, only to invest right before the market corrects. They then pull their money out of the market, back into cash, chastising themselves for making such a “risky investment” and vowing never to get back into equities.

    Obviously each person has their own specific circumstances with regards to investment needs and capabilities, but someone with an investment horizon of 10 years or more should be wary of the crippling effect on one’s net worth that sitting in cash will have.

    Take for example two investors who have R 1 000 to save. Investor A puts his money into equities, and B into cash. Assuming an annual return of 15% for equities and 8% for cash they will end the ten year period with R 4 046 and R 2 158 respectively (equities returning nearly double). This excludes the effects of dividends (probably adding another couple percent onto the equity yield) and the fact that interest is taxed at a higher rate than capital gains.

    In another scenario, with these two investors, assume that the market crashed in year 1 by 40% (even the 69 and 87 crashes were ‘only’ in the order of 25 and 35 percent sell offs), and then 15% p.a. for the remaining 9 years. If investor C stays invested in equities throughout the period, and investor D invests in equities, and then sells out after the crash, and puts his money into cash, they would end up with R 2 111 and R 1 199 respectively. Investor C falling R 47 short of an 8% annual return for the entire term that investor B made.

    Where the market to booms, the equity investor has great upside, while the cash investor has to be satisfied with a predictable, but low, cash return.

    Having a trusted advisor or having the personal capacity to formulate a robust financial plan and stick to it is crucial in the pursuit of long term wealth creation. Even when times are tough one needs to have a clear idea of the big picture.

    I trust that you will have a great weekend.

    Kind regards,

    Mike Browne

    Permalink2007-01-26, 17:41:29, by ian Email , Leave a comment

    New Highs

    The JSE All Share Index ended the day up 0.50% at 25 572, a new closing high, after trading at a new all time high of 25598 just before market close. This performance came on the back of strong performance of the heavyweight resource shares. The Resource 20 index was up by just over 1%, with the major drivers being Platinum and Oil stocks.

    Platinum stocks were up by an average of 1.60% with Implats up by over 2.5%, Angloplat up 1.23%, Sasol up 1.331%, and Anglos up 1.4% last trading at R346.50. Billiton ended the day slightly in the red, down 0.11% at R136.25. All platinum shares weren’t up, with Northam down over 5% for the day, ending at R48.01.

    Goldfields ended the day up slightly after releasing interims that indicated that they have slightly increased their gold production, and they also mentioned the net profit was up 136% compared to the same quarter in 2005! Clearly the market was pretty much anticipating these results as the share only moved up 0.21%, less than Gold Mining which was up by 1.50%.

    The broader winners/losers measures saw 238 shares advancing, while 167 declined, showing that there is still positive market breadth, a good sign that the large caps aren’t entirely driving the market. Value traded was fairly brisk, with over R 10 billion traded.

    Industrial’s performance slightly lagged the Resources, ending the day in the green by 0.28%, but this was ahead of Financials which ended the day down 0.40% dragged down by the banking sector which was off 1.39%.

    Barloworld ended the day up a massive 7.35% closing up just above R190 a share. Of the banking shares, RMB was down 3.41% and Firstrand was off 2.22%.

    Some shares ending the day at new highs included Simeka, Implats, Mr Price, Sallies, Metorex, Tongaat, Mvela Resources, Grindrod and Massmart. Definitely a sign of a broad increase in the market!

    At writing Gold was trading at $651.80/oz, with the rand losing some of its shine off over 1% to the major currencies, last trading at 7.21, 14.21 and 9.36 to the dollar, pound and euro respectively.

    Global markets ended the day, or are currently trading, in the red, so the JSE bucked the trend here.

    That’s all for today.

    Kind regards,

    Mike Browne

    Permalink2007-01-25, 17:40:08, by ian Email , Leave a comment

    The Power of Dividends

    Investors often neglect the effects that dividends can have on the performance of their share portfolio over time. If one went about constructing a portfolio based primarily on large and mid cap companies with a high dividend yield, the ‘dividend return’ could conceivably be around 4-5% (tax free) in the first year! At current rates, and assuming a 40% marginal tax rate, an after tax cash yield would only equal this dividend yield.

    Doing a simple, back of the matchbox, calculation shows that investing in a share that has an initial dividend yield of 5% (whose dividends grow at 15% p.a. in line with earnings growth) will result in the investor receiving a 10% yield (on cost) by the end of the 5th year, and a 20% yield after 10 years! This excludes the impact of reinvesting dividends which, over time, adds significantly to performance.

    Obviously one may argue that dividends are at the discretion of management. This can be countered somewhat by only selecting those companies that have a good history of regularly declaring dividends. Companies are loathe to reduce/cancel their dividends owing to the negative signal it sends to the market. By selecting companies with a stable dividend policy, one is generally implicitly selecting stable companies, which should further reduce the volatility of the portfolio.

    If one went about slowing picking up high yielding stocks early in life, or even 10 to 15 years before retirement, and held onto these stocks, reinvesting when the dividend cash account is high enough (or by adding dividends to other savings), one could conceivably live off the dividends in retirement. The attraction of living off dividends is that there is no pressure in deciding when to sell shares, and the fact that dividends will generally increase at a rate higher than inflation.

    At the moment dividend yields are historically low (reflecting a bull market that is nearly 4 years) but there are still companies with attractive yields.

    As always, patience is a requirement for long term capital accumulation.

    Kind regards,

    Mike Browne

    Permalink2007-01-24, 17:13:52, by ian Email , Leave a comment

    Interest Rates

    One is often asked, “What is the interest rate?” This question can be asked in a wide variety of circumstances, and frequently has implications for the questioner’s wellbeing, and decision making.

    We all know the effects of rising interest rates on our bond repayments. It hurts the pocket at the end of the month, and allows for less spending on more ‘luxury’ items. Conversely a falling rate allows us to spend more on these items. What the rates mean for markets varies across the sectors and varies depending on the magnitude of the movement.

    South Africa’s prime rate experienced a significant decline from 17% in September 2002 to a 25 year low of 10.5% in April 2005. The first cut in rates in that cycle occurred in June 2003, significantly around the time that the ALSI bottomed out. The subsequent run in the Bull market is closely aligned with falling rates.

    Exchange rates have a complex relationship with interest rates. An increase in interest rates results in a higher yield. Capital should therefore flow into the market, with the currency appreciating. An increasing interest rate is often, however, associated with negative sentiment towards the country, e.g. the central bank wanting to curb spending, with foreigners pulling their capital out of the market, resulting in the currency depreciating. Currencies are notoriously difficult to forecast.

    Tito Mboweni faces a tough question in the coming weeks as to whether rates will continue up a notch or if they are going to pause. Obviously data that comes out between now and the Reserve Bank meeting will have a major influence to the final decision, but either way you can be sure that there will be lots of market activity once the decision has been made in the middle of February.

    Have a good day.

    Kind regards,

    Mike Browne

    Permalink2007-01-23, 17:38:36, by ian Email , Leave a comment

    Contruction's Prospects?

    The Construction and Materials Index has been a sector of the market that has received quite a bit of attention since South Africa was awarded the rights to host the 2010 Soccer World Cup in May 2004. This attention has been justified, owing to South Africa's shortage in stadia with sufficient capacity to host the largest sporting event on the earth.

    Companies such as Murray and Roberts, PPC, and Group 5 will all be beneficiaries in the massive infrastructure spend over the next few years, both directly in the stadia, but also to the supporting systems, such as roads, rail (Gautrain) and upgrading of the airports.

    It should come as no surprise then that investors who invested in the C&M Index the day after South Africa was awarded the right to host the World Cup have seen the prices in these shares appreciate by 64% per annum, more than 20% above the ALSI's excellent price return(42%) over this period! (These returns exclude the effect of dividends). With these shares hitting new highs, many investors are wondering whether the party will continue, or if these shares have priced a perfect run-in to the 2010 event (resulting in disappointing returns)?

    The sector's PE is currently at just over 22 (ALSI 17.45) with dividends yielding only 1.89% (ALSI 2.22%). This level is high, when compared to the overall market, but not at astronomical levels. Companies are facing bottlenecks as raw materials are at a premium (PPC will be importing cement until their newest quarry comes online - squeezing their margins). The construction companies also have their problems, with a lack of skills often hampering the projects.

    Despite these problems, order books continue to show record breaking levels, with developers and government in a situation where they NEED building done NOW and are often willing to pay inflated prices to get it done in time.

    While at high levels, this sector still has many attractions. One needs to do homework on each of the companies in this sector to fully understand their operations before diving in. Now isn't a time when you can blindly buy into the sector and expect excellent returns (like one could have done a couple years back).

    The Construction and Materials Index closed up 1.04% today at 53335, near its record high of 53668 achieved on Thursday. Aveng was up over 3%, Murray and Roberts was down 0.44% and PPC was up 1.91% for the day.

    Kind regards,


    Permalink2007-01-22, 18:22:12, by ian Email , Leave a comment

    JSE ends the week down

    The JSE closed down 1.23% at 24921 with value traded at R 6.90 billion. Declines led advances 256 to 126 with 90 shares unchanged out of 472 active. Mining closed down 1.02% at 28325, while Industrials were off 1.04% at 22090 and financials ended the day off 1.73% at 23664.

    The best performing sectors of the day were Diamonds Mining up 2% at 619, AltX up 1.7% at 2998 and Industrial Engineering up 1.5% at 49814, while the worst were Mobile Telecommunications down 3.1% at 133, Gold Mining down 2.7% at 2691 and Telecommunications down 2.7% at 43524.

    There were 24 new 12 month highs today, including Afdawn which closed up 8.9% at 196, Tourvst up 5.6% at 264 and Dtp up 5.5% at 115.

    Of the major stocks Anglo was off 0.85% at 32650, Sasol moved down 2.09% at 22701, Naspersn moved down 0.87% at 17000, Richemont was down 0.73% at 4090, Edcon was off 1.16% at 3850.

    Biggest gainers of the day where Afdawn up 8.89% at 196 , Tourvst up 5.6% at 264 , some of the losing shares included Masonite down 19.6% at 2010

    The Dow was down 0.2% at 12543.82 and the S&P 500 unchanged at 1426.06 a few moments ago.

    Gold was down 0.9% at $ 629.10/oz

    The rand was last trading at R 7.16 to the dollar, R 14.13 to the pound and R 9.27 to the Euro.

    Permalink2007-01-19, 17:08:06, by admin Email , Leave a comment

    JSE ends the day up 1%

    The JSE closed up 1.01% at 25232 with value traded at R 9.45 billion. Advances led declines 279 to 96 with 91 shares unchanged out of 466 active. Mining closed up 0.93% at 28618, while Industrials were up 0.68% at 22323 and financials ended the day up 1.23% at 24081.

    The best performing sectors of the day were Oil & Gas Producers up 3.6% at 9451, Oil & Gas up 3.6% at 17578 and Pharmaceuticals & Biotechnology up 3.1% at 4534, while the worst were Beverages down 0.8% at 58475, Real Estate down 0.4% at 832 and Non-life Insurance Index down 0.2% at 18730.

    There were 45 new 12 month highs today, including Gvm up 18.2% at 650 and Sable up 10.5% at 3315.

    Of the major stocks Anglo ended up 0.4% at 32931, Sasol gained 3.55% at 23185, Stanbank was up 2.49% at 10300, Billiton ended up 1.81% at 12808, Firstrand was up 1.36% at 2382.

    Some of the top gainers included Gvm up 18.18% at 650 , while the major losers were Sanyati down 5.33% at 213 and Capemp down 5.06% at 150

    The Dow was down 0.1% at 12570.10 and the S&P 500 down 0.2% at 1427.39 a few moments ago.

    Gold was up 0.3% at $ 627.65/oz

    The rand was last trading at R 7.15 to the dollar, R 14.10 to the pound and R 9.25 to the Euro.

    Permalink2007-01-18, 21:35:21, by admin Email , Leave a comment

    Industrials gain on Resources

    Another very strong day for the JSE despite the All Share declining some 0,7%. Because of the weightings of the resource shares, it masks the performance of the industrials, which were the real big winners. Anglos and Billiton fell while the likes of Barlows and SAB Miller were marching forward.

    These industrial and consumer related companies are literally printing cash and investors continue to benefit. Today saw the release of trading updates from SAB Miller, reporting its 3rd quarter to end of December. It saw organic volumes up “some 10%”.

    China saw growth of 30% for the quarter.

    A number of the retailers have been providing updates and today we saw Woolies come out with excellent numbers. For all those who paid a visit to the stores in December and ahead of the New Year, you can understand. Food especially was literally flying off the shelves as if there was no tomorrow.

    They reported comparable sales growth of 13,6%. Food was up 25,9% in total and 15,1% in comparable stores, while inflation ran at 7,4%.

    The shares raced up to over R20, touching 2044 and ending up 4,4% to 2015c

    Nu Clicks reported same store sales up 14,8%. The shares jumped 3,8% to 1173c

    Controversial Shoprite reported that its 6 month sales had increased by 14,7% to R19,1 billion, with internal inflation moving up at 5,6%. Its shares gained 1,2% to 2606c

    Largest furniture retailer JD Group reported total sales up 22% for the 4 months to 15 January. It also announced that arrears and provisions for bad debts had increased. It’s also got something called receivable arrears, and this has come down as a percentage of total gross receivables. JD shares gained just 32c to 8835c

    Kind regards


    Permalink2007-01-17, 17:42:44, by ian Email , Leave a comment

    Another Big volume day

    The JSE closed off 0.16% at 25155 with value traded at R 8.20 billion. Advances led declines 213 to 186 with 79 shares unchanged out of 478 active. Mining closed down 1.13% at 28999, while Industrials were up 0.43% at 22045 and financials ended the day up 0.69% at 23851.

    The best performing sectors of the day were Media Index up 2.8% at 39983, Food & Drug Retailers Index up 1.8% at 20222 and Construction & Materials Index up 1.7% at 50541, while the worst were Oil & Gas Producers Index down 1.9% at 9317, Oil & Gas Index down 1.9% at 17328 and Other Mineral Extractors down 1.6% at 6510.

    There were 48 new 12 month highs today, including Gvm which closed up 20% at 450, Wearne up 6.1% at 435 and Spar up 4.9% at 4675 while there were 3 new lows of which Imuniti topped the list, down 11.3% at 110, Pzgold down 5.6% at 1700 and Anooraq down 3.8% at 770.

    Of the major stocks Anglo lost 1.6% at 34025, Sasol was off 1.87% at 22855, Billiton moved down 1.8% at 12850, MTN lost 0.41% at 8500, Angloplat was up 1.67% at 91100.

    Biggest gainers of the day where Gvm up 20% at 450 , Sizafika up 8.7% at 300 , some of the losing shares included Delta down 15.4% at 1950 and Imuniti off 11.29% at 110

    The Dow was unchanged at 12557 and the S&P 500 unchanged at 1431.36 a few moments ago.

    Gold was up 1.2% at $ 626.95/oz

    The rand was last trading at R 7.23 to the dollar, R 14.17 to the pound and R 9.35 to the Euro.


    Permalink2007-01-16, 17:28:24, by ian Email , Leave a comment

    Looking back at History

    After trading at a new high on the first day of the year, the market pulled back. Today saw many investors come back from Christmas leave and if it’s any indication of what lies ahead, then it could well be another big year. The JSE All Share index traded up to a new record high at 25194.

    Very few investors expected the 41% that the JSE All Share index produced in 2006. For the last three years now the annualised gains for the overall index have been 37,6%. There is no denying that the real returns have been above the long term trend.

    But this is the very nature of returns from an ownership in real assets. Unlike a fixed deposit account, the returns are not linear in nature. Rather they are lumpy. No one complains when they receive the big positive returns, but over time this is generally tempered back with some nasty declines. Long term investors require patience and they are rewarded.

    I had a quick look back at the annual equity returns going back since 1960 and it makes for very interesting reading. For example in 1977 to 1980 annual returns were 29,4%, 36,2%, then a monster 91,3% and then a 41,4% in 1980.

    1981 gave exactly 0%, and then 34% in 1982. Then a slowdown but still positive and then 41% in 1985 (the debt standstill and sanction year) and then 54,8% in 1986. So the years 1977 until the crash in 1987 were extremely positive for investors.

    The crash in 1987 only produced a negative 3,4% for the full year. Ten years later in 1997 and 1998 with the Russian and Asian debt crises, the local market produced negative returns.

    Looking at discrete calendar years then does mask the extent of movements, especially declines. 1969 and 1987 experienced large declines, but ended the year reasonably well.

    The current market is not cheap after a strong run up from 2003. Investors may however still be pleasantly surprised, as it moves up even further. I always say that an investor must be positioned for possible further gains, but as always have a well defined investment plan. This includes ongoing monitoring and active management.

    Kind regards


    Permalink2007-01-15, 18:51:25, by ian Email , Leave a comment

    Week ends on a good note

    The JSE closed up 0.94% at 24909 with value traded at R 9.47 billion. Advances led declines 259 to 113 with 69 shares unchanged out of 441 active. Mining closed up 1.33% at 29003, while Industrials were up 0.92% at 21743 and financials ended the day up 0.58% at 23355.

    The best performing sectors of the day were Platinum Mining up 4.1% at 79332, Household Goods up 2.4% at 139 and Technology up 2.4% at 13253, while the worst were Fixed Line Telecommunications down 0.8% at 1470, Media down 0.7% at 38496 and Gold Mining down 0.6% at 2732.

    There were 39 new 12 month highs today, including Elbgroup which closed up 9.4% at 1050, Paracon up 8.8% at 185 and Topfix up 5.9% at 197.

    Of the major stocks Stanbank ended down 0.1% at 9690, Sasol was down 0.43% at 22901, Implats ended up 3.98% at 18300, Billiton ended up 1.54% at 13058, Anglo was up 0.73% at 34349.

    Biggest gainers of the day where Compclear up 12.24% at 275 , Afovr-n up 10% at 660 , while the major losers were Jubilee off 11.9% at 903 and Glenmib off 8.11% at 170

    The Dow was off 0.1% at 12506.33 and the S&P 500 up 0.1% at 1425.32 a few moments ago.

    Gold was up 1.3% at $ 619.85/oz

    The rand was last trading at R 7.23 to the dollar, R 14.14 to the pound and R 9.34 to the Euro.

    Permalink2007-01-12, 17:19:17, by admin Email , Leave a comment

    January is stock picking time

    Virtually all financial publications do it. They come up with names of their top share selections for the year. Today the Financial Mail came out with their list of top share picks and online financial site, Moneyweb has been asking a range of fund managers for their top share selections.

    Invariably investors and speculators jump in and buy the shares.

    In 2006 virtually all share selections performed well and naturally stock picks looked prescient. This could very well be the case again this year. While daily prices are volatile and valuations more expensive, we may all be pleasantly surprised should the market climb a further 20% or 30%

    Some of the top shares selections and their sectors coming through included.

    Comair (airlines)
    Enviroserv (environment control)
    Sasfin (investment banks)
    Investec (investment banks)
    African Bank (consumer finance)
    Sanlam (life assurance)
    Metropolitan (life assurance)
    Didata (computer services)
    BTG (computer services)

    So clearly across these two publications, within certain sectors there is some difference of opinion as to which share will benefit. It’s not an exact science. Many will benefit but the vast majority won’t.

    It’s easy to offer up a stock pick and anyone can do so. The shares being offered up as good investment bets may prove to be winners at the end of 2007. However the only way to benefit is to be meaningfully invested, and this is the difficult part.

    The problem is that there are too many stock picks being thrown up and this makes share selection difficult. The question is do you try and select the top five or top ten (and if so how) or do you select all in equal proportion?

    The biggest problem with this method of investing is that buying on a “hot tip” basis means buying with low levels of conviction. With reduced conviction, often what happens is that smaller investors are quick to sell out when the price suddenly dips, or indeed sell when they receive conflicting advice from other publications.

    Solid investment portfolios are built on high conviction ideas and not share tips. High conviction money will stick around when prices zig and zag, and be invested for the longer haul. In general low conviction investments will not stand up to the fluctuations in the market.

    My advice is to do your own homework and work alongside a trusted advisor in building your portfolio. By all means put some capital into certain hot tips, but for the bulk of your wealth ensure that it is being managed properly. Have a high level of conviction that your portfolio strategy will see you through to and beyond retirement.

    Kind regards

    Ian de Lange

    Exsequor Investments is a registered financial services provider.

    Permalink2007-01-11, 17:14:25, by ian Email , Leave a comment

    Is the trending market coming to an end?

    One look at the global main indices and all I see is red. Asian markets all closed down, Europe is down, the US markets have opened into negative territory and the local market all closed down. Remember the one point that I mentioned yesterday that came from the Bloomberg interview with Marc Faber?

    He said when asset prices move up, liquidity increases. An increase in liquidity further helps to keep prices moving up. The converse is also likely, when prices start falling, liquidity is also likely to fall off, putting asset prices under pressure.

    On a technical basis most markets are still trending up, but a few days and weeks of prices starting to fall will get investors nervous.

    The JSE All share index started the year at 24915, moved up to a fresh high on the first day of trading to above the 25000 level, and then came under some pressure, now at 24535. But I am not saying everything is about to collapse. While there is clearly not as much value in most company prices, investors are still pushing certain shares to new highs.

    Looking specifically at the consumer shares, investors will be questioning the extent to which all the good news is factored into prices, but I am not sure consumers have even yet felt the interest rate hikes. Shopping centres and retail stores including food retailers like Woolies and clothes retailers like Edgars were enjoying a phenomenal Christmas boom.

    We saw two announcements today:

    A positive trading announcement from Mr Price in the morning, saw the share price gain 2,7% to 2590c after trading at a new high. It reported that sales for the 3rd quarter to the end of December grew by 24,1%. The newer Home division grew sales by a massive 31%.

    Edcon came out with its update saying that it also benefited from strong consumer confidence, and reported sales up 12% for the quarter to end of December. This compared to selling price inflation of only 2%. The CNA was a winner with sales growth up 23%. The price fell 1,25% to 3861c.

    I don’t think that the upward trend is yet broken. It could very well be another positive year for share prices. But it’s definitely going to be more of a stockpicking environment than has been the case over the last 4 years. Investors must make sure that they have a very good grasp of their overall asset allocation and how they should be adjusting this.

    Kind regards


    Permalink2007-01-10, 17:46:48, by ian Email , Leave a comment

    Views on global markets from a renowned investor

    I listened to an interview today that Bloomberg had with Marc Faber. He was giving his latest views on global markets and prices. Marc Faber is a Swiss national residing in Hong Kong, and acts as a global investment advisor and market commentator.

    He has strong views and a very good perspective of global markets, prices and above all valuations. These are some of the points that he made:

    Spending, which drives the US economy remains high. He says despite the higher interest rates in the US, that economy has not really experienced a massive tightening in liquidity, largely because of the effects of asset price inflation. Higher asset prices give investors the ability to extract liquidity and spend.

    He distinguishes between the real economy producing goods and services on the one hand and then the asset shuffler economy on the other. The latter has done well and continues to do so because of the extent of excess liquidity in the world.

    The decline in the US dollar has masked the gains on the US markets. While in dollar terms the S&P500 preformed strongly, he pointed out that the euro has gained some 60% against the US dollar since 2000. His view is that the US dollar is still likely to slide steadily against precious metal prices, but not necessarily too much against the euro in 2007.

    He was asked what is likely to happen to US share prices:

    He answered by saying that he has a theory, which is actually quite interesting: “rising asset markets actually create liquidity. When markets go up liquidity increases. When markets start to decline, so liquidity vanished quickly.” So if share prices come down, then this is likely to squeeze down liquidity, which in turn will negatively impact share prices.

    On gold? The price is likely to continue to go up and in the future probably substantially. New mining output is under pressure.

    Energy and specifically oil prices? Prices will move in large cycles but the trend is up and we are unlikely to ever again see $12/barrel. Demand is continuing to increases and is not matched with new production. He reckons that the valuation of global oil companies is relatively cheap though.

    He is somewhat concerned about share valuations in some emerging countries like Russia, India and China but he likes real estate in some emerging countries.

    Asked about his specific calls for 2007. He thinks that Yen and some Asian currencies are under valued and so believes these to be good investment calls. On the Japan currency he says that investors have been borrowing yen and buying risky assets all around the world. If some global asset prices start to go down, then the investors will have to liquidate position and buy back yen.

    He is also positive about the Japanese markets but prefers some of the other Asian markets.

    Locally we saw volumes pick up substantially. Big trades and price increase for Standard Bank, up 5,7% to 9776c. 25 shares trading at new highs and the JSE All Share index putting on 191 points or 0,78% to 24603.

    The Financial index gained 2,7%.

    Any long term investor cannot afford to be out of the market. The big question is determining the risk of being invested into so called risky assets (aka shares) and the risk of not being invested and optimising between the two extremes.

    Kind regards


    Permalink2007-01-09, 17:35:47, by ian Email , Leave a comment

    What Do Investors Want?

    Potential investors often say to me, Ian perhaps I should wait 6 months or a year when the outlook for investments looks a bit clearer, before I invest. My reply is that the outlook is never crystal clear. Investors must make decisions in times of uncertainty.

    The uncertainty is compounded by the daily market movements and swaying market sentiment.

    The plethora of investment articles also don’t help matters.

    A look at the headlines today on the Sunday Times web pages highlighted the following:

    - Property to slow in 07
    - JSE mixed, uncertainty abounds
    - Strong rand may dent Sasol
    - Dollar keeps rand weak
    - Golds firmer after tumble
    - Rand leaves rates unpredictable

    So even on one day and from one publication, headlines are indicating both a strong and a weak rand. Its headlines and stories such as these that leave private investors confused, and unsure of what approach to take.

    Many investors are shooting in the dark, with little indication of whether their savings and returns are sufficient.

    Often they chase the latest fad or hot tip, and with very little conviction don’t have the ability to exercise the necessary patience. The result is not too dissimilar to gambling at the casino. Some big gains, some big losses, with no steady compounding of gains.

    This results in many portfolios being a hodge podge of investment products, mixed risk and investment policies (which I absolutely hate) and with no asset allocation or performance tracking.

    A shot gun approach to investing hard earned capital will not work.

    My experience is that investors typically want one main thing for their financial position:

    An inflation beating risk adjusted return on their funds that, that together with saved capital will provide a more than sufficient retirement asset base.

    My motto this year is to plan, consolidate and simplify. The definition for consolidate is to “make or become stronger or more stable”. I believe that investors need a strong foundation for their investments. This includes quality planning.

    I trust that 2007 is an extremely successful year for you.

    Kind regards


    Permalink2007-01-08, 16:42:53, by ian Email , Leave a comment

    Bank Salesman

    Bank client’s can expect more calls from salesman. All financial institutions are competing for a bigger slice of the consumer pie. Banks, with some pressure on their traditional banking fees, are actively looking at other areas for revenue generation. One thing if you are an investor in banks, but not necessarily a client.

    One area where banks have been active, but becoming more so is the selling of investments to their clients. To me the idea that an investment should be “sold” is an anathema.

    Banks know that they have a good audience and so have come up with concepts such as cross selling, bancassurance, leveraging clients, capturing market share etc.

    Stripping away the marketing speak, their plan is simple. Banks have clients, the clients have money, the bank will try and sell investment products to the clients. The bank generates commission income adding to their bottom line.

    In most cases the unfortunate aspect to this process is that the bank representative will try and SELL a bank owned investment product, under the guise of investment advice.

    I have seen it too many times, and even today had two investors telling me that their portfolios were skewed because they had been SOLD investment products by banking representatives. They now realised that they needed independent investment advice and were unlikely to find it from their bank.

    So on this Friday just how did bank shares perform? Not bad at all. The JSE All Share index gained 0,25% but Banks put on 1,8%. Standard Bank up 1,1%, Absa up 0,68%, Firstrand up 3,1% and RMBH up 3,5%.

    Global markets are down, while the JSE ended up after 2 very weak days.

    Before being sold another investment product, make it one of your goals for 2007 to streamline your investments and have a proper plan put in place. Feel free to contact me – ian@exsequor.co.za

    Have a great weekend



    Permalink2007-01-05, 17:49:06, by ian Email , Leave a comment

    Risky Investment Decisions

    I read a very good article today that has the number one rule of investing as patience. Don’t rush to invest, take your time to consider all aspects and once invested be patient. Because of the very strong bull market in all asset classes, this virtue has needed absolutely no practising over the last 4 years.

    2007 may or may not be any different to the last 4 years. However experience tells us that asset prices have the ability to continue to move to extremes and persist for far longer than is rational.

    Obviously all investors just love the quick gain, but the impatient often leave far too much on the table as they sell out to bank the easy gains. Patient investors will see investments double and double again and not be too easily tempted to sell as markets zig and zag.

    An e-mail from a subscriber today asked me if he should be switching from a higher risk investment portfolio to a lower risk portfolio for his pension fund. I think that it’s the type of decision that many investors have on their minds. “Do I sell and bank profits now, or do I hold out.”

    My first question is – what is your objective. Investing for retirement means having a CLEAR plan to get to that point and then also for the years beyond that point. There is risk in converting all your assets to cash running up to and at retirement age.

    It also does appear that patience is going to be needed for investors on the JSE. The market raced up to a new high on the first day, but has tumbled on Wednesday and Thursday with the JSE All Share index falling 1,6% to 24200. Gold shares shed 3,6% and the heavyweight resources shares fell 2,7%.

    It’s going to be a very interesting year.

    Kind regards

    Ian de Lange

    Permalink2007-01-04, 17:45:15, by ian Email , Leave a comment