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JSE Direct with Simon Brown

Weekly podcast hosted by Simon Brown covering the JSE and listed companies.
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Now displaying: 2017
Dec 13, 2017

Simon Shares

  • EOH (JSE code: EOH), so the collapse was because of directors margin calls that forced them to sell? This is an epic disaster, if it was my board I would fire them. A share price collapse has real consequences, especially for a company like EOH that uses their shares for acquisitions.
  • Steinhoff (JSE code: SNH) mess continues but an interesting meme occurring in an attempt to make sure the asset managers take no blame. The same happened after African Bank, Enron and other notable corporate collapses. I not saying we should be jailing the asset managers but we should be asking hard questions and having the debate.
    • I am seeing more and more analysis on the fact that SNH was not quality, sure it is in some (but not all) cases after the fact but enough people are speaking out. Yet this low quality stock was valued at around R300billion at its peak and suggesting that it was impossible to tell is an outright lie as proved by many people being short and querying the numbers. Surely as an industry it is important to understand how this happened? Now some managers hunt out low quality as an investment theme, but they are the minority. Pretty much every asset manager will say they buy quality at a good price - but then I ask again, how did this low quality stock end up worth over R300billion?
    • As an industry we are the custodian of peoples retirements, savings and ultimately their dreams - we need to take this seriously and surely, at a minimum, the honest response when we get it spectacularly wrong is to reflect how we get it wrong? Instead I see all sorts of head in sand or finger pointing? Why? Too busy keeping the fees and buying luxury German sedans and Cape Town holiday homes?
  • Likely this is the final JSE Direct for 2017. I have many more ideas but need to take a break. We'll be back with our predictions show in January with Marc Ashton and Keith Mclachlan and as always we'll start by scoring our 2017 predictions (find our 2017 predictions here)
  • Position your portfolio for 2018 is online (video, audio and PDF).

Asymmetry of investing

The asymmetrical nature of investing is a huge boom to investors. A share we own can go to zero with a 100% loss, but the flip side is that it can up go up multiples of 100%. So even the occasional loser doesn't derail a diverse quality investment portfolio.

The two key points, diverse and quality. If you have only one stock you're at massive risk and if you have a basket of dogs then you're still in serious trouble.

But a collection of quality stocks can survive the occasional blow out as they others run and we only needs a few real winners to make it all work and market beating.

Now in an ideal world we'll never see a 100% blow out because when it's time to panic we'll panic quick, right?

A last word on the asymmetry of trading (as apposed to investing). We have no real floor on loses as we also have no real floor on gains. So it is not asymmetrical and so we have to make it so by being ruthless with stop losses. I have long said my trading success is due to my always taking the stop immediately no questions asked.


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Dec 8, 2017

Our signature yearend JSE Power Hour presented by Just One Lap founder, Simon Brown.

Simon looks at what he predicted last year before embarking on his 2018 predictions that include;

  • Steinhoff (JSE code: SNH)
  • Naspers (JSE code: NPN)
  • Bitcoin (BTC)
  • The December ANC elective conference, who'll win and how will this impact our market
  • Junk status
  • The R50billion tax hole looming in the February budget
  • Interest rates
  • The Rand
  • International markets
  • Commodities
  • His preferred stocks and ETFs for 2018.

The PDF of the presentation is here and video here.

Dec 6, 2017

Simon Shares

Twitter poll for tonight's JSE Power Hour presentation ~ What's your expectation for the Top40 in 2018?

 

Steinhoff, where there's smoke

Markus Jooste has also quit Stenihoff (JSE code: SNH), Star (JSE code: SRR), PSG (JSE code: PSG) and Phumelela Gaming (JSE code: PHM) boards.

Steinhoff CFO and Star CEO Ben la Grange has quit as CEO of Star, but seemingly stays on at Steinhoff, for now.
It's an oldie but it always true. Where there's smoke theirs fire and locally that is Steinhoff. Forever people have been in one of two camps on this stock. They either loved it or didn't understand the financials and stayed well away. I have always been in the latter camp and recently the warnings have gotten dire and now the CEO is out, results delayed and an investigation by PwC to try and understand exactly what's happen.

Now hindsight is easy, but there has been a lot of smoke around Steinhoff for ages, enough to scare away any investor one would think. I warned as recently as a month ago about this.

For traders the lesson is simple. Don't try and catch falling knives. Sure sometimes it works but when it doesn't you blow up.

Wiese took some R122million SSF exposure in early November at 6146c. This is why we largely ignore director buying.
The company did a share buy back also in early November for about R4,8billion, now worth R1.2billion.

Also a lot of hating on ETFs as Steinhoff was 2.35% of the Swix (which is a truly horrid index) and 1.88% of the Top40. Frankly active fun damagers who liked the company probably had a lot more.

 

Of course everybody now wants to know if it is time to buy? The answer is no because we simple know nothing except that what we thought we knew is not true. Never blindly buy something where everything is simple unknown. Some saying they have 2500c odd value in Star, PSG & Kap, but then they also have debt that is likely about the same.

Viceroy Research has published their report in Steinhoff and it makes for scary reading.

Lastly, what to do if you hold Steinhoff? Sell. The 'it can't get worse' trope is a lie. It can get worse, it can go to zero.

Nov 29, 2017

Simon Shares

  • More downgrades as S&P Globals makes our local debt junk as well to go with Fitch. Moody's gave us 90 days which takes us to just after the February budget and if they drop us then we full on 100% junk, AKA Brazilian.
  • The Rand is powering ahead trading in the R13.60's against US$. My call for a stronger Rand remains in force. Slowly but surely.
  • The latest Long4Life* (JSE code: L4L) deal is a perfect fit with the Gauteng based contract bottler they are also buying. I like the share at these lower prices.
  • Yearend portfolio clean up is coming up and the one I eyeing is Calgro M3* (JSE code: CGR) in my second tier portfolio. I sold most back when Nene was fired keeping a few and they have pretty much halved since then. Checking my notes from when I sold my plan was to monitor and sell if I saw weakness. Well we got the weakness, but I didn't sell. Now I could hold them on a prayer - but I'd rather just bin them.
  • I've been writing my yearend columns for FinWeek looking into 2018 events and stocks. They'll be out Next Friday and I'll share some in the podcast in the weeks ahead.
  • Sygnia Itrix 4th Industrial Revolution Global Equity ETF (SYG4IR) lists next week.
  • ETF winners for the year, what's RHO?
  • Up coming events;

I hold ungeared positions.

Trading buddies

Trading is often very lonely, sure there's the people on Twitter or WhatsApp group you chat to - but mostly that's wild and wooly and not really any support. Your friends and partner are likely not much help either as frankly they don't truly get what you do or the pressures involved.

So we need a trading buddy, not just to keep us sane - but also to keep us honest and help us when we need it. we can use them to vent as required but even more importantly we give them access to our trading account for two reasons.

  • Firstly they check our trades and make sure we're trading as we say we do. Keeping to the system and staying honest.
  • Secondly they can get us into or out of trades when we're not able to.

The real hard part is finding this trading buddy. Check around your circle of friends, try Twitter and other forums and be very selective when choosing.

We Get Mail

  • Anne
    • Why when I look at the daily chart of an ETF does it jump all over the place?


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Nov 22, 2017

Simon Shares

I hold ungeared positions.

Stop faffing, start trading

I want to aim this mostly at the newbie traders. Those who've been flirting with the idea of trading for ages. Maybe you've tried your hand at it but failed or perhaps you haven't dipped your toe into the water as yet.

Trading is not hard, the psychology is hard, but there are ways to deal with that.

First find a strategy you think makes sense, then start working on it. Test it with hundreds of back tested paper trades. Tweak as required and test again, rinse and repeat until you have something that seems to have a profitable edge. This may take you weeks of manual work - that's fine.

Then when you have something that seems to work, start with a small amount of money. Small as this will help reduce the stress.

Set the rules and risk management and get trading. Track your performance, your perfect trades and keep a journal. Importantly change NOTHING about the system. Ideally you should trade the exact same system for the entire 2018. If it is losing money badly, then your testing was bad. But by the end of 2018 you'll ideally have a working trading strategy and you can start increasing the portfolio size.

Point is start and have modest expectations. Aim to break even in year one - that's winning.

Online resources;

We Get Mail

  • Ivor
    • Why do so many large cap companies not make it into the Top40? (Glencore, South32, Amplats, Hammerson, NEPI, Kumba, Resillent & Capco).

 

Nov 15, 2017

Simon Shares

  • Zimbabwean coup, or not coup or whatever. People are all asking me what's the best investment thesis here. There isn't one, a coup is not great for an economy. A democratic functioning state is what is good for investments.
  • My comments last week about large M&A activity seldom working promoted a number of responses about successful deals - but all were private (not listed). This makes sense, no hype, no over paying. Just good old fashioned due diligence and right price paid.
  • Consolidated Infrastructure Group (JSE code; CIL) update and delayed results is a massive mess. Third update and this one says we simple don't know how bad things will be nor if previous results are sound. Major management failure both to communicate to market and to manage the company.
  • Spar (JSE code: SPP) results show revenue up 5.4% while operating costs increased 19.2%. Not good at all. Switzerland seems to be coming right, Ireland not and South Africa is tough.
  • Netcare (JSE code: NTC) trading update is all about their UK BMI Healthcare business and it's all bad news. Another large offshore deal gone all frot?
  • South African bond issue on Tuesday at largest ever (R3,3bn vs. R2.75bn) and over subscribed 3x. But at 0.75% higher rates and maturing between 2031 and 2048. Compound that cost to our economy.
  • Survey results are out.
  • Up coming events;

I hold ungeared positions.

When it's time to panic

My grandfather introduced me to markets in the 80's and one of his key sayings was "when it's time to panic, panic fast".

When bad news breaks (yes we looking at you CIL) and a stock crashes the immediate response is that it's too late to do anything. Maybe, but often times the will be continued weakness because news and response is not instant. It takes time for everybody to respond. The bigger issue is if the news markedly changes a view and saying the damage is done is not an answer.

This is especially true if the issue is management related and also in cyclical and small/mid cap stocks.

Importantly I am not talking about panicking when the market crashes. This is about exiting a stock forever and moving on until it proves its bonafides again. Selling crashes is nice in theory but never works. Stocks are different because they can go to zero worse case or spend years, decades, forever languishing around little or nothing.



JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Nov 8, 2017

Simon Shares

  • More highs locally and global for markets. And of course that makes everybody worried and certain we're about to crash. Well we will most definitely crash, just nobody (and I mean nobody) knows when. So as always ignore the doomsayers.
  • Tencent buys a 10% stake in Snap, a clever deal as it gets them into the US market. It also means we now all own some Snap via any Top40 ETF we have with Naspers (JSE code: NPN) in it.
  • Purple Group (JSE code: PPE) results were rough. Ignoring a write down of Real People, GT24/7 made a sliver of profit, Emperor is losing AUM hand over fist while EasyEquities continues loses. With almost 60k users the burn rate for EasyEquities is about R3m a month with revenue of some R800k a month. That's a large gap that needs a lot more customers to close. They do however have the money from Sanlam that tides them over for the next 3 years while they try turn the low cost idea into profits.
  • Steinhoff (JSE code SNH) is back in the bad news on reports that it hid US1billion worth of related party deals. This company has a lot of smoke around for an innocent company.
  • Sasfin (JSE code: SFN) has a price-to-book (PB) of around 1x and that is always a buy signal for the stock. Ungeared and hold until PB is 1.4x or higher, about 12-18 months typically. You'll get NAV uplift, dividends and the price gain above NAV.
  • I have sold my Tongaat (JSE code: TON) shares. The latest update showed that even with returning rain we're not seeing the profits from sugar, so my thesis was right (rain) but with no profit to show for it I bailed.
  • Help us help you, do our six minute user survey.
  • 4 New ETFs from Sygnia.
  • Up coming events;

I hold ungeared positions.

Too big to work (AKA big deals suck)

Brait (JSE code: BAT) has valued their UK New Look business at zero. They paid R37billion just under two years ago. Woolies* (JSE code: WHL) and Famous Brands* (JSE code: FBR) both struggling with big deals and now Firstrand (JSE code: FSR) spending some R20billion buying Aldermore.

How many big deal really work? Sure they work eventually, but at what cost and never as management promised.

I suspect it has two key problem. Firstly they buyer typically over pays in their eagerness to get the assets, this is especially true when the target is listed and the premium has to be agreed on by shareholders and is hence usually 20%-30% or more. Secondly merging two business is never easy. Some easy wins such as centralised costs like HR can be lowered, but actually extracting value a lot harder. The third of course is the ego of management. Who wants to be boss of some regional business when you can be a global titan over seeing a vast network of losses?

My memory says very few ever work very well. Have you got some examples of large deals working? SABMiller worked, BHPBilliton* (JSE code: BIL) worked. Any others?

We Get Mail

  • Peter
    • I see that some of the Satrix products are offered as either ETFs or unit trusts. What would compel me to purchase via a unit trust rather than an ETF for something basically the same?


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Nov 1, 2017

Simon Shares

  • Famous Brands* (JSE code: FBR) results were nasty. Local was weak but the real issue is the UK GBP purchase that cost a bunch and is not performing.
  • Long4Life (JSE code: L4L) is now 510c as I record. Nice price and a lesson that we must never chase stocks.
  • Sasfin (JSE code: SFN) has a price-to-book (PB) of around 1x and that is always a buy signal for the stock. Ungeared and hold until PB is 1.4x or higher, about 12-18 months typically. You'll get NAV uplift, dividends and the price gain above NAV.
  • Clicks (JSE code: CLS) are a master class in how a set of results should look if the company really is firing on all cylinders. Revenue +10.9%, HEPS +14.5% and the dividend +18.4%.
  • The Traders Life three part series with IG is online.
  • Up coming events;

I hold ungeared positions.

How important is your trading system?

Your trading system is one of the least important parts of a successful traders arsenal. Yes you need one and yes it need to be profitable. But it is not what is going to make you the money. That will be your discipline, your money and risk management - this is your trading edge.

So stop trying to find the best system in the world. Stop tweaking your system every tine it loses some money and stop jumping from one system to another.

Find a system that makes money, test it and learn to trust it. Become the absolute pro at the system and then trade it; unemotionally and with discipline.

We Get Mail

  • Ron
    • I want to buy Tech stocks (eg Alphabet, Amazon, FB, Apple, Tesla ...) and get a little Biotech exposure using an off-shore account. I'd prefer an ETF than individual stocks.

=========


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Oct 26, 2017

Books

  • Trading
    • Trading in the Zone – Mark Douglas (detailed review)
    • Trend Following – Michael Covel (detail review)
    • Reminiscences of a Stock Operator – Edwin Lefevre
  • Investing
    • One up on Wall Street – Peter Lynch (detailed review)
    • Common Stocks and Uncommon Profits – Phil Fisher (detailed review)
    • Effective Investor – Franco Busetti
    • Intelligent Investor – Benjamin Graham

123


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Oct 18, 2017

Simon Shares

  • Local markets have been making new all time highs and right now the sellers look shell shocked and unable to exert any real downside pressure.
  • Taste (JSE code: TAS) results were just a shocker and they need money fast, real fast.
  • Pick 'n Pay (JSE code: PIK) results were uninspiring. Like for like sales after inflation went down as they continue to lose market share and operating margins remains very weak at 1.6%.
  • Calgro M3* (JSE code: CGR) not bad is we strip out the funnies. Memorial parks coming along and Western Cape drought hurting a bit as is the weak economy. I reduced exposure at the the time of three finance ministers in 4 days in December 2015 and am not upping my exposure for now.
  • Long4Life (JSE code: L4L) at 550c starts to get interesting and offers an important lesson - careful of chasing hype.
  • Up coming events;

I hold ungeared positions.

Managing the dreaded drawdown

Every trader will at some point have a drawdown when a string of losing trades sees your once lovely equity curve head south. Or worse an ugly equity curve get even worse.

Typically the gut response is to either; change system, tweak the system, reduce trade size or just panic. None are a good idea.

August saw me have a horror week with four large loses (within system expectations, but not expected all at once). My immediate response was some Amazon shopping but then I got into my drawdown mode.

First I check every trade to make sure I did everything right. Now every trade I do is marked for a 'perfect trade' but I double check. I also go back to my initial system checking and see if this was expected. I use the Mark Douglas method of system testing and this process is very important. Firstly it gives an expectation of what the system can deliver, tests if it works and also shows what sort of drawdown you can expect.

The point is drawdowns are a part of trading and veery trader will have many of them over a life time of trading. We need to expect them, manage them and not have a knee jerk response to them.


I was interviewed by Duncan McLeod from TechCentral on local and offshore tech stock, interview below or here.



JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Oct 11, 2017

Simon Shares

I hold ungeared positions.

When to short shares

A recent flurry of emails from people shorting stocks and getting burnt. In particular shorts on Capitec*, Naspers and Kumba. A side note that emailing me is a form of confirmation bias as the emailers wanted me to essentially confirm they were right and the market was wrong.

First rule is don't.

Second rule is don't short on fundamentals. Short on price action, if you want coupled with fundamentals. But don't just decide a share is expensive so now it must go down, it can get way more expensive.



JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Sep 27, 2017

Simon Shares

  • Market going nowhere, I take a week off and it literally goes sideways in tight range.
  • Capitec* (JSE code: CPI) results saw HEPS up 17% (trading statement said 15%-18%, they always come in near top of range). Lots of wow numbers; 9.2million active clients and cost-to-income ratio at 36%. The disputed arrears coverage ratio is back at 237% after concerns about it decreasing a year ago.
  • Discovery* (JSE code: DSY) results solid with lost of spending on the future. Still my favourite share I own in terms of potential and I happy to add below R156.
  • Richemont* (JSE code: CFR) trading update shows they turned the corner re nasty watch sales that resulted in them having to buy back watches. Stock trading up at all time highs above R120. My buy price is R118.
  • Santova* (JSE code: SNV) nice clean deal buying out a 25% silent partner from their Australian operation at decent price. Gives immediate extra AUD earnings.
  • New Ashburton World ETF
  • Up coming events;

I hold ungeared positions.

Trading time frames

The first question no new trader asks is which time frame should they be trading in. Typically one starts looking at daily charts but quickly drops to shorter time frames because we want the rush that comes from each trade and we get more at shorter time frames. Yes trades happen in all time frames, but it's our ability to manage and profit from them.

But truthfully can most people manage an intra-day time frame unless this is all they do? Markets is pretty much my life and an hourly chart is still tricky for me as I miss some entries (stops are automated so that no problem).

Shorter time frames;

  • Are also more noisy,
  • Require quicker responses
  • Means shorter trade duration, smaller profit per trade but same costs

Forget about getting a rush from trading and find a time frame that works for you and potentially use multiple time frames. Start with a weekly chart, if you get a tigger wait for it to confirm in the daily chart.

Now if you not using technicals but more about price then tie frames become less of an issue, but you're then having to watch the market consistently hence no other day job or trade at night.

We Get Mail

  • I started buying ETF’s about 4 months ago. I purchase through on line trading. It appears however that prices are manipulated to keep them within a band. I have been seeing signs of this across all ETF’s – some more than others. Last traded prices are impossible to buy at due to the artificial bid volume/price. What makes it even more obvious is often the identical bid / offer volumes.


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Sep 13, 2017

Simon Shares

  • Metrofile* (JSE code: MFL) results very modest as they reduce dividend for H2 but keep it flat for the year.
  • Clover (JSE code: CLR) results were ouch, very ouch. They call it a perfect storm, I call it over priced branded milk.
  • Spur (JSE code: SUR) were also very bleak and give us some insights to the Famous Brands* (JSE code: FBR) due at the end of October. Now Famous Brands has a way better business model and management, but expect very tough results from them.
  • JPMorgan's Dimon said that Bitcoin 'is a fraud'. Right or wrong the price collapsed again and expect a lot more attacks from 'traditional' financial institutions, attacks that Bitcoin fans will say prices its value as it shakes up the establishment.
  • No to tax, yes to fees?
  • Up coming events;

I hold ungeared positions.

Everything is at all time highs

Why does everybody hate highs? If we're an investor highs are a great thing as it means we're richer then before?

I once had a trading system that one of the rules buy new twelve month highs, and it made money.

We get mail

  • Leonard
    • I was a client of Saambou back in the day, and I’m concerned about possible risks of holding everything through a single financial institution. Would there be any risk associated with putting all my eggs into one basket?
  • Hoosain
    • Just read about Patrice Motsepe's ARC investments going public on the JSE yesterday. The headline on moneyweb says "Patrice Motsepe lists his Berkshire Hathaway". Alarms bells rang off in my head when I saw this. Your thoughts about the company and its potential to be South Africa's Berkshire Hathaway?
  • Chris
    • Could u please explain the implications of the STAR spinoff? I currently hold Steinhoff and Shoprite. If I want to hold on to my exposure to PEP, ACKERMANS etc., do I now need to go and buy STAR? Or does Steinhoff still own STAR and thus I can just hold on to my Steinhoff shares?


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Sep 6, 2017

Simon Shares

  • Capitec* (JSE code: CPI) trading update is looking for HEPS to be 15%-18% higher. Modest for a 27x PE stock with consensus being 18.7%.
  • The DB x-tracker ETFs will see their name change on Monday 18 September as Sygnia completes the purchase process. The new name is Sygnia Itrix and the ETF codes will see DBX replaced with SYG.Rhodes Food Group (JSE code: RFG) got hit after a trading update that saw decent local operations but declining offshore sales further hurt by the stronger Rand.
  • ARC Investments (JSE code: ARC) lists today (7 September) after an over subscribed placement at 850c. They have an interesting set of assets, mostly unlisted with net asset value (NAV) also 850c and an investment holding company should trade at a 10%-20% discount to the NAV. So we should see some weakness which give an entry to those wanting stock.
  • Star lists later this month and after the Shoprite* (JSE code: SHP) vote on Tuesday to buy the shares back from previous CEO they now have total control of SHP. Reading the star listing docs, they are most certainly coming for my SHP shares and I am not a keen seller.
  • A Periscope viewer asked my views on the Easy Equities launch of US listed stocks. Short answer is I like but with some cautions such as cost and paper work to transfer money and what to buy.
  • Up coming events;

I hold ungeared positions.

Ignore the fear

Remember Greece? I don't mean as a holiday destination, I mean as the country who's debt levels caused years of panic that were going to crash the global economy? This peaked in 2015 with elections in January 2015 and then in July a referendum saw voters reject the European Union proposed bailout leading to new elections in September 2015. Yet two years later Greece is pretty much never spoken of? The debt had not magically disappeared, rather it is being 'managed'. The struggle remains real for ordinary Greeks and no doubt the politicians continue to do whatever politicians do.

The point is the word is full of one crisis or another and the media will always make the crisis seem way bigger then it often is. If it bleeds it leads is the old newspaper adage and a financial crisis in an EU economy is always going to lead with plenty hysteria thrown in for good measure.The truth is the Greek debt crisis never really mattered to the rest of the world and I did a JSE Power Hour on this in June 2012.

Now don't get me wrong, we will have another global financial crisis - of that I am certain. But what will trigger it and when it will happen I have no idea. So as long-term investors and short-term traders we ignore all the hype and fear mongering. We focus on what we know and can control. For investors that means buying quality at prices we like. For traders - trade the price and ignore the noise.



JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Aug 30, 2017

Simon Shares

  • Telkom (JSE code: TKG) has confirmed government wants to sell their 39% stake in the company, likely to bail out SAA. Classic rookie error, exiting good trade to keep bad trades.
  • Amazingly good results from Home Choice (JSE code: HIL), but with zero liquidity in the stock the results are merely of passing interest.
  • Decent results form AdaptIT (JSE code: ADI) albeit some margin pressure in the education and financial services segments albeit with the latter doing decent revenue growth. All considered around 900c price is a fair value.
  • I mentioned last week I was digging more into ADvTech* (JSE code: ADH) to determine a price to buy at and have now started buying with my fair value (so price below which I am happy to buy) being 1970c.
  • The Harvey storm has hit land again, this time at Louisiana and this is just next to Lake Charles where Sasol* (JSE code: SOL) is building their Ethan Cracker plant. So far Lake Charles has been spared the worst of the wind and rain but we have a few more days of rain to come. The Sasol project will almost certainly be delayed by some amount (and hence costs) but as yet management have said nothing.
  • Understanding the Krugerrand Custodial Certificate.
  • Up coming events;

I hold ungeared positions.

Where's your stop loss?

 

As a trader your stop loss is your most important decision as it protects your capital from destruction. Sure it is hard emotionally cutting losing trades, but that's a lot harder then going bust - so every good trader is ruthless with their stop losses.

But where to place it is hard.

Point is - don't be obvious when placing a stop loss. Don't make it too tight or place it where everybody else would place their stops. Other traders will go stop loss hunting and will shake you out. If you find yourself being stopped out only for the trade to reverse and go in your initial direction - widen your stops. That said careful your stop loss isn't so wide that your system starts to lose money.

Yes stop losses are hard. Hard emotionally as we're losing money and even harder to know where to place them. But without a stop loss process as part of every trading system you will go bust. So spend the time working on your stop loss placement within your trading system.

We Get Mail

  • Hawu
    • I kindly would like to know, what is meant by a company when its raising funds on book-build?


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Aug 23, 2017

Simon Shares

  • Shoprite* (JSE code: SHP) results were stellar, the best food retailer anywhere on this planet? Operating margin from 5.6% last year to 5.76% in the 2017 (more than double that of Pick n Pay), market share growing, rest of Africa rocking (albeit some currency pains).
  • ADvTech (JSE code: ADH) results show tertiary booming but schools under a bit of pressure that they partly blame on "rise in the number of families emigrating"? I like the stock, am doing some more digging and working out my preferred pricing. Will update my portfolio page as and when, certainly cheaper and better positioned than Curro (JSE code: COH).
  • Implats (JSE code: IMP) wins the award for stupidest thing in a SENS announcement "The major reason for the decline in HEPS from the comparative period is that the prior year gross profit declined to a gross loss in the current year."
  • BHP Billiton* (JSE code: BIL) results show them back on track. Reducing debt, paying dividends and not going crazy on capex. I have been holding for ages but not buying, I have updated the buy price and it comes out at R168, so a long way off. 
  • Naspers (JSE code: NPN) hit R3,001.00 and it still valued at less than its passive stake in TenCent.
  • The video from Trader Petri is online - things he does well as a trader.
  • Understanding the Satrix MSCI World ETF.
  • Up coming events;

I hold ungeared positions.

Scam alert

Recently I have been getting a ton of scam phone calls around trading and investing that follow two themes.

The first is offering me some training and software that will make me a fortune, usually 40% in six months! It won't. If it was so awesome why's this person stuck in a call center cold calling me?

The second is offering to get me on the ground floor on some stock (such as Space-X, Uber or the like) or alternatively they've got a hot tip for me. If it all so hot, why are they cold calling me? Surely people would be queuing up to buy?

These are scams, disconnect the call and if you can block the number and warn your friends. Certainly do not start sending money offshore to some random voice on the phone regardless who they say they are. Nor pay top money for software and training when much is free or cheap on the internet.

We Get Mail

  • Babsy
    • What is the importance of having ETF in ones portfolio? why cant one just invest in shares only as this ETF also generate their income in shares. In a nutshell what is the importance of ETF in ones portfolio?
  • Steven
    • I invested in the DBXWD last week, me and a partner got into a discussion about what happens to my portfolio if I die?

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JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Aug 16, 2017

Simon Shares

  • Curro (JSE code: COH) were mixed but mostly good. The lower priced schools struggled and the tertiary are still getting off the ground and will be unbundled in September. But for a stock on a PE of some 100x HEPS growth of just 22% is way to low.
  • Anchor Group (JSE code: ACG) results were as expected from their trading update - a massive disappointment. Last March I was expecting HEPS of 100c for this financial year and they just did 22c (down 39%) and will be hard pressed to do 50c HEPS for the year. That said, 50c HEPS puts them on a forward PE of around 10x, not bad but frankly Coronation (JSE code: CML) with a dividend yield of some 6.5% looking much more attractive.
  • PPC (JSE code: PPC) woes continue as the share trades at 1999 levels. Yip zero price profit this century if you've been holding the stock. This after a high of 5300c in 2007. So now everybody wants to buy, but there's no rush (if at all). Wait for a doubling of price before considering an entry.
  • Famous Brands* (JSE code: FBR) update shows very modest like for like growth but this statement worries me "To date, certain of the new UK stores opened since acquisition have not met sales projections.".
  • Up coming events;

* I hold ungeared positions.

Back to Bitcoin

I did a Bitcoin (code: BTC) podcast in March and nobody cared . Another in June and interest was still modest. Now it booming and everybody wants in?

  • Is it too late? No idea.
  • Is it going to crash? No idea.
  • How high will it go? No idea.

What is Bitcoin? It is not a currency, it is if anything a commodity. It pays no dividends and can buy things but remember sea shells have been used to buy things in the past.

For those wanting to buy Bitcoin, Magda Wierzycka )CEO of Sygnia) recommends using Luno locally (albeit it internal so only market within SA and hence price not always reflective of other exchange prices). Or use an offshore exchange (using your annual R10million offshore allowance) via Kraken or Xapo.

Here's a trick, there is no central exchange for Bitcoin, so what's the price? Also no regulator and we have seen exchanges crash, be hacked and go bust. So this is fairly wild west out there.



JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Aug 9, 2017

Simon Shares

We Get Mail

  • Johan
    • If everyone is making money from trading, who are they making the money off? The answer is of course that everyone can’t be winners and there has to be losers. The ones that lose more than they win, give up and stop trading. Therefore you need a constant flow of newbies that will fail so that the winners can keep winning. Does this not seem like some sort of great pyramid-type scheme? Or is the general justification “survival of the fittest”? Your take on this?
  • Wouter
    • One question from a new investor. Would you stick to your current ETFs you have in your tax-free savings account or add new ones as markets change. Regards from China.
  • Eric
    • I have R50 000 that I want to passively invest in Satrix for 3-5yrs and I was thinking about taking 7 Satrix products and divide the money equally.
  • Tim
    • Could we not just be another Japan, everyone says the market may go up but Japan is the elephant in the room? Or am I mistaken?


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Aug 2, 2017

Simon Shares

  • British American Tobacco (JSE code: BTI) is in trouble on two fronts. Firstly the US is looking at requiring nicotine be reduce to non-addictive levels. Then the UK is investigating the company bribing African governments to get favourable smoking legislation. I suspect many had though the legal issues for these companies were behind them.
  • Bank results are showing surprisingly low dab debt levels. Barclays Africa (JSE code: BGA) at 0.96% and Nedbank (JSE code: NED) at 0.47%. Good news, but cost-to-income levels remain high with Nedbank blowing it out at 59.3% and Barclays 56.4%. These high cost bases are a problem and are not coming down.
  • MTN (JSE code: MTN) update was bleak. It finally gave us real numbers and shows it is down by about two thirds compared to 2015, which is pre-Nigeria.
  • Local markets toying with all-time highs but unable to break higher.
  • Understanding ETF TER ratios.
  • Upcoming events;

Investor or trader? Or both?

I got an email about how a long-term investor had a 15% trailing stop loss on their share and asked it this was the right stop loss level. The question was moot as the writer seems confused as to whether they were a trader or an investor.

The easiest measure is how long you plan to hold a position. If less than three years than you are a trader as SARS says holding less than three years is income and hence taxed at your marginal rate. So derivative or not short-term under three years is trading.

But there is another issue which is technical vs. fundamental. Traders generally use charts as price action trumps all else and plays out in the short term regardless of valuations. Long-term investors use fundamentals as they will play out over the long term. So a long-term investor would have a stop loss but it would be fundamental based, not price based.

Lastly, you can be both. Certainly I am both short-term trader and a long-term investor. Importantly use separate accounts, even if with the same broker.


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Jul 26, 2017

Simon Shares

  • PPC (JSE code: PPC) announced departure of CEO and share tanks. This company in serious board room trouble.
  • Kumba (JSE code: KIO) results were decent, dividend was wild (ahead of actual HEPS) as they compensated shareholders for missed dividends! This is odd and asks the question about dividends going forward. Concern is average cash break-even price of US$43/tonne was up from US$29/tonne in the previous period.
  • Long4Life (JSE code: L4L) runs to 838c then announces confirmed deal for Holdsport (JSE code: HSP) at slightly higher ratio (was 10.44 L4L for every HSP, now 12.1) and share down to 600c. Starts to get interesting another 50c lower.
  • Upcoming events

The market vs. the economy

On Tuesday the Top40 was trading at the high for 2017 (and again on Wednesday) and when I tweeted the fact the replies were mostly about how the market is wrong. Look at unemployment, Guptas, recession, down grades etc. they all shouted. None of the is wrong, but is it relevant?

Firstly we've had a three year +/-30% correction in time. But as importantly the market is not the local economy with listed companies earning a lot beyond our boarders and mostly the better stocks in the index as loser are tossed out. Lastly and perhaps most importantly the market looks head 12-18 months. With rates coming down, Zuma out in the new year and his preferred choice struggling 2018 looks way better for South Africa than many a recent year.

So if we're looking to the seed half of 2018 then the future s brighter, and sure this may be relative, but brighter surely means higher for the market?


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JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Jul 19, 2017

Simon Shares

  • Finally, 5 weeks after moving my FTTH has been installed so I am going to Periscope each recording as it happens which is typically Wednesday afternoon. https://www.pscp.tv/SimonPB/
  • Retail trading updates coming in and as expected they are mostly bleak, but we are seeing the impact of the rains mostly returning.
  • Netflix is a monster, over 100million customers world wide.
  • Long4Life is buying; Holdsport and Sorbet.
  • Steinhoff (JSE code: SNH) raises R12bn (Euro800million) in Europe with a 7.5 year bond at 1.875%.
  • Upcoming events

Is the fees battle over?

Last week I spoke about the price war in ETFs. But do fees still matter?

For the passive market fees are surely at point where they almost don't matter. Sure they can go lower but we're talking most local ETFs now nicely below a 0.5% TER ratio while the offshore are slightly above 0.5%. Don't get me wrong, every 0.1% makes a difference, but on R100k that's R100. Not nothing but not the difference between retiring or not.

I still look at VOO with a TER of 0.04%, but we're never going to get that low (they're a mutual company and owned by the fund holders and have massive scale we'll never see in South Africa).

Admin fees, once a silent killer have also disappeared at some brokers where a simple ETF or tax-free account has zero admin fees.

Transaction fees are still a bug bear at some places with minimums that mean you need to trade some R18k-R30k per hit to get the effective rate.

We Get Mail

  • Georges
    • I would like to find out how/when do ETFs collect their TER? Is this set off against distributions quarterly or “baked” into the price?
  • Helen
    • What will happen to my preference shares with Basil III? Will I loose them?

JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Jul 12, 2017

Simon Shares

  • Finally, 5 weeks after moving my FTTH has been installed so I am going to Periscope each recording as it happens which is typically Wednesday afternoon. 
  • Calgro M3* (JSE code: CGR) update on their missing SENS. Feeling is that the impact is marginal and will hardly hurt earnings? Time will tell, I still don't like asymmetrical information.
  • Oakbay (JSE code: ORL) is delisting from the JSE as they can't find a sponsor. No surprises but real bad for any shareholders.
  • Sygnia (JSE code: SYG) announced the details of the rights offer and it is at 900c but only for R160million as apposed to the expected R320million. So much less dilution, albeit also much lower price.
  • Pubic Protector not fighting the SARB objection of her attempt to change its mandate.
  • New emerging market ETF from Satrix
  • Upcoming events

I hold ungeared positions.

ETF price wars

With the new issue of ETFs from Satrix and Sygnia taking over the DB x-trackers (to be branded Itrax) we're seeing some price wars forming. Very good news for consumers, but some buts.

  • Read the small print.
  • Don't rush. Much of this is targeted TERs and the incumbents may also adjust their TERs downwards.
  • Switching into a same but cheaper ETF may not be economical
  • Tax, costs and spread adds up.

My strategy will be where I buy an ETF that now has a cheaper alternative I will start buying the cheaper immediately. Switching will take longer.

We Get Mail

  • Everybody is asking
    • Are you buying the new emerging market ETF from Satrix?

JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Jul 5, 2017

Simon Shares

  • New Satrix ETFs; S&P500, MSCI World Index and MSCI Emerging Markets Investable Markets and at low 'target' TERs. A price war in the local ETF offerings?
  • Wednesday was exactly ten years since the UK had an interest rate increase from the BoE?
  • Calgro M3* (JSE code: CGR) issued a press release stating that they're cutting back on 'wet work' in the Western Cape due to drought. But no SENS?
  • ANC policy conference has proposed that the SA Reserve Bank be nationalised. Aside from my (so far failed) attempt to buy shares in it, so what? Shareholders have no say in the running of the bank and almost every other central bank is state owned.
  • What percentage ETFs in a portfolio?
  • Upcoming events

I hold ungeared positions.

New listings in hot sectors

We've seen two small stock listing recently that were trying to attach themselves onto the hype of a hot sector. Gold Brands in the quick service restaurant (QSR) space and Pembury in education. Both have failed and both teach us an important lesson in the new stars that are worth investing in.

It is about quality, it always is. Sure a raging bull market will lift all stocks as we saw way back in 2005-8 listing boom. But in a more subdued market, a more skeptical market, quality matters. Cash matters, brands matter, management matters. It all really matters. It is not enough to just be in the right space.



JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Jun 28, 2017

Simon Shares

  • Taste (JSE code: TAS) couldn't get the public to take up all of the 120million new shares, but a new shareholder of note did and it good news for the company.
  • Naspers (JSE code: NPN) results talk of core HEPS. Now sure they tell us what 'core' means but as always I very skeptical of anything that is not IFRS.
  • Wescoal (JSE code: WSL) results in part really hit it out the park with production up 82% while IFRS HEPS was 11.3c vs. 27.1c (company HEPS excluding BEE deal costs).
  • Lafferty Group’s 2017 Global Bank Quality Benchmarking study is out, it ranks 100 major quoted banks across 32 countries and Capitec* (JSE code: CPI) comes out tops as the only bank to get five stars.
  • Upcoming eents

* I hold ungeared positions.


 


How long is long-term?

A recent question asked about some investing ideas and concluded with the comment that "I'm looking at long-term say 5 years.". Wow. For me five years is short term while long-term is decades (yes with a 's' at the end).

I am not falling into the trap of saying things are faster these days with always on smart phones with taxis at our beck an call and online derivative trading. But the tweet below highlights that while we know long-term buy and hold works excellently, especially with ETFs, the average investor finds it hard. Stats continually show that average holding periods for stocks has been rapidly reducing. On the NYSE it is now months whereas it used to be years and years.

I'm not sure if it's fear, impatience, indecision or just a greed to be rich quickly. But wealth creation takes time and sure it is no fun when over the last three years most local portfolios have returned nothing, only beating money under the bed.

What I do know is that thinking of a few years as long-term is bad.

We Get Mail

  • Dale
    • I understand the logic behind an equally weighted ETF, and why it *should* be a good thing, but I can’t help wonder if it’s not a case of “in theory, but not in practise". If I compare the performance of the CSEW40 to the plain Satrix 40, without exception over an almost 10 years period, the Satrix 40 outperforms the equally weighted 40 – sometimes really significantly (thanks etfSA for the data).

JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Jun 21, 2017

Simon Shares

  • Woolies* (JSE code: WHL) share price is under pressure hitting 12 month lows on Monday. Recession is hurting them as high LSM consumers shop down and even Australia is struggling economically. The winner here will be Shoprite* (JSE code: SHP) as they cater for mid/low LSM consumers and will pick up Woolies shoppers.
  • Index changes effective Monday 19th. Only changes from the main four indices is Capitec* (JSE code: CPI) into the Top40 and Implats (JSE code: IMP) exits.

* I hold ungeared positions.

What do you trade? Why?

When I ask people this question I generally get a surprised look as if it is a stupid question and the answer is generally CFDs. The follow up question is always - why do you trade them? Here the answers get garbled because there is seldom a good reason.

We need to be strategic about what we trade. There are differences between; shares, indices and FX. Different funding, risks, costs, spreads and more. We need to understand what they are and trade those that best suits trading in general and our trading specifically.


JSE – The JSE is a registered trademark of the JSE Limited.

JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

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