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;
  • The Traders Life: The process with IG and Simon Brown
  • JSE Power Hour: Disruptions or Innovation

* I hold ungeared positions.

Where's your stop loss?

The #ALSI gives us a free lesson in stop hunting pic.twitter.com/EkqvebhUkV

— Trader1137 (@Trader1137) August 30, 2017

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?

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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.

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;
  • The Traders Life: The process with IG and Simon Brown
  • JSE Power Hour: Disruptions or Innovation

* 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.

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;
  • JSE Power Hour: Getting trading right with Trader Petri
  • The Traders Life: The process with IG and Simon Brown
  • JSE Power Hour: Disruptions or Innovation

* 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.

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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.

Simon Shares

• New all time highs locally for the All Share Index, Indi25, Top40 and ALSI futures as latter traded one contract at 50,000 for first time ever. I love all time highs.
• Upcoming events;
  • JSE Power Hour: Getting trading right with Trader Petri
  • JSE Power Hour: Disruptions or Innovation

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?

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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.

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;
  • JSE Power Hour: Getting trading right with Trader Petri

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.