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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: April, 2018
Apr 25, 2018

Simon Shares

  • Libstar listing is proceeding and I am not taking part. I do think the market will love it but Google the private equity sellers (Abraaj) lots bad happening their and the company has declared a R800million pre listing dividend - while raising R1.5billion?
  • Consol has pulled their JSE listing citing "challenging market conditions". Have the market conditions really changed that much in the last few weeks or was the market just not excited by the listing?

Auditing - it's complicated

The local auditing profession is having a tough time of it with the Auditor General (Thembekile Makwetu) commenting on The Money Show with Bruce Whitfield he said that that the professions reputation was "in the gutter".

I wanted to understand what we as investor really can expect from an auditor? Are they to blame for Steinhoff (JSE code: SNH) and other recent collapses or is that beyond their scope?

Keith McLachlan, fund manager at Alpha Wealth, studied as an auditor and is now a fund manager so decided to have a short chat with him to get some perspective. The short chat ended up being a long chat and I suspect we missed a number of angles but one thing did stand out for me, the word "material".


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.

Apr 18, 2018

“Brought to you by Absa ETFs”

Simon Shares

  • EOH (JSE code: EOH) under pressure again trading at 5 year lows. The company claims it is because of false allegations published on some news website.
  • CPI in March was 3.8%, a great number but April has both VAT and petrol tax increases so we may have seen a low in CPI for a while.
  • Pallinghurst (JSE code: PGL) issue audited results but they use an auditor not accredited by the JSE so they don't count.
  • Mediclinic (JSE code: MEI) issued a solid trading update and the share is responding (they also got upgraded by Barclays over the weekend). I now expect the usual flurry of emails abut how I am missing out by not investing in healthcare stocks. I am indeed, but I am also missing out on the other 450 stocks I do not own. The stock market is no place for FOMO - it'll kill you.
  • Finding winning SA Inc. stocks.
  • Tax-free and saving for your child.

Price leads narrative

I heard this on a podcast I listen to, or maybe somebody tweeted it.

Hugely important. Those commenting on price action (myself included) are always doing so after the fact and most times trying to find a narrative that fits the price move. As humans we believe in order and we have an expectation that things happen for a reason. Now sure prices move for a reason, but there is every chance we're not privy to the reason. The short answer is that prices go up when there are more buyers than sellers, anything beyond that is trying to fit a narrative to a move.

As a trader we frankly don't care why they move. We simple wait for our entry and obey our stops.

As an investor price only matters when we're buying as this is all we control. Other than that it is results that matter.

So the narrative around price is fun, but it is not very useful.

We Get Mail

  • Brian
    • Is there a way I can find the names of ETFs that hold Santam?
  • Reino
    • You state that one can open an TFIA account for anybody from day one of birth, but only with an FSP. This TFIA you speak of will it be just an normal account at the bank like a cheque/savings account or will I be able to open one to trade ETF's through for my children?


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.

Apr 11, 2018

“Brought to you by Absa ETFs”

Simon Shares

  • SARS announces tax must be paid on Bitcoin profits - why is anybody surprised?
  • Sagarmatha (JSE code: SGT) listing on Friday, if they tick all the boxes. Some saying they should not be allowed to list but this fails to understand the role the JSE plays. They are regulatory gate keepers, not quality of profitability gate keepers.
  • Steinhoff (JSE code: SNH) now under 300c at 226c, well below late 1998 listing - all-time-low and the bad news just continues to drip out.
  • ETFs and the cost of the spread.
  • Living vs guaranteed annuities.
  • Upcoming events;

Liquidity risk

Homechoice (JSE code: HIL) keeps on putting out great results and cash generation but has almost zero liquidity (30 trades since 6 March and currently no offers to sell on market with last trade at 4700c and buyers at 1226c! This makes it uninvestable in my world as we'd essentially be buying into a quasi private equity arrangement as exiting would be almost (absolutely) impossible. But they did announce in the latest results they plan to improve liquidity and I'll keep an eye on this.

In the excitement of finding a great share we'll often over look the liquidity issue but I remember getting very badly caught in an illiquid stock way back in the day and while I could have held on I panicked and exited at a nasty loss.

Liquidity is not just the spread, which is a cost. But also the amount of volume being traded and we also have to remember that liquidity can disappear very quickly.

So two things to look for.

  1. What size spread are you having to cross to buy. A 1100c / 1500c is 400c and over 30%. I want spreads as tight as possible and certainly not more than 5% at worse.
  2. I want average daily value traded to be at least 30x the size I am buying so even if it dries up I can still get out without too much pain.

For traders liquidity even more important an I want spreads less than 1% and value traded 100x my trade size. This is because I want to have no impact when buying or selling (or as small as possible because there is never no impact) and I need the liquidity for very quick and efficient exits.

Last important point. Liquidity in terms of volume is not an issue for ETFs as the market maker ensures that they will have a bid and offer either side of fair value at all times. So while the ETF may not be trading it has the capacity to trade in larger volumes if required.



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.

Apr 8, 2018

If you secretly hate us but haven’t been able to find a different source of financial information, I have some great news! I found a Freakonomics Radio episode that summed up exactly the principles we champion on this show.

In this episode, Simon and I take the financial literacy survey. It’s only three questions, but understanding their answers will enable you to make great financial decisions. If this sounds vaguely familiar, you might be thinking of this podcast we did last year.

Here are the questions:

  1. Suppose you have R100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?
    1. More than R102
    2. Exactly R102
    3. Less than R102
  2. Imagine that the interest rate on your savings account was 5% per year and inflation was 6% per year. After one year, how much would you be able to buy with the money in this account?
    1. More than today.
    2. Exactly the same as today.
    3. Less than today.
  3. Do you think the following statement is true or false: buying a single company stock usually provides a safer return than a collective investment scheme like an ETF or unit trust.

Win of the week: Rob has been coming to our events for ages. He has some ETF investments, but he’s been wanting to trade since the day I met him. This week, he sent this email:

Yes I have done my first trade and  bought my first bunch of shares (7 shares in total - some bits and bobs) (as oppose to ETFs)

I am not sure how I am supposed to feel!

Its bit like sex for the first time - did not know what to expect!


Frederick

My world has been turned upside down! I started listening to your podcast a week or so ago, and fok... my google is broken!! From googling sport all day I now spend endless nights and have sleepless nights on where to put my money and avoid tax as much as possible!

I use to think money is money and my RA is perfect and that life is sorted! I was wrong!

I have an RA (diversified wealth builder) with Sanlam. Any thoughts here please? My FEES (to my knowledge) is 0.65%.

It says “management fee at benchmark %”.

I put some money in monthly with a 10% annual increase. By retirement I should be paid out R11,5m.

Let’s say you live another lifetime after your working life, how much will you need? It’s possible to retire at 60 and live to 100.

https://justonelap.com/podcast-much-money-need/


Frank is trading Simon's Lazy system and wants to know if he can park his money somewhere while he waits for entries. He’s not earning interest on the money that he’s allocated for this trade.


Shamona wants to know if timeshare is worth it.

What are the pros and cons? What should I look out for when buying?


Entries to win Manage Your Money Like a Fucking Grownup. We want you to share the financial fact that blew your mind. We’ll be running this competition for one more week.

I asked author Sam Beckbessinger hers and she said on R10k per month, you’ll earn R19m in your  working life. Mine is that a low cost of living is basically the answer to all your problems.


Lesigisha wrote back after we sent him a shout-out last week.

Thank you so much for the great affirmation I received from the submission of my email, it really really went a long way in validating what I’m doing.

It’s hard to start on this journey, but after doing it for a while one does sometimes get despondent and wonder if this is worth it. Your affirmation has helped reinvigorate me and I go back to it every time someone says they’re waiting until they have a bigger shoe size before they can start making “real money decisions”.


Khuliso’s mind-blowing fact is that you don’t need huge amounts of money to invest. As a result of his mail I spent a lot of time thinking about kotas this morning.

The most mind-blowing fact was finding out that if I can afford to buy a kota (R23.00) or street wise 2 I can afford to invest in the JSE and create wealth.

Even though it's little money, over the long term it makes a difference. In my case the problem was lack of information rather than a lack of money to invest.

I am now very conscious about my spending habits. Whenever I buy takeaways in the back of my mind I keep on thinking of ETFs that I could be buying. When I look back, I see missed opportunities where I could have invested and build wealth.


Apr 4, 2018

“Brought to you by Absa ETFs”

Simon Shares

Spot the losers

Steinhoff (JSE code: SNH) announces that their property portfolio is only worth half what they thought. Boom there goes another R16billion. I cautioned when this story broke that bad news would be dripping out for a while, and so it continues with the immediate question being hat about their other property assets?

Grand Parade (JSE code: GPL) CEO has quit exiting immediately. Ms. Tasneem Karriem joined the company in 2015 and was made CEO last June. This is not good news and the stock is off 4% and trading at 2010 levels.

Nampak (JSE code: NPK) is selling their glass business after spending R938m to buy the 50% of the glass business it did not own. It has also spent billions on capital expenditure and now we wait to see what price it sells for. But an absolute disaster for the company and the share is back at 2010 levels.

NetCare (JSE code: NTC) is to exiting its UK operations after twelve years of absolute disaster and the share is trading at 2010 levels.

Ascendis Health (JSE code: ASC) is trading below its 2013 listing price and just off all-time lows at 938c.

You spot the problem?

Middling quality companies expanding and the wheels come off. Now sure there are likely many examples of other companies that did not lose their wheels. But as investors we have to make sure we own the right ones. It is also worth noting that as a small investor we can place a core of ETFs (+50%) for diversification and then we need only own 10-12 individual stocks in the 'til death do us part' portfolio. This gives us a huge edge on fund managers who typically need to own 30-50 stocks. We can focus like a laser on quality and spend most of our time finding reasons NOT to invest in a stock.



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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