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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: Page 15
Mar 28, 2018

“Brought to you by Absa ETFs”

Simon Shares

  • Back from holiday and with lots of ideas around what you do and don't like for JSE Direct. That said main comment was not to really change except maybe some experts occasionally on broad topics.
  • Markets falling and Top40 is down some 8% for the year so far. End of the world? Not likely. As always, traders know and obey your stops. Investors know your stocks and entry points.
  • Naspers (JSE code: NPN) is under R3k and off some 30% since the November highs and is in large part why our market is under water as it's the largest stock by a mile in the indices.
  • MPC cut repo rate by 0.25%, 4 members voted for the cut and three for no change. No discussion of a 0.5% cut. Interestingly the VAT increase effective on Sunday is expected to temporarily add 0.6% to inflation.
  • Moodys kept us out of junk and improved our outlook to stable from negative.
  • Anchor group (JSE code: ACG) results were bleak but seemingly the bad news is now behind them and the share is responding well, up some 50% since the lows of January and this is a stock pick from Anthony Clark

Can you pick a winning fund?

The latest SPIVA for SA is out and it is bleak reading for active managers in South Africa. Around 75% are beaten by the benchmark over one, three and five years.

  • Benchmark is Domestic Shareholder Weighted (DSW) capped or normal.

This means you have a 1 in 4 chance of picking an out preforming fund - very bleak odds.

So here's the question, and it is a real question. How does one pick the winning manager going forward? There most definitely will be those who out preform, some even consistently, but how do we spot them in advance? They themselves will tell you that past performance is no guarantee of future performance, and this is 100% true for a bunch of reasons.

  • Changes in personal. A winning manager leaves, is the replacement as good?
  • They had a few lucky calls or managed to avoid some disaster that beset the market. Skill or luck?
  • As they get larger it becomes harder as your investable universe shrinks.
  • I remember a Morningstar report from a few years ago looking at the US market that said the only reliable predictor of future returns was fees. The lower the fee the more likely the fund will out preform. This makes sense, but it is still not a full proof method.

I also know a number of people who chart unit trusts with fairly good success. Either just normal technical analysis or relative performance. Of course tax is an issue here.

If you have a method for picking winning funds let us know.



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.

Mar 14, 2018

“Brought to you by Absa ETFs”

300 shows, I haven't been making a fuss because it just feels old, very old. Add to that almost three years as a live radio show on Classic FM, starting from 8 July 2008. It's almost ten years of a weekly (albeit changing) show. We started life focusing outside the Top40 as the other shows seldom ever did anything in the small and mid cap space - then everybody did. So we have evolved over time. The question is where to next? Another ten years (truthfully that scares me). Send me your ideas on what we should or should not be doing.



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.

Mar 7, 2018

“Brought to you by Absa ETFs”

Simon Shares

Fallen angels (devils?)

When a share is hit by scandal it can take ages to recovery as investors shy away from the stock.

Some like Steinhoff (JSE code: SNH) will never recover due to the seemingly rampant fraud hat happened. Others like EOH may but will stay under 'caution' for a while as will the Resilient (JSE code: RES) stable of stocks. Others such as Capitec* (JSE code: CPI) will also struggle for a while but should shrug it off in time.

Tiger Brands (JSE code: TBS) has held up fairly well since the Listeriosis story broke on the weekend and is only back to November levels. But it could get real bad with almost 200 dead people, but markets seem to not be so concerned with these sort of issues. I remember Pioneer (JSE code: PFG) righting the bread fixing claims, eventually paying a R1billion fine and the share rocketed. In part it is the known vs. unknown. PFG struggled until the fine was agreed on, and TBS could well see its share price struggle until some sort of finality is reached - and that cold be years.

The concern is perception and some potential investors will stay away while existing holders may head for the hills and this means less buyers for the stock so less/slower upside.

Your strategy needs to ask if the scandal is terminal, long-term or merely a passing fad? Then remember if it is time to panic, panic quick.



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.

Feb 28, 2018

“Brought to you by Absa ETFs”

Simon Shares

  • The new cabinet is of course a compromise, that's the nature of our political system. But the important departments are markedly better hands (SOEs, treasury & mining).
  • New tax-free year kicks off today. R33,000 per year and transfer are now also possible.
  • Up coming events;

Leverage your investment portfolio

Borrowing money to increase your portfolio is something most investors ponder at some point, but two questions come up. How and what are the risks? The theory is easy, over the long-term equity markets do better than the cost of borrowing, but there is more to leverage then just that. So here are some options, with the risks involved.

  • Derivatives such as CFDs;
    • Easy enough. But costs and margin calls are real issues. Keep it small.
  • Home loan
    • Clean and simple if you can afford the repayments remembering that when markets collapse interest rates typically rise. Make sure you can make the repayments with higher interest rates and what if your income drops?
  • Personal loan
    • Banks don't like lending against shares and again can you afford the repayments? Also unsecured loans typically attract higher interest rates meaning the numbers no longer add up.
  • Margin
    • Some brokers will lend against a portfolio with the amounts varying depending on the shares being used as collateral. The risk here is that loan amounts may be adjusted and you may be squeezed out.

Personally I have leveraged my portfolio once. In 2008 I maxed out my bond to add to my portfolio. It worked and I slept well enough but I have no plans to do so again.

On page 10 of his latest annual letter Warren Buffett writes "This table offers the strongest argument I can muster against ever using borrowed money to own stocks. There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions." 



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.

Feb 21, 2018

Brought to you by Absa ETFs” 

Simon Shares

  • Discovery* (JSE code: DSY) results were top notch and complicated as they always are. I own this stock as the business model really works, but as I have mentioned before the complexity adds risk. Risk I am happy with as most stocks I own have real simple business models.
  • JSE (JSE code: JSE) results show HEPS down 6%. But look at value being traded these days. R25billion a day has become a regular feature, last year average was around R15billion. That equals lots of extra revenue in this financial year.
  • Mining charter back to the drawing board. Good for local miners (of which we have very few).
  • January CPI dropped to 4.4%, interest cuts coming to a prime rate near you? But budget may add to inflation (fuel being the one, not directly but will increase transport costs so food inflation).
  • Up coming events;

* I Hold ungeared positions

#Budget2018

Firstly I think Cyril Ramaphosa may have played it real smart by letting Malusi Gigaba deliver the budget. He can now spend the next year claiming it was not his budget but a Zuma legacy budget.

Overall not the train smash expected but still lots of tax increases with R36billion of extra tax. Lots of cuts to spending, R86billion over three years and which has to actually happen.

  • VAT increased to 15% (first change since 1993), with 19 basic food items being zero-rated.
  • Cue everybody suddenly caring about how this will hurt the poor.
  • Wealthiest 30% of household contribute 85% of VAT revenue”. 
  • "The Old age, disability and care dependency grants will increase on 1 April 2018 from the existing R1600 by R90 to R1690 and by a further R10 to R1700 on 1st October 2018."

GDP growth 1.5% in 2018 and rising to 2.1% in 2020. I hope they are very wrong on this.

No changes to;

  • Dividend withholding tax (DWT)
  • CGT (40% inclusion rate with first R40k exempt)
  • Tax-free limits (annual or life time)

No Nuclear.

Retirement funds will be allowed to invest up to 40% outside of SA - 30% "offshore" and another 10% elsewhere in Africa.

JSE added 1.25% during the speech, USDZAR 8c and government bonds back at 8%, bond levels last seen three years ago.

For our investments. Consumers being taxed, no surprise. But with inflation dropping leading to prime rate likely heading lower I still like the SA Inc. investment thesis.

Overall - a good balancing act albeit still a tough budget. But could have been much worse and I think Moodys will not downgrade us on the back of it.



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.

Feb 14, 2018

Simon Shares

  • Market continues to wait for president Zuma to go. It is taking time but ejecting a leader usually does take time and markets are patient and way more interested in what is happen in the US with inflation data out after I have recorded this podcast. This will likely be the driver for now. When Zuma eventually goes, and he will go, then market can move on that info. It is messy (as politics usually is) but it just a matter of when, not if.
  • Oceana (JSE code: OCE) CEO quits to buy their boats?
  • Resilient, Nepi Rockcastle, ForstressB & Greenbay (JSE codes: RES, NRP, FFB & GRB) continue to flounder after 36One report surfaces. Was it leaked? Does that matter? Resilient have responded via SENS and a conference call and a FAQ - now the market gets to vote. http://resilient.co.za/faq.htm
  • New African property ETF.
  • RA, pension or provident fund by Carina Jooste.
  • Up-coming events

Avoid the big losers or risk your portfolio

 

Trading is really probability and all we have to do as traders is enter on time and then ensure no large losses. If we avoid the large losses those small profits and losses will cancel each other out and the occasional large winner will make all the profits. But we have to cut the large losers or else we go bust.

So why do we hang onto our losers?

  • Fear of the pain - we want the thrill of winner because then we're winners.
  • Fear of being wrong - measure by what you control (perfect trade challenge).
  • Fear of the money being gone - trade smaller size.

We Get Mail

  • Ruan
    • I am new to CFD trading and I see that with CFDs you qualify for dividends. How does it works?
  • Manoj
    • I am considering investing in the new CoreShares Global Dividend Aristocratic ETF that will launch on 22 February. However, I would obviously want to make sure that I am buying the share at fair value or at a discount. How would one ascertain whether the price is at fair value or a discount? Normally, one can use the P/E ratio to ascertain value. But, in the case of an EFT, this ratio is not available. Additionally, I am nervous about committing to purchase the ETF during the book build that ends on 15 February because I don't know the launch price. It this nervousness justified?


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.

Feb 7, 2018

Simon Shares

  • Dual CEOs at Investec (JSE codes: INL / INP)?
  • Market sells off and rebounds (a bit) and we're in correction territory (down 10%).
  • The falling property stocks of Resilient, Nepi Rockcastle, ForstressB & Greenbay (JSE codes: RES, NRP, FFB & GRB) continue to trade down at the low levels they hit when Viceroy concerns initially hit the market in early January.
  • Capitec* still under fire from Viceroy and share likely to be subdued for a while.
  • Brimstone (JSE code: BRN) has sold down their stakes in both Tiger Brands (JSE code: TBS) and Life Healthcare (JSE code: LHC). Now what will they do with the R750million cash?
  • Stress free tax year
  • Up-coming events

* I hold ungeared positions.

Section 12J (S12J)

Introduced in 2009 this enables a tax payer to invest into a startup (via the S12J fund, Section 12J Venture Capital Companies (VCC)) and claim it as a deduction on their tax return effectively reducing ones income by the amount invested. An important point is that the investment has to be held for 5 years or income becomes taxable.

In theory nice but with some buts;

  • Firstly investing in startups is high risk - of course it is.
  • That said you can invest in lower risk and more mature companies, know what you're investing into.
  • Exiting at the end of five years may be a challenge. How does one sell a stake in a startup? They could list but if not liquidity is going to be a potential problem. Check how the fund plans to manage this and how it has worked in the past.
  • Check the numbers very carefully. I've seen a lot S12J companies working the returns off R550k when you made a R1million investment. The theory is that they include the R450k tax saving into the return. Sure, but where did the R450k go?
  • Know what you're investing into. This is much harder then listed investments as they're startups and we have limited information and hence valuations are hard.
  • Get to grips with all the fees, all of them, in lots of detail.
  • Quality and track record of the VCC managers.
  • Bottom line is that there are good and bad in S12J. Make very sure you know which you're getting into.
  • Lastly, saving tax is never a good enough reason on its own for an investment.


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.

Jan 31, 2018

Viceroy charges into Capitec*

I think we're missing a point with this latest Viceroy report on Capitec. Sure we're proud of the business and if you're a shareholder you've made amazing returns. But we seem to be circling the wagons and shooting the messenger rather then actually discussing the merits of the report.

Two important thoughts to ponder.

What if Viceroy had published their Steinhoff report before Steinhoff admitted to their fraud, would we have believed them? Simple answer is no and we would have looked stupid when the company admitted the fraud.

A fund manager does their research in a company, decides it's a great sock. They buy it and then they go out into the world promoting the stock - talking it up in the media and notes to clients. How is this different from what Viceroy is doing (aside from Viceroy shorting rather then buying)?

Here are some others who have been asking questions about Capitec.

*I sold half my Capitec shares at R911.00 yesterday.

A last point is that with Capitec exposed as the Viceroy target suddenly the other contenders (Resilient stable, Aspen, etc) are now all forgiven. But hold on, when we were unsure who was next the market sold these stocks off aggressively - this tells us something important. It tells us the market is not confident about these stocks and we should take that warning seriously.

Here's a Periscope video I did just after the news broke.

Here's the Hebalife video.



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.

Jan 24, 2018

Global Dividend Aristocrats ETF

This week Simon chats to Chris Rule from CoreShares on their soon to be listed Global Dividend Aristocrats ETF. It uses dividends as a quality metric rather then searching for yield and much like the MSCI World ETFs we have locally it is concentrated in the US at 53% with Europe making up another 22% but it is light on tech.

You can book for the events 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.

Jan 17, 2018

Simon Shares

  • Aspen (JSE code: APN) being vice squeezed.
  • Woolies* (JSE code: WHL) trading update, "impact of a potential re-assessment of the carrying value of the David Jones assets". Watch out for the "goodwill write downs are not cash", true but they were paid for with cash.
  • Shoprite* (JSE code: SHP) update seemed lighter then I had expected, good but not awesome. That said market liked it and stock is up over 6% since the SENS.

* I hold ungeared positions.

New year resolutions for investors

"Everybody has a plan until they get punched in the face" Mike Tyson

  • Stop watching the prices. These are long term investments, check them every so often if you must but certainly not even weekly never mind intra-day.
  • Only own stocks that you have at least three strong reasons for owning and revisit these reasons at least once a year.
  • Sell the dogs in your portfolio, sell them now (I'll wait).
  • Sell anything that is not the best management and be very careful about what qualifies as best management (think Steinhoff).
  • Careful of complexity (again Steinhoff).
  • Miners and other cyclical stocks are never long term investments.
  • ETFs are best and easiest way to create wealth, always have a core of at least 50% ETFs in your portfolio.
  • Your first R33k invested every year must go into a low cost ETF tax-free account.
  • If you not regularly beating the market over a 1 and 3 year period. Stop trying and just buy ETFs.
  • Cost are a big killer.
  • Keep it simple.
  • Keep it diverse.


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.

Jan 10, 2018

Every year the first JSE Direct of the year is our annual predictions show. Marc Ashton, Keith McLachlan, Small/Midcap fund manager at Alpha Wealth and Just One Lap founder Simon Brown review their predictions from the previous year and make their top three predictions for 2018.

They then also make a call on the Top40 and ZAR/US$ for the year.

You can find the 2017 edition 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.

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.

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