Simon Shares

• Remgro (JSE code: REM) plans to unbundle its stake in Grindrod (JSE code: GND). There were ideas that maybe Remgro would take out Grindrod, but the unbundling is going in a different direction and Remgro unbundles shares they don't want. Remember also that after the unbundling expect weakness in the Grindrod share price for a few weeks.
  • They've held them since 2011 and hold a 24.81% stake
  • For every 100 Remgro you'll receive 30.70841 Grindrod shares.
  • Last day to trade (LDT) is 11 October 2022.
  • You'll receive them with a base cost that Remgro paid, that value is still to be determined.
• Barloworld (JSE code: BAW) trading update is not bad. The big news is that they plan to list Avis by year-end.
• Tiger Brands (JSE code: TBS) trading update was solid off a low base. The chart looks bullish as it rose +10% on Monday after the update. Chart looking decent and a potential delisting target?
• The UK is an absolute mess.

Here the UK 5, 10 & 30 year bonds for September .(with correct carts) . Just September pic.twitter.com/hMj5yP65bC

— Simon Brown (@SimonPB) September 28, 2022

Rampant Dollar

The US$ Index (code: DXY) is at twenty-year highs and within a few percent taking out the highs from the early 2000s and heading back to levels last seen in the mid-1980s.

The reasons are simple and two-fold;

• The world is scared and fear sees investors rushing to the safety of the US$.
• Rising rates in the US now see the US ten-year treasury bills trading around 4%, the highest level in over a decade. So investors can flee to the US$ and buy 10-year bills for a ±4% return.

Importantly this is hitting every currency in the world.

Has earnings implications for US companies selling products offshore as those profits are now lower due to US strength.

When does the strength stop?

• In the short-term a pullback is likely.
• But as long as fears remain the strength will continue and could continue well into next year.

What to do?

• Don't panic.
• Consider some JSE listed currency ETFs.
• Continue with your offshoring strategy.

The tables have turned. Emerging markets are much more resilient against the US Dollar than the rest of the G10. Year-to-date, the Dollar has risen a stunning 15% against the G10 (black), but only 5% against emerging markets (blue). EM is the new standard bearer for stability... pic.twitter.com/ToaQvQB9DS

— Robin Brooks (@RobinBrooksIIF) September 27, 2022

hh

Simon Shares

• FedEx (NYSE code: FDX) spooks the market by withdrawing guidance and saying demand is collapsing.
• Thungela Resources (JSE code TGA) went ex-dividend to 6000c.
• Wilson Bayly (JSE code: WBO) is letting their Australian operations go bust, not giving any more financial assistance.

Has inflation peaked?

• Local inflation down at 7.6% for August from 7.8%.
• US August inflation at 8.3% from 8.5%.
• UK August 9.9% from 10.1%.
• EU 10.1% up from 9.8%.
• Europe and UK still have a winter of energy crisis to contend with.
• US and local looks to have topped, but energy/petrol still needs watching.
• Food inflation remains high and remains a risk.
• A recession will dampen demand and help inflation lower.
• Transport costs are down.

BUT, what of interest rates?

The problem is getting back to target.

• Locally 3%-6%
• US 2%

Rate increases still coming, likely into the new year before pausing.

Then the long wait for inflation to get to target (or near) before rates start coming down. In the US this is at best 2024 but probably 2025. Locally rates may start moving lower in early 2024.

Simon Shares

Trading

• Trading in the Zone – Mark Douglas (detailed review)
• Trend Following – Michael Covel (detailed review)
• Reminiscences of a Stock Operator – Edwin Lefevre
• Market Wizards - Jack Schwager
• The Complete Turtle Trader: How 23 Novice Investors Became Overnight Millionaires - Michael Covel

Investing

• The Little Book of Common Sense Investing - John C. Bogle
• One up on Wall Street – Peter Lynch (detailed review)
• Common Stocks and Uncommon Profits – Phil Fisher (detailed review)
• Effective Investor – Franco Busetti
• The Little Book that Beats the Market - Joel Greenblatt

General

• Thinking, Fast and Slow - Daniel Kahneman
• Fooled by Randomness - Nassim Taleb

Simon Shares

• Anthony Clark on small caps
• Purity baby powder products were recalled by TigerBrands (JSE code: TBS) due to traces of asbestos.
• PSG (JSE code: PSG) unbundling effective at close on Tuesday. Holders at the close will receive
  • 3.87 PSG Konsult (JSE code: KST)
  • 1.82 Curro (JSE code: COH)
  • 0.12 Kaap Agri (JSE code: KAL)
  • 1.04 CA Sales (JSE code: CAA)
  • 1.02 Stadio (JSE code: SDO)

The bear and bull case for investing in Shoprite

Shoprite* (JSE code: SHP) results saw the stock down 7.5%. Let's dig into what the market maybe didn't like.

• Only 10% earnings growth?
  • With one week less and the 2021 riots in the numbers, decent albeit not knock the lights out.
• Only 600c dividend for the full year?
  • Very much in line with the average.
• Expensive on PE of over 20x?
  • Always is, but mid-range is about 15% lower. So yes, maybe a little more than usual?
• Opening 275 new stores?
  • Cost and are they cannibalising their other stores?
• RSA operating margin 6.8%?
  • The top end of the long-term range, worries that it may move lower?

But Shoprite remains one of the best food retailers globally and a core holding in my portfolio. I have bids in the market at around R170 which would put it on a PE closer to the mid-range from the last decade.

Sixty60 grew 150% and remains the absolute market leader in the grocery delivery space.

Checkers Xtra Savings has 24.7m members and it turning into a bank account.

* I hold ungeared positions.

• Sold my Murray & Roberts (JSE code: MUR)

Murray & Roberts weekly chart

Not a lekker chart, I've held for a while, but am now out #JSE pic.twitter.com/BKKP4HOLhr

— Simon Brown (@SimonPB) September 4, 2022