Previously, I highlighted that Distell Group’s (code: DGH) was on a winning wicket coming out of this pandemic (Distell: Quietly Winning). Subsequently, Distell broke the news that Heineken has approached the Group regarding the acquisition of the majority of Distell’s business (see official SENS here). For the purposes of this article, let us ignore the…
Who Eats Whom
The current debate of whether inflation is transitionary or structural has a sub-argument that references rising soft commodity prices, food inflation and struggling consumers and argues that food producers will be caught in the middle. This narrative makes some sense, rising input costs cannot be fully passed onto struggling end-consumers and someone is going to…
Open Letter to Mining CEOs
Writing this letter occurred to me while listening to Simon Brown’s MoneywebNOW podcast this morning where he and his guests spoke around the current free cash flow most mines are making. What will the miners be doing with all this cash (flow)? It is certainly a topic amongst our team (we are bullish on commodities…
How Much Could EasyEquities Be Worth?
A combination of boredom, lack of dopamine alternatives, stimulus cheques and the gamification of markets led the USA-based online stockbroker, Robinhood, from relative obscurity into a multi-billion dollar empire. This slick operation has amassed an estimated 20 million brokerage accounts and attracted a last-recorded $20bn fair value (even though shares have reportedly traded on the…
Winners in Lower-for-Longer
Mike Schüssler wrote a piece about how the pandemic-induced rate cuts are impacting South Africa (Economic recovery: Low rates are playing a starring role). Taking this further, I am going to build a top-down investment shopping list for those who believe that rates will remain low-for-longer and inflation benign. Simplistically, low interest rates are stimulative…
Company valuations: Why first principles matter most
‘The more variables going into a valuation, the more chance there is that that the outcome is actually rubbish’: Keith McLachlan, Integral Asset Management. I sometimes write better than I speak. Especially at 6am.. For the last answer of this interview, the key point I was trying to make is the following: All successful businesses…
Safer than Houses: Stor-Age Property
About five years ago I pointed out that the local commercial property sector (i.e. REITs) in South Africa was heading for trouble (see Part I and Part II). I would have preferred to be wrong but—and in no small part helped by the pandemic—this has played out as expected and almost every single REIT on…
Profiting Off Delistings
All shares prices on all stock markets around the world are minority valuations. They reflect what markets think an investment without control is worth. The moment an investor takes control of a company, though, they can—effectively—access the cash flows of that business. And, for this reason, that control is worth something. Therefore, bids to take…
How is South Africa Doing (right now)?
Earlier this week, Stats SA published a bleak GDP update for South Africa that saw the domestic economy shrink -7.0% y/y in 2020. Perhaps a little better than expected but still a huge contraction. But that was last year and is old news now. A more relevant question is how we are doing right now?…
Distell: Quietly Winning
Despite having most of its products effectively banned for a little over a fifth of the reporting period, Distell Group Holdings Ltd (code: DGH) published a sterling H1:21 result. Group revenue grew +3.8% y/y with volume growth of +0.8% y/y, profits and cash flows were equally strong and the Group’s balance sheet degeared further. Context…
Is Inflation Picking Up?
As with most of the world, South Africa’s inflation rate has been falling for a number of years. This becomes incredibly clear when you see it visually: Yet, globally bond yields are lifting, yield curves are pushing out, soft and hard commodities are rallying & energy prices are rising. All the indications are that inflation…
JSE-listed Preference Shares
Preference shares are an underappreciated asset class, particularly for income-seeking private investors who are less constrained than institutions when it comes to liquidity. But what are preference shares? Preference shares are shares with special rights attaching to them. Each preference share is unique but most have the following characteristics: Dividends: Preference shares typically pay a…
Trellidor: Building up to a Rally
Originally published over here. Cashbuild (CSB) recently indicated that their sales till end of December 2020 had jumped +24% y/y. Massmart too has indicated a strong second-half recovery in their Builders Warehouse sales with Spar’s BuildIT outfit echoing the same sentiment. While these are great results, they are not unique. Building materials, DIY and home…
Afrocentric vs. Discovery
ORIGINAL ARTICLE APPEARS HERE. Having listed on the JSE in 1999, Discovery Ltd (DSY) has been a phenomenal success generating early investors multiples of their money. The Group administers the Discovery Medical Aid (a separate legal entity to the listed company) and, through data mining, clever incentives and cross-selling, the Group has won huge medical…
Redefine Properties: Is this REIT-listic?
Late on Friday, Redefine Properties (RDF) published its long-awaited dividend announcement for the year-ended August 2020. You can find the full announcement here: LINK. A Real Estate Investment Trust (i.e. “REIT”) has some special privileges and they come with some onerous requirements. If you don’t satisfy the requirements of being a REIT, you lose the…
Timing Your Market Exits
‘A good exit starts with a good entry’ — Keith McLachlan. Full interview found here: LINK.
Finding value in SA’s small- and mid-cap sector
Diversification across sectors is the best hedge against bad luck, stresses Keith McLachlan in a Moneyweb interview. Find the full interview over here: LINK.
Small & Mid Cap Snap Back
Click on the embedded video below to play it.
How to Fix the JSE
We cannot fix problems if we cannot be honest enough to admit that they exist. If we are honest with ourselves, there is something deeply wrong with the JSE’s stock market and it appears systemic. One way to see it is that the JSE’s ecosystem is stuck in a negative feedback loop. Our stock market…
Ascendis Health: Why I Sold
OLD ARTICLE – Original posted on March 29, 2017 I have been following Ascendis Health since it listed and, while I was sceptical at first, I warmed to the company as I saw management executing their stated strategy. If you see here, I even use them as an example of how acquisitive growth can work: How…
EOH: The Cracks Appearing
OLD ARTICLE – Original posted on July 28, 2017 It may sound like I am picking on EOH Holdings (EOH), but I am not. My job is to look critically at companies and, where appropriate, disagree with the consensus view. Even if this is uncomfortable and hurts peoples feelings, it is important that I do…
Master Drilling: Illustrating Value
OLD ARTICLE – Original posted on March 22, 2018 I have written about Master Drilling (MDI) previously and I refer you back to these articles for some of the narrative: Master Drilling: Hidden Gem Master Drilling: The Big Mistake You will notice a consistent theme: I like them. The Group recently put out some soft…
Master Drilling: The Big Mistake
OLD ARTICLE – Original posted on August 26, 2016 Previously I wrote the following article on Master Drilling (Master Drilling: Unknown Gem). I will not rewrite the investment case that I noted in that article for Master Drilling as a world-class, niche industrial technology play with global, growing scale and sophistication. Pretty much all of that…
Master Drilling: Hidden Gem
OLD ARTICLE – Original posted on March 29, 2016 When I first encountered Master Drilling (MDI), I was mildly impressed and put them on the radar to follow closer. Over the subsequent three years, I began to become quite impressed with the business and its operations. Did you know that Master Drilling (run out South…
Santova: Growing & Undervalued
OLD ARTICLE – Original posted on October 11, 2017 Santova (SNV) is a non-asset based supply chain manager with more than 65% of its earnings coming from outside of South Africa, including the majority of hard currency in this. Santova put out a H1:18 trading statement yesterday that can be summarised as follows: H1:18 EPS and…
Good Businesses Tend To Stay Good
OLD ARTICLE – Original posted on January 24, 2018 I have a counter-intuitive argument that scale can create problems. Why do I say this? Anecdotally, we know that you cannot choose which stock to invest in based purely on the size of the company. We know that investing is not that easy. But can we prove…
Warning Signs: Retailers, Shopping Centres & Retail REITs (Part 2 of 2)
OLD ARTICLE – Original posted on November 24, 2016 See Part 1 over here: Warning Signs: Retailers, Shopping Centres & Retail REITs (Part 1 of 2). There are three harmonious parts to a Real Estate Investment Trust (REIT): Income: These are predominantly rentals from tenant renting space from the REIT. The lower the vacancy rate…
Warning Signs: Retailers, Shopping Centres & Retail REITs (Part 1 of 2)
OLD ARTICLE – Original posted on November 22, 2016 Following an exchange with Byron Lotter on Twitter (see here) after what I believe (and the market believes) was a very poor trading update from Woolies (WHL). But Woolies is not alone in this regard. Here are the key listed retailers, their like-for-like same-store growth, inflation…