When fellow participant pre-empted one of my 2025 predictions in an annual prediction show (see the show here), I was forced to scramble for another prediction. My improvised prediction for 2025 was that a bundle of Aspen Pharmacare and Sandoz AG will outperform a bundle of Eli Lilly and Novo Nordisk. It is perhaps worth…
Category: General
General posts.
Some Personal Lessons
While I normally write about markets and investments, I thought it was time I wrote down some lessons. I hope you find this valuable. Invest in your relationships In an epic, multi-generational study on happiness, it was found that the strongest (by far) correlating data point with those that lived long, healthy and happy lives…
PIK the Turnaround
Following a rights issue and the successful floating of Boxer’s IPO on the JSE, Pick n Pay Stores (code: PIK) offers an interesting opportunity. The market has valued Boxer for us and, thus, Pick n Pay’s 65.6% stake in the retailer is worth R19.4bn (excluding a control premium). With Pick n Pay’s market cap currently…
Looking at Strong Rand Beneficiaries
The Rand has been strengthening, so of course analysts are now turning bullish on it (FirstRand turns more bullish on SA’s economy, rand). How long and how much are anyone’s guess, but the Rand’s trend is currently certainly towards strength. Ironically, though, this hurts large swathes of the JSE’s listed companies, from miners that export…
Why retailers suck at going offshore
Spar Group (code: SPP) is the latest in a long line of South African retailers that have burnt their fingers trying to go offshore with their businesses. From Shoprite retreating from a range of African countries and Woolworths and Mr Price failing in Australia to Truworths’ continuing struggles with UK-based Office Retail Group, South African…
“SA Inc” Small Caps
South Africa’s Government of Nation Unity (GNU) has been a momentous event that markets have rewarded by strengthening the Rand and buying into our bonds and our equities. While nothing is certain and plenty of risks and challenges lie ahead for so-called “SA Inc” (i.e. South African centric investments), this is potentially a trajectory change…
Reinet’s Hidden Giant
Back in the 2008 when Reinet Investments (RNI) was formed, most of its net asset value (NAV) was made up of British American Tobacco (BTI). While the tobacco giant still makes up about a quarter of Reinet’s NAV (Figure 1), the investment holding company’s major exposure is now the Pension Insurance Corporation (PIC) – see…
AMCs & JSE-listed Global & Domestic Small/Mid Cap Notes
See the below presentation for details: The two small cap AMCs can be bought on the JSE as follows:
Which Earnings Figure to Use?
Previously, I wrote about “Which Valuation Matters?” and a key input in most valuations is what the company has earned. With the increasing abstraction of International Financial Reporting Standards (IFRS) and many management teams publishing their own “versions” of earnings (so-called “adjusted”, “normalized”, “core” or “underlying”, et al earnings), the next logical question is: what…
Which Valuation Matters
Recently I was working through lists of companies that other people had valued (i.e. the JSE-listed HoldCo sector presentation I gave) and I realized that, perhaps, this article needed to be written. There are lots of different ways to value the same listed share, but which one is the correct one? As a “Rule of…
Sector Analysis of JSE-listed HoldCo’s
Strategic status awarded to Renergen’s Virginia Gas Project by the SA government
Renergen is pleased to announce that the Virginia Gas Project’s Phase 2 is now a Strategic Integrated Project (SIP) under the Infrastructure Development Act (Act No. 23 of 2014) (IDA) and its amendments, gazetted by Public Works and Infrastructure Minister Patricia De Lille on 6 December 2022. Benefits related to SIP status include processes relating to…
There’s Life in the Life Insurers
While the pandemic created excess mortalities and hammered life insurers’ profits, it did reinforce how critical life insurance is and how important the institutions that write this cover are to the broader economy. The pandemic has faded into an endemic, mortalities have drifted lower (though they remain slightly elevated on some metrics and we still…
What Parts of PSG Should I Keep?
PSG Group’s “Project Value Unlock” has seen the legendary investment company unbundle a portfolio of shares before it will delist the rump with a cash offer later this month. If you were holding PSG Group, your brokerage account now has a range of other shares in it, and this naturally leads to the question: which…
Why First-Generation Crypto Has Failed
“It’s difficult to get a man to understand something when his salary depends on not understanding it.” -Upton Sinclair A range of businesses and careers have popped around cryptocurrency and, thus, have to defend its place in society. While I believe that blockchain and decentralized finance (“DeFi”) are wonderful innovations and will likely play a…
Introduction to Fundamental Investing
I recently hosted a four-part introductory course on fundamental investing. It is free and it is available to be watched in your leisure. If you get value from this, please share this wide and far. Part I – Fundamentals Part II – Valuations Part III – Portfolios Part IV – Case Study & Q&A
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…
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…
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…
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.
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…
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…
Management Shareholding Abuses
OLD ARTICLE – Original posted on June 21, 2018 A traditional view wants a listed company to have their management as large shareholders. This gives them skin in the game, aligns them to shareholders and incentivizes them to succeed. All perfectly good reasons. But, this did not prevent Steinhoff from happening. If anything, this was…