Author Archives: PDSnet

S&P500 Support


Investors have been nervously watching the progress of Wall Street against the background of mounting allegations against Donald Trump and senior members of his staff, and the “trade war” which he has instigated against China. At the same time, investors are also concerned that the continuing strength of the US economy will result in a more rapid increase in interest rates going forward.

The effect of this nervousness has been to take the S&P500 index into a correction from its all-time high of 2930 made on 20th September 2018. The fears usually associated with October month are now well behind us and it is unusual for markets to be in a corrective phase over the festive season – but then the political situation in America is nothing if not unusual. Read More

The Confidential Report – December 2018


America

The American economy continues to grow rapidly. A survey of fund managers by Bank of America in September 2018 showed that on average they currently expect the S&P500 index to rise at least 12% more before peaking. They are allocating a further 10% of their cash flows to US stocks than they did in October 2018 – especially into the high-tech stocks like Facebook, Amazon, Apple, Netflix and Google (the “Faangs). On average they felt that the S&P would peak at 3056. On 4th December 2016, we predicted in an article, on the basis of a Point and Figure horizontal count, that the S&P would go to 3027. Now, finally, two years later, American fund managers are agreeing with us. In fact we believe that the S&P will go much higher than that before it turns.

S&P500 Index September to November 2018 – Chart by ShareFriend Pro

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Transaction Capital


Transaction Capital (TCP) is a company which specialises in financing, repairing, insuring and selling minibus taxis in South Africa. It completely dominates the entire value chain associated with the minibus taxi industry.

The company listed in June 2012 and since then has generated an annual compound growth in earnings per share of 20% with a 33% per annum average growth in dividends. This is an almost unique performance from a JSE-listed company. The share is shaping up to be a “diagonal” share (our term for a share whose chart goes from the bottom left-hand corner of your screen to the top right-hand corner). Its share price has risen from 470c in March 2014 to its current level of 1910c today. Read More

Showdown


A showdown is looming in the gold mining industry. On the one side we have Sibanye Stillwater which is now South Africa’s largest gold producer represented by Neal Froneman, and on the other the notorious Association of Mineworkers and Construction Union (AMCU) led by Joseph Matunjwa. Froneman is a tough, experienced mining engineer who has taken on the task of reviving and consolidating South Africa’s ailing gold mining industry. Matunjwa is the leader of AMCU, the man who brought the platinum industry to a complete stand-still for five months.

Sibanye is operating at break-even in its South African gold mines with a cost of production around R565 000 – which does not allow for excessive wage increases. Sibanye has already done a deal with the other three unions for an increase of R700 per month for its lowest paid workers – but Matunjwa and AMCU are holding on for R1000. AMCU represents 43% of Sibanye’s work force of 32 000 in the gold industry. Read More

Capitec Revisited


On 19th February 2018, about two weeks after the Viceroy report on Capitec that took the share price down 25%, we published an article in which we suggested that Capitec was in fact very cheap, because its Price:Earnings Growth ratio (PEG) was at just 0,63. At the time, Capitec was trading for around R820 per share.

The PEG ratio can be easily calculated by dividing a company’s P:E ratio by its average growth in headline earnings per share (HEPS). All the required numbers are in the ShareFriend Pro software. The HEPS is given in the comment feature for each listed share and the P:E ratio is quoted with other price-related data at the top of your screen above the chart. Read More