Monthly Archives: July 2019

Anheuser-Busch


Anheuser-Bausch, or AB-Inbev (ANH), is the world’s largest brewer of beer, operating in both first world countries and emerging markets. On 10th October 2016, AB-Inbev bought out SABMillar for $107bn. This massive acquisition (a world record) left ANH with over $104bn in debt – a burden which it is only now beginning to eliminate. It expects to bring that debt down in the second half of 2019.

AB Inbev trades on the JSE as ANH, the Brussels Stock Exchange as ABI and the New York Stock Exchange (NYSE) as BUD. It announced its intention to list its Asia-Pacific arm on the Hong Kong stock exchange to raise approximately $10bn. The cash will be used to reduce its debt.

The company has brands like Budwieser, Stella Artois, Castle, Beck’s and Corona. After the acquisition of SA Breweries, AB Inbev is four times the size of the next largest brewer – Heineken – so there is very limited potential for further meaningful acquisitions. Growth from here on must be organic. Read More

Rand Strength


For most of June and July this year, the rand has been strengthening as international investors became more confident of the reforms which the Ramaphosa administration is implementing. It has, of course, been very volatile because it is buffeted by many factors which are outside South Africa – most notably the probable reduction of interest rates in the US and various developments in other emerging economies. But Ramaphosa’s decision to re-appoint Kanyago as Governor of the Reserve Bank and two long-serving insiders as his deputies has largely put to bed the fears surrounding that institution and the talk of quantitative easing. The rand responded positively, but now a new concern has arisen with RMB’s John Cairn’s saying that there is a high probability (47%) that the rand will fall by as much as 30% or more once the US begins a new cycle of reducing rates over the next year. Since the election result the rand remains in a strengthening trend:

Rand Dollar Exchange March to July 2019 – Chart by ShareFriend Pro

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S&P500 Going to 3506


In December 2016 we wrote an article on the use of a Point and Figure (P&F) horizontal count to forecast the future of the S&P500 index. At the time, the S&P had been in a long sideways pattern which made a good horizontal count possible once there was an upside breakout. In our article, we published this P&F chart to explain the count:

First Horizontal Count – Point and Figure Chart of the S&P500 Index 2014 to 2016 – Chart by MetaStock

P&F is a one-dimensional chart (it has no time dimension like normal charts) so this chart shows data from November 2014 to December 2016 which enabled a horizontal count of 9 and predicted that the S&P would rise to 3027 from its position at the time of just below 2200 (i.e. a 38% rise). Read More

Omnia


Omnia (OMN) is at an interesting point. The share price has been falling since its peak of R242 made in September of 2014. It is currently trading below R30. This should be seen in the context of its net asset value (NAV) which was R105 on 31st March 2019.

The question that private investors should be asking is, “Does this represent an opportunity?” On the face of it, this is a massive blue chip company which has fallen on hard times. But it has dominant positions in the three major markets which it serves throughout Africa:

  1. Agriculture – where it supplies fertilisers and related products.
  2. Explosives – where it supplies the mining industry with all elements of their blasting requirements.
  3. Chemicals – Where it supplies industry with a variety of chemicals and polymers.

All of these industries require substantial capital investment and have the usual problems of working capital management. So Omnia’s business is not an easy one (such as the service industries which require almost no working capital) and requires a high quality of management. From a private investor’s perspective, this is a negative, but it also means that the share is much cheaper. Read More

Your Stop Loss Strategy – Example of Capitec


It has been well said that the secret of success in the share market is to cut your losers and keep your winners. And that implies some sort of stop-loss strategy (if you are not familiar with the concept of a stop-loss strategy, please read module 12 of the PDSnet Online Investment Course). We all tend to get emotionally involved with the shares that we buy and those emotions interfere with our objectivity, no matter how careful we are.

The logic of having a stop is contained in the question, “How much am I prepared to lose?” Shares are a risk investment and so you should have a clear idea of how much you are prepared to risk. Most investors do not want to lose more than 10% to 15% of an investment. Certainly no one wants to lose 50% – because then you have to make 100% just to get back to where you started! And, if you are unwilling to lose 50% or more of an investment, then you have to have a stop-loss strategy. It’s as simple as that.

The great benefit of a stop-loss strategy is that it eliminates emotion with a series of hard and fast rules which are there to prevent you from losing your shirt when you make a bad decision. The problem with stop-loss is that those rules have to be established before you invest, because otherwise you will be tempted to constantly adjust them as the market and the price of your share changes. Read More