Category Archives: Investment Strategies


On 1st August 2019, Business Day carried an article on the performance of asset managers and how difficult it is to choose a winner from among them. In that article they commented that research done by Goldman Sachs in the US showed that, “competing managers, no matter how much they purported to have unique strategies all tended to pile into the same bundle of high-performing stocks”. In May of 2016, for example, the research found that 68% of fund managers were substantially invested in the same 10 shares.

In our experience, this supports our position that fund managers tend to be more concerned with their reputations and their jobs than the performance of the funds under their care. For this reason they tend to move together – like a herd of sheep. When one crosses the bridge, they all cross the bridge, because there is safety in numbers. The worst thing for a fund manager is to find himself on this side of the bridge when all the other fund managers are on the other side – because that is how you lose your job in the fund management business. It is much safer as a fund manager to choose an investment which has already been selected by other fund managers, even if you think it is wrong, because then, if it fails, you are at least in good company – and you will not be fired. No fund managers were reported to have lost their jobs as a result of the R200bn which was lost in the Steinhoff debacle. Read More


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

Transaction Capital

Transaction Capital (TCP) describes itself as “an active investor in and operator of credit-orientated alternative assets”. This is a fancy way of saying that it goes where no one else dares to go in the new South Africa. It has made highly profitable businesses out of financing and servicing the burgeoning mini-bus taxi industry and also out of buying up high-risk debtors books for a fraction of their face value and then systematically collecting the outstanding amounts.

Both of these industries are risky, but both also have enormous potential to be profitable. Transaction Capital has made an excellent business out of finding high-tech ways to reduce the risks which leaves it free to exploit these two “under-served segments of the South African and Australian financial services markets” almost without significant competition. Read More

Learning from Steinhoff

The Steinhoff debacle, which really came to an end on Wednesday when they published their re-stated financials for the 2017 year (reported in Business Day of 9th May 2019), contains some vital lessons for private investors.

The financials reveal a web of companies which were used by a group of unscrupulous executives to move money around, overstate profits and obscure fraudulent transactions.

Clearly, the investing public and even the highly-qualified and experienced analysts at various asset management companies like Coronation, Allan Gray and the Public Investment Corporation (PIC) were fooled into thinking that Steinhoff was a solid blue chip company which was growing rapidly.

Steinhoff’s financial results were analysed exhaustively. Steinhoff executives were interviewed and questioned about various aspects of the business. Auditors did numerous spot checks of the figures and wrote clean audit reports. Nobody realized until it was too late that the structure and the published results were just “smoke and mirrors”.

How can a private investor with limited time and resources protect himself against this type of cataclysm? Read More