ARTICLES

Choosing Winners

We are often asked how we go about selecting the shares to put on to the Winning Shares List (WSL). Right now, there are 102 shares on the list with 5 having gone down since they were added, 94 are up and 3 are unchanged. On an annualised basis, 24 of them are performing at above 100% per annum.   

As a private investor, how do you go about choosing a share on the JSE?

The JSE has just less than 300 equity shares listed, and you probably want at most 6 shares in your portfolio and certainly not more than 8. So, you are looking for shares which are in the top 2% of opportunities (6/300).

The best way to approach this problem is to first eliminate shares which are clearly unsuitable for various reasons.   

The first and probably the best reason not to waste your time with a share is if it does not have sufficient value traded on average every day to make it viable. A key feature of a successful portfolio is an effective and carefully constructed stop-loss strategy. But if there is an insufficient value of that share changing hands in the market then you may not be able to sell out of your shares quickly when you want to. So, it is vital for the share to have a liquid secondary market.

We define sufficient liquidity as being 3 times what you want to buy changing hands each day on average over the past 30 trading days. For example, as a rule of thumb, if you want to buy R10 000 worth of a particular share then you should ensure that there has been at least R30 000 worth of those shares changing hands each day on average over the last 30 days.

The second word of advice we would have for you is to look for high quality shares which are for some reason falling excessively in the market.

Perhaps a good topical example is Tiger Brands (TBS). In the years up to 2018 this company was regarded as one of the JSE’s leading blue chips and was consistently in demand. It reached a record high of R474.50 on the 25^th of January 2018. Then the listeriosis disaster happened with 200 people dying because of processed meats produced by Tiger Brands.

The fallout from this disaster took almost 6 years to work itself out in the share market. But eventually, the share reached its lowest level of R135.94 on the 14^th of June 2022. Consider the chart:

The chart shows the massive downtrend that affected TBS shares as a result of listeriosis. That downtrend came to an end with a rising double bottom with lows in June 2022 and October 2023. We finally added it to the WSL on the 1^st of December 2023 at a price of 18295c because we were convinced by then that all the bad news had been fully discounted into the share’s price.

So, for the best share selections you are looking for three things:

1. The share must be of excellent quality with a long track-record of rising profits.
2. The share must have fallen heavily because of some well-established crisis.
3. The share has finished falling because the crisis is over and has been fully discounted.

Once those three requirements are in place, then you can consider buying. You will note that we make no attempt to buy at the lowest point. Indeed, we want to see that the new upward trend is well-established before we add the share to the WSL. Usually, that means it must rise to a new 6-month high after we believe that there are no more nasty surprises.    

Of course, finding blue chip shares which are recovering from a major downturn like Tiger Brands is just the least risky way to find winners on the JSE. Many of the shares on the WSL do not fall into this low-risk category, but are added to the list because we see a relatively high-risk opportunity which some of our clients may wish to take advantage of.

For example, Kore (KP2) was added to the list on the 16th of May 2024 at 20c because, at that time, we thought it had upside potential. Over the next 5 months it rose over 400% to 83c. But this is not a blue chip. Rather, it is  a highly risky commodity penny-stock.  

Remember that the most important discipline for a private investor is to use a stop-loss strategy to ensure that you never lose more than 15% on any share market investment – ever – including your dealing costs. Then, if you can make 100%, 200%, 300% or more on your winners while only losing a maximum of 15% on your losers, you have to be successful.

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PDSNET ARTICLES

Kore Revisited

Kore (KP2) remains at once the most exciting and most risky investment on our Winning Shares List (WSL) at the moment. We originally added it to the list just over a year ago on 16^th May 2024 at a price of 20c. It subsequently rose to a high of 83c on 3^rd October 2024 and we published an article

Rand Strength 2025

The strength of the rand is both a critical and a complex issue for private investors on the JSE. Our currency is influenced by two primary forces:

1. Our local economy’s prospects
2. The rand’s role as a leading emerging market currency

These, in turn, are

Sibanye Revisited

In these uncertain times, when nobody really knows to what extent Trump will back down on the international trade war which he has initiated, many investors are moving into precious metals as a hedge against the weakness of paper currencies (especially the US dollar) and paper assets like equities and bonds.

The problem

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Jerome Powell

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Uncertainty Soars

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Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s

The Creation of Money

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V-Bottom is likely

The 10% collapse of Wall Street, which is a direct result of Trump’s random policy of on-again, off-again tariffs, is very similar to what happened to Wall Street in February/March 2020 when investors tried desperately to accurately discount the impact of the COVID-19 pandemic.

Normally, corrections in the market

The Trump Correction

It is relatively unusual for the activities of American presidents or what they say to have an impact on the New York Stock Exchange, especially during their first 100 days in office. Trump, however, is the exception. His confused, on-again, off-again rulings on tariffs have rattled the market. Markets hate uncertainty and even Trump himself doesn’t appear to know exactly