PDSNET Market Snapshot

The Hotel business was probably the worst hit of all sectors during the pandemic in 2020. With the travel restrictions and the various difficulties aimed at preventing the spread of the disease, many business people simply elected to stay at home and conduct meetings on Zoom or Skype. Conventions of various sorts which are major business for hotels also stopped almost completely. Gradually, over the proceeding years the situation has steadily improved, and occupancy rates have climbed back.

From an investor’s viewpoint, the hotel industry offers a very secure and relatively unexciting investment. It has a substantial investment in land and buildings and it has a large staff contingent. In normal times, it can be expected to grow steadily as the economy grows. It remains sensitive to political risk and economic external shocks.

Southern Sun Hotels (SSU) was spun out of Tsogo Sun (TSG) and separately listed on 12th June 2019 – immediately before COVID-19. The share opened at 400c and quickly rose to 460c. It was always expected to be a solid well-traded institutional counter. As the pandemic gained momentum, the share collapsed, eventually reaching an intra-day low of 102c on 23rd March 2020.

At that point it was trading well below its net asset value (NAV), clearly under-priced given its huge property asset base and potential. Slowly, as investors began to realise that the pandemic was past its worst levels and that a vaccine would be produced, they looked around for bargains in the market and SSU was an obvious candidate. Consider the chart:

You can see here the impact of the pandemic on the newly-listed SSU. At the time we always said that COVID would result in a V-bottom and therefore a buying opportunity precisely because it was a black swan event and its effects would not last. In our article published on 13th March 2020 we said, “...my expectation is that we will see a “V-bottom” in the chart...” SSU (together with many blue chip shares) moved sideways at its worst level for about year and then began to recover.

Then in February 2022, Russia invaded Ukraine and the share price collapsed again – but this time not as badly as during COVID, which was by that time already fully discounted. The subsequent recovery was slow and steady. We finally added the share to the Winning Shares List (WSL) on 17th May 2024 at a price of 555c, but a more adventurous investor might easily have bought it much earlier and at lower levels.

The chart also shows the impact of Trump’s tariffs which initially caused a significant sell-off and, more recently this year, his war with Iran. Both of these events offered private investors further solid buying opportunities, especially for a relatively low-risk share like SSU.

In its results for the year to 31st March 2026 the company reported income up 9% and headline earnings per share (HEPS) up 20%. The company said, "Trading momentum increased in the second half of the year, with broad-based improvements across all regions underpinned by major international conferences and events including the G20 in Gauteng and improved transient demand in South Africa."

Since we added the share to the WSL it has risen 80% in two years. We believe it will continue to perform well as the economic reforms of the government of national unity (GNU) begin to eliminate or at least reduce some of the absurdities in the South African economy. The November municipal elections at the end of this year are likely to increase and consolidate the DA’s grip on the GNU making this effect more pronounced.

The current bull trend, in our opinion, began in 2009 from the low point on the S&P500 index of 676 reached on 9th March of that year. It has now been going on for over 17 years – making it the longest bull trend in the history of Wall Street by far.

On Thursday, May 14, 2026, the S&P 500 closed at a new all-time record high of 7,501 and the Dow Jones Industrial index went back above 50 000. This means the market has gone up 11-fold over the past 17 years. The question which investors have to ask themselves is, “How much further up can it go?” – and nobody really knows the answer to that question.

The historical price:earnings ratio (P:E) of the S&P500 is now just under 32 – which is well above its average level, but this does not necessarily mean that it cannot go higher. The fundamentals driving the 500 shares which make up the index are a direct function of their perceived future earnings and their potential to increase those earnings even further.

This in turn is a function of the on-going impact of new technologies like AI, and humanoid robotics on productivity levels. The problem is that during a protracted bull trend like this one, markets tend to become over-enthusiastic about that future potential, to the point where they begin to create their own momentum. Then share prices can begin to lose touch with the underlying profitability of the companies which they represent – and Wall Street is certainly moving in that direction.

A similar situation arose in the 1920’s when the new technologies of the motor car and the telephone began to become ubiquitous. These technologies impacted the profitability of all companies big and small giving rise to the “Roaring Twenties”. As Wikipedia puts it, “...the decade was characterized by economic prosperity, rapid social and cultural change, and a mood of exuberant optimism.”

The problem is that investors tend to push share prices up so high that their potential to produce concomitant profits becomes irrelevant to investors. In other words, the investors get carried away in the excitement and bid shares up to absurd and unsustainable levels. Eventually a “bigger fool” point is reached where investors buy a share, not because of its earnings potential, but because a bigger fool will buy it back from them in a few weeks for even more money. The inevitable result is a 1929-style crash.

So, we need to ask, “Is Wall Street at a similar position now?” We believe it is getting there, but not yet. The new technologies are certainly impacting profitability across the board but the upward trend has not yet become crazy. It is still linked to future profits. So, we believe that Wall Street is still at a relatively early stage in this process and that the bull trend will continue for quite a while, getting steadily more and more excessive.

Our view is that the profitability gains flowing from AI are only just beginning. We are expecting far greater gains in the future. In our view America and the world is at much the same point that it was at, say, in 1923 or thereabouts, just when the Roaring Twenties were just getting going.

Sometimes it is useful to step back from the immediate excitement of the latest all-time record highs to look at the big picture. Consider the following chart which shows the progress of the S&P500 index since the start of this great bull trend 17 years ago:

The chart shows the progress of the S&P500 index since March 2009. You can see there the low point of 676 followed by a very gentle upward slope until about 2016. Thereafter, the gradient increased, but not very much and it was interrupted by the COVID-19 pandemic in 2020. Bear in mind that we regard COVID-19 as an aberration, not directly related to the stock market from a technical point of view. After that came the war in Ukraine which held the market back for a time, but since then the market has been accelerating despite Trump’s two interventions. What you can see from this chart is that the market is definitely becoming exponential. It is going up faster and faster. The move from 7000 on the S&P to 8000 is definitely quicker than the move from 6000 to 7000. The chart is rising almost vertically now.

And we can only imagine where the S&P500 would be now if the Brent oil price was still at around $70 per barrel instead of close to $110. Trump’s war in the Middle East has had the effect of temporarily cooling markets, but it has been insufficient to dampen the tidal wave of investor enthusiasm for the “blue sky” potential of AI and related technologies.

It is always fun to participate in the final stages of a great bull market, but you must be aware that nothing goes up forever. Your best protection against the coming bear, whenever it happens, is to maintain a strict stop-loss strategy on all your share investments. Remember, it is acceptable to widen your stop-loss percentages when your investments are strongly in-the-money, but you can never lose sight of the fact that at some unpredictable date in the future the market will come down – so it is important to have a clear strategy that locks in your profits.  

Stefanutti is a highly diversified construction company operating in Southern Africa. Its operations include roads and earthworks, marine construction, concrete structures, bulk pipelines, piling, geotechnical services, open pit contract mining, affordable housing, mine residue disposal, renewable energy and other services.

It’s status as a level one BBBEE operator enables it to successfully tender for numerous government and state-owned enterprise (SOE) contracts inside South Africa. The company has benefited directly from the advent of the government of national unity (GNU) and the increase in infrastructure spend.

Historically, like the entire construction industry in South Africa, Stefanutti initially suffered from the suppression of the industry by the ANC and the adjustment to BEE requirements. Its share price fell from a peak of 2700c on the 14th of November 2007 to a low of 8c on the 13th of December 2019.

From that low point began a slow, but steady, recovery. We became interested in the share in June 2024 when its potential became more obvious. It had been in an extended sideways and downward market for 18 months before breaking up at the end of June 2024. Seeing its potential, we added it to the Winning Shares List (WSL) on the 22nd of June 2024 at a price of 146c. Consider the chart: 

The chart shows the end of the share’s sideways pattern in May and June of 2024 and then the sharp upward trend that followed. This upward trend came to an abrupt halt in September 2024 – but by then the share had already risen to a cycle high of 494c on the 30th of September 2024.

What followed was an 8-month downward channel in which the share price fell back to a cycle low of 300c on the 17th of April 2025. During this period, we maintained our view that the share had considerable upside potential and so kept it on the WSL.

Now a new upward trend has emerged, and the share has appreciated strongly to its close last Friday at a new record high of 654c.

In many senses, Stefanutti is an investment in the new South Africa and the potential of GNU to bring about significant economic reforms. Its wide diversity and BEE status means that it can benefit from projects in almost any industry, while being a preferred bidder for government contracts. This has enabled it to increase its order book and become more profitable.

In its financials for the six months to the 31st of August 2025 the company reported revenue unchanged, but headline earnings per share (HEPS) up 161%.

Since we added it to the WSL the share has appreciated by 338,36% - which amounts to over 180% per annum. Very few companies have achieved this level of growth. We expect the share to continue performing well going forward, especially given that the November 2026 elections are likely to result in further economic reform and a focus on infrastructure development.