ARTICLES

Speculative Opportunity

PDSnet is mainly concerned with teaching private investors about investment and medium to long-term opportunities on the JSE. The foundation of this approach is that South African tax law treats any gain on a share held for longer than 3 years as a capital gain. In other words, holding a share for more than 3 years means that the investor will not be treated as a share-dealer for tax purposes.

This is important because a capital gain in the hands of a private investor is taxed at an effective rate of 18% whereas if the investor is declared a share-dealer then any capital gain is added to their taxable income – and could result in them paying as much as 45% of capital gains in tax.

For this reason, when considering an investment, the private investor should always ask the question, “Where do I expect this company to be in 3 years’ time?”

On the 16^th of May 2024, we added Kore (KP2) to the Winning Shares List (WSL) at 20c per share. Kore is an extremely speculative mining development operation in the Republic of the Congo (ROC). Kore owns the rights to two potash deposits. It is in the process of raising the funds necessary to bring the mine into production.  

Our reason for adding Kore to the WSL was a clear on-balance-volume (OBV) buy signal based on a massive spike in volumes traded combined with a 5c jump in the share’s price. This is a clear indication that insiders are buying up all available loosely held shares in the market in anticipation of a major capital gain. Since then, the share price, while volatile, has doubled. Consider the chart:

The chart shows that until mid-May 2024 the share was trading for around 15c on very thin volumes – typical of a highly speculative mining exploration company with assets in an African country known for its political instability.

Without knowing the details of the company’s prospects, the price and volume action of the share showed clearly that its prospects had suddenly improved dramatically. Now, three months later, the share has held on to its price gain and may be about to rise further. On Friday last week, the company held a general meeting at which it was agreed that they sell 4,3m shares to the Chairman of the company, David Hathorn, for $60 000. This brings his shareholding to a total of 373,1m shares or 8,57% of the total issued share capital.

It is difficult for us to independently assess the viability or the risks of a mining exploration investment like Kore. There are many ways that it could go wrong, but when the Chairman of the Board of Directors is buying more shares to add to his already large holding, there is reason to believe that the prospects of the business are probably very good.

Volumes traded have dropped off, but the share remains well-traded at around 50c and appears to be entering a new upward trend. Based purely on what we know about it and its market action, we consider it to be a worthwhile speculative opportunity.

Obviously, with a potentially volatile and speculative investment like this it is very important to establish and maintain a strict stop-loss strategy.

I am reminded of a line that I used to use in my younger years: “If you never take any risks in life, nothing exciting will ever happen to you!”

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

PDSNET ARTICLES

The Impact of News

Old Wall Street wisdom says the following concerning news which comes out about individual listed companies:

1. Good news which is expected - causes the share price to drop.
2. Good news which is unexpected - causes the share price to rise.
3. Bad news which is expected - causes the share price to rise.
4. Bad

Karoo

In April 2018 – nearly seven years ago – we wrote an article about Cartrack. At the time we suggested that it was the ideal investment for private investors because it was a service company with debit order income and almost no working capital that was growing rapidly both locally and internationally.

Tweets

Over the Festive Season, we have been communicating with you via our tweets on “X”. The chart below shows the timing of our individual tweets and what subsequently happened to the S&P500 index.
 

Winners in 2024

2024 was always going to be a very good year for the share market. The year began with the S&P500 at 4742.83 (2/1/24) and it reached an all-time record high of 6090.27 (6/12/24) – a gain of 28,4% excluding dividends.

On the 25^th of January 2024 we made the following prediction on Twitter (X):

Pan African Update

Pan African (PAN) is undoubtedly one of our best picks for this year. The share price has doubled in less than 12 months from when we added it to the Winning Shares List (WSL) at the end of January at 430c to last Friday’s close at 861c. Consider the chart:

Mr Price Interims

Almost 6 months ago, on 17^th June 2024, we wrote an article about Mr Price (MRP) in which we examined their results for the year to 30^th March 2024. These results had been published on the Stock Exchange News Service (SENS) a few days earlier on 13^th March 2024 and they were very impressive.

Altron

Allied Electronics better known as Altron, is South Africa’s oldest technology company listed on the Johannesburg Stock Exchange (JSE). Since 1965 it has been providing IT solutions to the economy in various forms. Its customers include more than half of the top 100 companies listed on the JSE. It processes more than 100 million healthcare transactions every year,

Lewis Revisited

Working capital is always a key consideration when looking at a share, because it shows the quality of the company’s management. In simple terms, working capital is the cash tied up in the running of the business and it is calculated as:

Debtors + Cash – Creditors

Obviously,

Trump

I am a stock market analyst, not a political analyst, and I have to admit that I got the recent election in America devastatingly and horribly wrong. I honestly believed that the vast majority of Americans would never vote for Trump. My perception was that were just too many negatives – his proven and almost compulsive dishonesty, his life history of overt sexual perversion, his unashamed

The Great Bull Market

In recent months I have read a number of articles which suggest that the bull trend which is currently in progress on Wall Street began just over two years ago on 12^th October 2022, starting from the S&P500 index’s low point of 3577.03 on that date. The technicians who make this assertion suggest that therefore the bull market is still at an early