Tag: Equities

Altron


On 31 October 2017, we published our usual monthly Confidential Report and in it we drew your attention to Altron. What we said was:

“For the two years between 2014 and 2016, Altron did badly, but since then the share has executed a long slow “saucer bottom” and now appears to be mounting something of a comeback. The newly appointed CEO, Mteto Nyati, is at the front of this new optimism.

Consider the chart:

Altron (AEL) August to October 2017 – Chart by ShareFriend Pro

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The Confidential Report – October 2019


United States

The Federal Reserve Bank of America (Fed) has cut rates again by a further 0,25% which indicates that the monetary policy committee (MPC) is still concerned about the possibility of the US economy sliding into recession.  At the same time Europe has resumed its quantitative easing program also because of fears of a recession. Some of this is certainly due to the trade war between America and China. Nobody is quite sure how that will play out in the world economy and the primary result has been a shift towards “risk-off”. This risk-off sentiment has had an impact on the S&P500 index and also on the South African rand. Consider the chart of the S&P500 since April 2019:

S&P500 Index April to October 2019 – Chart by ShareFriend Pro (Click to Enlarge Image)

This shows the previous cycle low at 2744 made on 3rd June followed by the rise to the all-time record high at 3025 on 26th July. After that, Trump managed to invoke the next correction with his China trade war taking the S&P down to support at around 2840. A period of sideways movement followed, generating a “flag formation” which we predicted on 4th September would break to the upside. That upside break has occurred, but a new record has not yet been set. The index is currently falling back towards the resistance line of the flag formation – which is at around 2932. That resistance has now become a support level.

In our view, we expect that the index will move upwards from current levels and break above the all-time record high – probably sometime in the next month. That will signal a resumption of the great bull market which has been in progress for over ten years since March 2009. Read More

Spur


The decision to buy into a share is often scary. What if the share falls after you have bought if? You may then have to execute your stop-loss and lose money. There is a tangible feeling of risk.

Obviously, you want to buy a share when it is at a low point in its cycle – after it has fallen so that you can get it cheaply. But when a share falls there is always a reason – and you might be concerned that it could fall further. There is usually considerable negative press which accompanies a falling share and you will definitely feel the risk of investing. In fact, if you don’t feel the risk you are probably not going to make any money.

Of course, the ideal place to buy a share is somewhere close to its cycle bottom – and that means that you must “see a mountain behind you”. In other words, the share should preferably have fallen from a much higher price.

At the same time, it is far better if the share is an established blue chip with a solid business and a long track-record of being profitable. That way you can be fairly certain that it is not going to fail completely and that sooner or later institutional fund managers will begin buying it again.

One of the ways to mitigate the risk is to at least wait until the share has turned and is moving up again. Ideally, you want to buy it when it is past its lowest point and is recovering. You are looking for some sort of upside breakout.

So, where do you find such a share? In this article we would like to draw your attention to a high-quality share which may be worthy of your consideration. Read More

The Confidential Report – September 2019


Political

The concerted attack on President Ramaphosa and his retinue has seen the rand fall to almost R15.50 to the US dollar. But this fall also includes and is confused with a sharp international shift to “risk-off” as a result of Donald Trump’s trade war with the Chinese and their currency retaliation, which makes it difficult to accurately assess the impact of the attacks on Ramaphosa. The best way to evaluate the importance of these attacks and distinguish them from what is happening internationally is to look at the yield of the South African government’s 10-year bond, the R186. Consider the chart:

R186 Bond May 2016 to September 2019 – Chart by ShareFriend Pro (Click to Enlarge Image)

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Omnia Breaks Up


On 12th July, 2019, we carried an article about Omnia. The essence of that article was that Omnia was a large blue chip chemicals company which had dominant positions  in agriculture, chemicals and explosives throughout Africa.

This company took a significant risk by buying two companies, Umongo Petroleum and Oro Agri for around R2bn – which over-extended its balance sheet, loading it with excessive debt. To bring its debt levels down, the company was forced to conduct a rights issue of 100m shares at R20 a share – substantially below the price that the share was trading for at the time in the market (which was closer to R30).

The rights offer is now unconditional and fully underwritten. The nil-paid letters of allocation will begin trading alongside the ordinary shares on 4th September 2019.

The execution of this rights offer clearly demonstrates that the gamble which the board of directors took has now paid off. They have managed to persuade shareholders to inject the necessary funds. Read More