ARTICLES

The Corona Correction

One of the enduring characteristics of markets is that they over-react. The size of their over-reaction depends on exactly where they are in the cycle and whether sentiment at the time is generally negative or positive. The S&P made a new all-time record high on the day before Martin Luther King Jr Day (20th January 2020) – after a consistent run which has lasted since the beginning of October 2019 – almost four months. Clearly, the market is now looking for a reason to correct. And since Donald Trump has been preoccupied with his Impeachment trial, he has been leaving the Chinese and the rest of the world in peace.

The coronavirus is becoming the very excuse that markets need to correct. With growing numbers of people infected, a rising death-toll and the spread to countries outside China, the virus has caused some panic on world markets. The S&P500 index fell 2,6% from its highest point (3329.63 reached on 17-1-20). Technically at record levels and after a 4-month run, the S&P was surely due for some sort of correction. In the absence of any negative tweets from Donald Trump, the spread of the coronavirus is providing the necessary scare. But can a disease which has so far only caused deaths in China – really damage the world economy that badly. The restrictions on movement inside China, imposed by the authorities will certainly impede the economy. China also is the world’s largest importer of commodities which could hurt South Africa – but at this stage we feel that the 2,6% fall in the S&P is probably over-done. That does not mean that it cannot fall further. Consider the chart:

If this is the start of a correction, then you can expect either the virus or some other reason to take the S&P down at least 10%. In our view, authorities are moving quickly to contain and control the spread of the virus which has less than one third of the mortality rate (2,8%) of the SARS virus (9,6%) – but appears to spread more quickly. Scientists are urgently engaged in finding a vaccine and an effective treatment. Of course, the rate of infection could become far worse, but we believe that it will not spread significantly beyond China and that the situation will be brought under control fairly soon. In our view,  this correction has the potential to become a buying opportunity – especially for shares like Prosus, which have taken a sharp fall. Look at the chart of Prosus:

Prosus (PRX) October 2019 to January 2020 - Chart by ShareFriend Pro

You can see here that Prosus made an “island” at the start of December 2019 and has been moving up from that point. The island created support at around R1020 and the share may fall further to reach that level. Technically, it seems unlikely that the R1020 level will be broken. You should watch Prosus and the S&P closely to find the best buying opportunities.

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PDSNET ARTICLES

Dividends

Investors know that the return on a share is made up of a capital gain plus the dividend. Private investors are mostly attracted to the prospect of making a capital gain on the shares which they buy and do not often consider the dividends. What they perhaps do not realise is that a capital gain is actually just the dividend in a different form.

Quarterlies

One of the major differences between the US equity markets and the JSE is that listed companies in America are required to report every 3 months, not every 6 months as they are on the JSE. The quarterly reports of the S&P500 companies are closely followed by investment analysts and predictions are made for their profits.

Gold's Record Run

On Friday last week, gold reached a new all-time record high of $2871.42 per ounce. Its gain in rands has been even more impressive rising from less than R1000 per ounce in August 1992 to last Friday’s close of R52864.85.

In our Confidential Report of March

Growth by Acquisition

Hudaco (HDC) is a master of growing by acquiring smaller businesses in similar fields of activity or businesses, which then complement its existing suite of businesses. It has been making these bolt-on acquisitions for many years and has developed great expertise at selecting and evaluating appropriate targets.

These bolt-on acquisitions are mostly small

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.