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<center><figure class="figure"><a class="lightbox" href="/onlinecourse/images/" data-plugin-options="{'type':'image'}"> 
<img class="figure-img img-fluid" src="/onlinecourse/images/" /></a><figcaption class="figure-caption"><strong>A caption...</strong></figcaption></figure></center>

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At the beginning of this year, we published an article on <a href="/index.php/clicks" target="_blank" rel="noopener">Clicks</a> . In that article we described Clicks as a “diagonal” share because its share price chart generally goes from the bottom left-hand corner of your screen to the top right-hand corner. Since then, Wall Street has entered a bear trend. The S&P500 index has now fallen about 25% from its record high made at the beginning of this year.
The JSE began its bear trend 3 months later than Wall Street, on 2nd March 2022 and so far the JSE Overall index has fallen 15,4%. During that same period Clicks shares have fallen just 3%, revealing its defensive nature and showing how reluctant institutional investors are to sell them.
Consider the chart:
 
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<figure class="figure"><a class="lightbox" href="/onlinecourse/images/Clicks_23octArt.png" data-plugin-options="{'type':'image'}"> <img class="figure-img img-fluid" src="/onlinecourse/images/Clicks_23octArt.png" /></a>
<figcaption class="figure-caption">Clicks (CLS): 20 March 1996 - 21 October 2022. Chart by ShareFriend Pro.</figcaption>
</figure>
</center>
 
The above chart is drawn with a semi-logarithmic scale – which basically means that the price movements shown in the chart are proportional throughout, despite the massive rise in the share’s price. On 20th March 1996, just over 26 years ago, you would have paid just 370c for one Clicks share. They closed on Friday last week at R294.34 per share and have been as high as R321. We use semi-log charts because it is difficult to show such a substantial price rise meaningfully in a linear chart.
The continuous rise in the company’s share price reflects its growth. Over the period, turnover, profits, number of stores and number of employees have all increased substantially.
The Clicks’ results for the year to 31st August 2022 were published on Friday.
The results reflect the torrid times that South Africa has experienced over the past 15 months. The year began at a time when vaccinations for COVID-19 were at a peak with Clicks administering a total of 3,5m vaccinations – the most by any private sector company. Then there was the effect of the civil unrest in July 2021 which impacted Clicks more than other companies because of its large store base. The results were also affected by loadshedding and the general decline in consumer spending.
The fact that despite all these problems Clicks was able to open fifty-eight new stores, employed 621 new staff and increase comparable store turnover by 8,4% while keeping comparable costs down to just a 5% increase is impressive. It shows the extraordinary quality of the company’s management.
But is also shows the defensive nature of the Clicks business model. Even in very difficult times, when consumers are struggling to make ends meet because of sharply higher fuel prices and the effect of rising interest rates, they still spend money on beauty and cosmetics.
This does not necessarily mean that you should rush out and buy Clicks shares now. We are still in a bear trend which means that even blue-chip shares like Clicks could fall further. The company’s latest results have had the effect of reducing its price:earnings multiple (P:E) from a high of over 41 at the beginning of this year to current levels around 28.5. In a normal market the company’s continuing growth would probably have seen the share price rise significantly and the P:E would be somewhere around 40 translating into a price of over R400 per share. Instead of the share being on its lower channel line it would have been on its upper channel line.
However, we are in a bear trend.
From your perspective, this is an excellent blue-chip share which is getting cheaper and cheaper in relation to its earnings. In last week’s <a href="/index.php/the-golden-cross" target="_blank" rel="noopener">article</a> we spoke about the “golden cross.” If you wait for the S&P500 index to make a golden cross, you will at least have some assurance that the bear trend is over, and it is safe once again to buy blue-chip shares like Clicks. In our view, at least until then, you should wait and watch.