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Simon Shares

• So a friend has a business that has been beset by fraud and is now bankrupt and is trying to find some new investors. They have no financial statements to show you and no real idea how bankrupt the company is or how bad the fraud was. Do you invest? So why scramble for busted JSE stocks?
  • Thanks to Kristia van Heerden for the analogy.
• Libstar (JSE code: LBR) has listed on the JSE. The listing price was right at the bottom of the range at 1250c and opening trade was around 1200c and expensive. Historic PE is apparently around 26x and sub 20x is the maximum to pay, so 900c - 950c. Personally I am not looking to buy.
• Long4Life* (JSE code: L4L) publish their first results and pay a dividend. The dividend is odd as they on a buying spree so why pay out cash? R1,7bn cash = about third market cap, HEPS 30c so on non cash market cap = PE of some 12x which is fair (compared to some it frankly deeply cheap).
• Decent Santova* (JSE code: SNV) trading update, especially considering stronger Rand hurting with majority of earnings from offshore.
• Back in March Naspers (JSE code NPN) sold US$9.8billion worth on Tencent shares and has now sold its Flipcart stake for US$2.2billion. That's a US$12billion (R150billion) pile of cash. Trader1137 on Twitter suggests maybe they'll use it to buy back some shares, would be about 10% of market cap.
• The Berkshire Hathaway AGM was on Saturday and the audio is here. 
• Upcoming events;
  • Fat Wallet 100th celebration 
  • JSE Power Hour: How to profit from SA mining 
  • JSE Power Hour: How to identify quality stocks 

* I hold ungeared positions.

Fight the FOMO

Fear of missing out. Man this used to kill me when I started out in markets. It's a true killer as it makes us do irrational things. Pause for a moment, we have say 400 stocks listed on the JSE, your odds of picking the top performer over the next ten years is 0.25%. You're pretty much guaranteed to miss out. Globally 100,000 stocks so 0.001% chance.

Thing is hype and higher prices make us scared. Scared we picked the wrong stock. Scared we're missing out of becoming fabulously wealthy. We need the courage of our convictions and perhaps more importantly the courage to be wrong, often.

FOMO will make us do stupid things. We'll jump in with no real research. We'll jump in with no exit plan. We'll jump in at far to rich valuations.

Forgot about the flyers and focus on your plan. What are you investing for and how long is your investment horizon. Find quality stocks at good prices that meet your requirements. And if you find yourself suffering from FOMO remove yourself from the market (like over a weekend or on a internet free holiday) do solid research on the stock. Find the nay sayers and see what the counter argument is and try construct a real evidence based plan and a price you think is a fair one to pay.

There is another angle of FOMO I want to touch on as well. When you're in the stock (or crypto or whatever) and now feel you need to convince everybody else that they're missing out. Sure they may be, but truthfully they may have done their own research and decided it is not for them and you could both be right (different strokes for different folks). Not everything is for everybody. But more importantly is that assets need people to be missing out, that's how they go higher. For example Buffett was very late to Apple (Nasdaq code: AAPL) only building a stake in the last 18 months, a stake that is now over 5% of the company. If he'd bought back in say 2008 or 1998 he would not have been a large buyer over the last 18 months and make no mistake, his large buying, and the news of his stake, has sent the price higher. You need late comers. If everybody is in on day one then who pushes the price higher on day two?

Taking it a step further, the market needs disagreement otherwise nothing would happen. So don't hate on people who don't love your investments. See them as potential future price drivers.

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