Simon Shares

• Local June inflation, 7.4%, MPC tomorrow.
• BHP Group* (JSE code: BHG) update, they are worried. ArcelorMittal South Africa (JSE code: ACL) trading update says global growth and recessions fears "present challenges for the outlook of commodities and steel demand in the next 12 to 18 months.".
• China's holdings of U.S. debt fell below $1 trillion for the first time since 2010
• Alviva (JSE code: AVV) delisting at 2500c.
• Brent oil trade keeps on trucking, buy below $100 exit $113.

• Brent oil
• Nasdaq, triggered a buy, waiting for confirmation which is a close above 12,250 while 7 EMA remains above 21 EMA.
• Building resilient portfolios for tough markets
• Lithium & Battery Tech ETF
• Stats and data on 95 years of bear markets. How much longer? How much lower?

* I hold ungeared positions.

 

Simon Shares

• US June inflation 9.1%, and core inflation was also up a 5.7%!
• Still stage 4. Rand continues to weaken.
• Back backs between 4 July 2022 & 8 July 2022
  • Naspers JSE code: NPN) bought 659,095 shares at an average price of R2 648.3315/share for R1.745 billion (US$104.73 million).
  • Prosus (JSE code: PRX) bought 6,240,339 PRX shares at an average price of €67.1361/share for €418.95 million (US$428.59 million).
• SARB now considers cryptocurrencies as a financial asset and will create regulations around them. This means cryptocurrencies can be listed on SA exchange platforms but the process will take 12-18 months.

Dividends, love them but be careful.

• But we also need to remember a few important things about dividends.
• They can disappear as we saw in 2020. Even the most stable dividend payer can stop paying. REITs which have to pay them by law being a REIT structure) stopped paying because payment would see them fail their solvency tests.
• They are backwards-looking. A high dividend yield is certainly attractive, but is it because the price has been falling? Could this be a warning of a dividend cut?
• Cyclical stocks (think commodity stocks) pay massive dividends sometimes, then nothing for years.
• Boards can change the cover ratio. This is the percentage of HEPS they pay as dividends. In tough times they can cut them. As the company matures they pay more.
• Progressive dividends are the worst. The idea is that every year the dividend goes up a set percentage regardless of profits. A few local stocks have tried the idea, all have abandoned the idea.
• Cash dividend vs. script dividend. I'll usually take the script.

• Reg28, proposed a two-pot system
• Sam Beckbessinger: My fav ETFs

Simon Shares

• Still stage 6. Rand continues to weaken.
• Naspers (JSE code: NPN) and Prosus (JSE code: PRX) both are holding well after the hard run the previous Monday on results and buy-back news.
• Resources under pressure, all of them.
• Supply chains adjusting
  • • Just in time is now just in case
    • Higher inventories
    • Higher costs
    • More localisation

Upcoming events;

• 13 July ~ To short or not to short with Markets.com
• 14 July ~ JSE Power Hour: Building a resilient portfolio for tough markets

Simon Shares

• Episode #500. Huge thanks to all, I go into some background about the show. Where and how it started, lessons learnt and more.
• Stage 6, the Rand lost 30c.
• Sun International* (JSE code: SUI) update for five months to 31 May 2022 shows they are nearly back at pre-pandemic revenue and this while we still had some restrictions and fewer international travellers.
• Naspers (JSE code: NPN) / Prosus (JSE code: PRX) results. Tencent (Hong Kong code: 700) is 125% of profits. The other businesses are all loss-making and in tough markets. They plan to sell down Tencent and buy back Prosus shares, but the discount to NAV remains around 50%, even after a massive move on the announcement.
• Grindrod (JSE code: GND) good update and share has been flying. This remains a very cyclical business and right now the cycle is paying off.
• Invicta (JSE code: IVT) saw strong results albeit some accounting points improved them a bunch.
• JSE (JSE code: JSE) trading update is surprisingly strong with HEPS expected +24%-32% for six months ending June.

* I hold ungeared positions.

 

Simon Shares

• Thungela (JSE code: TGA). Coal prices doing great, production is good but rail is the problem but HEPS is expected at 5800c. If we double for the full year we can expect ±R116 and a dividend of ±R100?
• Stor-Age* (JSE code: SSS) results are not exciting but steady.
• Omnia (JSE code: OMN) results were really strong, another special dividend and good future prospects.
• Orion Minerals (JSE code: ORN) raises money to get their Prieska up and running. Expected to take some 19 months.
• Amazon prime coming to South Africa next year. It will seriously challenge Takealot, owned by Naspers (JSE code: NPN)).
• City Lodge* (JSE code: CLH) trading update show them cash flow positive with occupancies back in profit.

* I hold ungeared positions.

Crypto in trouble

Not an inflation hedge nor a store of value. Just another risk asset. The problem is as QE ends and rates rise, will it still see a strong inflow of money? I think not.

It's not the end crypto, but new highs could be some way off.

 

Simon Shares

• US May inflation, 8.6%. Federal Reserve announced rates last night and surely it was 0.75% for the first time in 28 years?
• Either we have continued high inflation or a recession, maybe even both?
• Time for a Paul Volcker and do a 1% raise?
• It's ugly, Nasdaq and S&P500 both closed at lows for 2022 and are both are now in a bear market. S&P500 draw down at close 13Jun22
• And failing a real test or liquidity and exchanges halt withdrawals.

Simon Shares

• Sygnia (JSE code: SYG) results and a forward dividend of maybe as high as 10%.
• Local GDP at 1.9% for Q1 2022. The economy has now recovered to its pre-pandemic levels.
• Consumer cracking? I interviewed Evan Walker 36One Asset Management.
• Inverse ETFs that go up as the market falls.

* I hold ungeared positions. Upcoming events;

[events_list limit="3"]

ddd

Are Robinhood's troubles Purple concerns?

[caption id="attachment_34522" align="aligncenter" width="761"] Robinhood since listing vs. Purple Group[/caption]

Robindhood Purple Group (Nasdaq code: HOOD) Purple Group* (JSE code: PPE); Listed July 2021 at $38, hit $85 and now under $10 (-75%) July 2021 145c, high since 350c and now 260c (+81%). Makes most of their revenue from selling the deal flow and Gold accounts. Revenue is from transactions. The majority of transactions are in options or crypto. The majority of transactions are in equity, but crypto, EC10, is growing. Needed a quick $billion to settle meme stock trades. The balance sheet is fine. Huge repetitional damage when they halted trade in some meme stocks.   Value traded by clients has been falling since Q1 2021. Value traded by clients fell in the last set of results. Not yet profitable. Profitable, PE ±50x. Users declined in 2022. Users grew in last results to +1million active accounts. Market cap per user = $478 (ZAR7,400) Market cap per user = ZAR3,263 Revenue per user (2021) = $80 (ZAR1,250) Revenue per user = R109

Simon Shares

• The good news is the US had a green week last week, for the first time in 8 weeks
• Goldfields (JSE code: GFI) is down on news it paying a chunky 33.8% premium to acquire Canadian Yamana Gold in an all-share deal
• We finally got the petrol price increase and the 150c fuel levy reduction remains in force, for now.
• German inflation hits 7.9% for May. Highest since the 1950s. EU inflation for May 8.1%, the highest ever.
• EU agrees on a partial ban on Russian oil imports
• Monthly dividends in a JSE equity portfolio
• Offshore ETFs paying monthly dividends

  Demand destruction in commodities

There comes a point at which a commodities price is simply too high and the price itself reduces demand. Depending on the commodity high prices often need to be high for protracted periods of time.

Simon Shares

• Results are pouring in, food producers are struggling.
• Coronation (JSE code: CML) results with DY of over 10% and PE ±9X.
• Snap Inc (NYSE code: SNAP) profit warning. It now trades at half its listing price.
• Current under recovery in petrol price is 236c, + the 150c fuel levy suspension means we could see a 386c increase in June to over R25 a litre!
• What’s your fav ETF? We ask our readers, Rochelle is first up and likes an offshore ETF with a monthly dividend payment of almost 1%.
• Hello Eskom, best budget power banks.

Slightly better than average is enough

Investors and traders love big winners. That 10 bagger that happens in a matter of months or maybe a few years. But by consistently hunting for those big winners we're taking larger risks.

We're better off aiming for the modest winners.

Beating your benchmark by 2% a year sees you with almost 50% more after twenty years.

A recent Planet Money Podcast, Investing in mediocrity, talks about a fund manager who only ever aimed to be in the top third of all funds. After a decade of succeeding at that, they were the top fund over ten years.

 

Simon Shares

• 10X Investments buying CoreShares.
• MPC, 0.5% expected.
• Balwin (JSE code: BWN) results vs. Calgro M3 (JSE code: CGR).
• Pick n Pay (JSE code: PIK) results vs. Shoprite* (JSE code: SHP).

* I hold ungeared positions.