JSE Investing

[Slowbee]

Aren't you f....g glad you did not buy Sasol ??

I suspect it might get worse.

 

They have some capex issue's as well due to environmental concerns, and then the balance sheet arrives with their US overspending.

[Chris_]

How have the more active investors here positioned themselves given the current state of affairs? 

 

Just left everything alone and wait for the recovery?

 

or, moved 1 or 2 positions or small sector changes?

 

or, changed your whole outlook (and acted upon) the last say  - 2 months? 

[bertusras]

This bit came through from Allan Gray a couple of days ago:

 

 

Global asset prices are under extreme pressure as investors rush to

perceived safe-haven assets in the face of a global economic slump

brought on by the coronavirus. Even large companies with strong

balance sheets have fallen sharply, for example BHP is down 37%

from January highs. Companies with highly geared balance sheets

have generally fallen over 50% in the last few weeks.

 

There is little doubt that coronavirus will spread around the world

and cause a sharp economic slowdown. Given the current case

number growth rate, it seems peak infections may occur within five

months and subside quickly thereafter. The direct impact on asset

valuations could potentially be a single year of lost earnings. For

a company trading on 15 times earnings this would indicate a 7%

price fall. If businesses lose in a single year what they would have

normally made, this indicates a 14% price fall is appropriate. The

downside scenario is if the coronavirus economic slowdown causes

a far greater rolling recession as in 2009.

 

Businesses that can survive a year of no cash flow should hold up

well; this does not apply to companies with substantial financial

leverage. Fortunately, most South African businesses do not have

heavy debt loads, unlike many in the US, which have geared up to buy

back shares. The obvious risk in our portfolio is Sasol. Sasol took on

R145bn of debt to build a chemical plant in Louisiana. A US$35 oil

price puts the balance sheet under considerable strain. As of 6 March,

Sasol accounted for 2.5% of the Allan Gray Equity Fund, 1.9% of the

Allan Gray Balanced Fund and 0.9% of the Allan Gray Stable Fund;

this was prior to the share falling 47% on 9 March. We think Sasol

is undervalued at R87.50 per share – but the debt load makes the

company a risky investment proposition. Ironically, the outlook for the

oil price is the best it has been in a long time. US oil production growth

has plateaued in recent months and at these oil prices US production

will slow sharply as the industry is cash flow negative at US$50, let

alone US$35. US shale oil is not the only production source facing

declines – the capital starvation of the past five years is beginning to

bite in several jurisdictions. I think the current Saudi/Russian strategy

is the right one for a strong stable market in the long term. (Saudi

Arabia and Russia seem to have decided not to defend a US$60

oil price and rather let low prices drive US shale oil producers into

bankruptcy and therefore stem supply).

 

The recent price falls have created very exciting buying

opportunities. We are buyers of equities and South African

Government debt. Numerous companies are trading at free cash

flow yields of over 10% and we have not seen expected total returns

of this magnitude since the early 2000s, when South African shares

were extremely out of favour, and the global financial crisis of

2007/08, both of which proved to be exceptional opportunities to

invest in equities.

 

I realise it sounds hollow to say now is the time to invest given

the recent underperformance of our funds and the consistent

outperformance of cash over the past five years, but the rewards

of investing at times like this in the past have been substantial. As

contrarian investors we invest in assets that we believe are trading

at a discount to their intrinsic value, the recent price action has

widened those discounts. 

[Captain Fastbastard Mayhem]

Yup. Lots of opportunity

[SwissVan]

How have the more active investors here positioned themselves given the current state of affairs?

 

Just left everything alone and wait for the recovery?

 

or, moved 1 or 2 positions or small sector changes?

 

or, changed your whole outlook (and acted upon) the last say - 2 months?

Left my current investments where they are, various equity based funds in EU and USA.

 

Trying to figure out when the right time (bottom) and what will be a good fund to invest in again while prices are diving for cover.

 

I’m so glad I’m not retiring / cashing in, in the near future....

[Chris_]

I had made a lot of changes in Jan. I think the ZAR will keep depreciating and SA continues to quietly take pain. So probably 3/4 of my portfolio got moved to Rand hedge type stocks, and away from the SA consumer. 

 

Then Covid hit, my gold names initially held up a little better than the rest but today I mean just everything is getting crushed now so unless you're in cash theres no way through this.

 

I have made a few cheeky buys in some big miners on the way down but its pretty dire right now.

[SwissVan]

I had made a lot of changes in Jan. I think the ZAR will keep depreciating and SA continues to quietly take pain. So probably 3/4 of my portfolio got moved to Rand hedge type stocks, and away from the SA consumer.

 

Then Covid hit, my gold names initially held up a little better than the rest but today I mean just everything is getting crushed now so unless you're in cash theres no way through this.

 

I have made a few cheeky buys in some big miners on the way down but its pretty dire right now.

WRT waiting for lower prices to buy, I guess it’s a question of how greedy you (investors) are....

[Chris_]

WRT waiting for lower prices to buy, I guess it’s a question of how greedy you (investors) are....

 

Haha only sellers can pick the bottom. (comic sans probably req)

[Carmichael]

Holy crap .... when to buy Capitec?????

[sawystertrance]

That old aphorism applies:

 

It's not timing the market, but time in the market

[Chris_]

That old aphorism applies:

 

It's not timing the market, but time in the market

 

As does:

 

If it can halve today, it can halve again tomorrow.

[sawystertrance]

I was wondering..

 

Is it possible that we may be saved from a downgrade by Moody's because of consideration given to the Covid outbreak?

[sawystertrance]

As does:

 

If it can halve today, it can halve again tomorrow.

Haha. Selling tomorrow is not spending time in the market.

 

And it just means you have to stay in four times as long..

Edited March 19, 2020 by sawystertrance

[Chris_]

I was wondering..

 

Is it possible that we may be saved from a downgrade by Moody's because of consideration given to the Covid outbreak?

 

I've been wondering the same. The whole worlds stats are in the toilet so could we skate by?

 

But, the tide is rising for everyone so perhaps covid can be slightly discounted? 

 

At the very least the virus is going to exacerbate inefficiencies and cracks in weak policy so they need to be on their game. Once all the reserve banks have done their bit are we still relatively equally 'investable'? I doubt it.

[Jakkals.]

Holy crap .... when to buy Capitec?????

dont go throw your every cent at it.

 

guys, what seems like bargains might be trash and started overvalued. let the storm settle and invest wisely. chip away every month. like any other month. 

[Chris_]

Capitecs customer base will be hit hard - as will we all, but theirs especially relative to other banks. First to be fired, last to be rehired.

 

I cannot see a situation where their bad debts don't become out of control. 

 

I hope I'm wrong, its a super slick operation, but I'm very weary of this one.