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Posted: 27 November 2009 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

In one of the best ever presentations of otherwise dry data you will ever see, Hans Rosling shows the virtues of simple clarity to transform data into information into insight.

 

Watch till the end, to gain a better appreciation of the importance of opening data up to public for value adding. Shall we send a copy to the JSE???

 

Cheers

Stuart

 

 


Total votes: 0
Average(Out of 5): 0
Posted: 27 November 2009 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

In one of the best ever presentations of otherwise dry data you will ever see, Hans Rosling shows the virtues of simple clarity to transform data into information into insight.

 

Watch till the end, to gain a better appreciation of the importance of opening data up to public for value adding. Shall we send a copy to the JSE???

 

Cheers

Stuart

 

 


Total votes: 0
Average(Out of 5): 0
Posted: 27 November 2009 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

In one of the best ever presentations of otherwise dry data you will ever see, Hans Rosling shows the virtues of simple clarity to transform data into information into insight.

 

Watch till the end, to gain a better appreciation of the importance of opening data up to public for value adding. Shall we send a copy to the JSE???

 

Cheers

Stuart

 

 


Total votes: 0
Average(Out of 5): 0
Posted: 27 November 2009 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

In one of the best ever presentations of otherwise dry data you will ever see, Hans Rosling shows the virtues of simple clarity to transform data into information into insight.

 

Watch till the end, to gain a better appreciation of the importance of opening data up to public for value adding. Shall we send a copy to the JSE???

 

Cheers

Stuart

 

 


Total votes: 0
Average(Out of 5): 0
Posted: 27 November 2009 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

In one of the best ever presentations of otherwise dry data you will ever see, Hans Rosling shows the virtues of simple clarity to transform data into information into insight.

 

Watch till the end, to gain a better appreciation of the importance of opening data up to public for value adding. Shall we send a copy to the JSE???

 

Cheers

Stuart

 

 


Total votes: 0
Average(Out of 5): 0
Posted: 27 November 2009 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

In one of the best ever presentations of otherwise dry data you will ever see, Hans Rosling shows the virtues of simple clarity to transform data into information into insight.

 

Watch till the end, to gain a better appreciation of the importance of opening data up to public for value adding. Shall we send a copy to the JSE???

 

Cheers

Stuart

 

 


Total votes: 0
Average(Out of 5): 0
Posted: 30 September 2010 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

I have been known to say on the fundamentals courses I give  ( Company Financials and Announcements course group ), that Graham's classic "The Intelligent Investor" has a deceptive title. The point I try to make, in my clumsy references to brains selling for six bob a kilo at Cato Ridge abattoir, is that pure IQ cleverness is not going to get you there. The uncommon thing which you need is actually common sense!

 

Talking more to the brains, egos and so on that can bring big companies to their knees, Bill George  of Harvard Business School  here sets out some delightfully clear notions on how to find and harness the skillsets needed.

 

Enjoy the clip...

Stuart

 

 

Play 2.5 minute Video


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Posted: 11 November 2010 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

At 11 o'clock on the 11th day of the 11th month a bugle was sounded, and World War One officially ended.

 

Read poems from the likes of Wilfred Owen , Siegfried Sassoon and Rupert Brooke to get a flavour of this crazy conflict... below  is a famous piece by Owen, who died on November 4 - a week before the conflict ended.

Relevance to the Markets? Plenty.

 

Rightly, it was known as the Great War - not because this or any war is "great", but because of the bizarrely high death tolls. World War One has also been called "the war to end all wars", since its accepted figure of 38.8m killed, woulded and missing in action seemed an unbeatable level. Taken over the 4 and a bit years, that amounts to 24,907 people lost every day, of which around 6,350 died. Daily!  Which seems impressive, unless you compare it with battles like the one at Canae in 215 BC, where Hannibal's Carthaginians gave the Romans a bloody hiding, with a one day Roman death toll of 48,200 ( according to Livy), 50,000 (Appian, Plutarch) or 60,000 (Quintillian). Add some 8,000 dead Carthaginians, and that was a very bloody single day.

 

So, it appears that history does repeat, with due adaptation for the technology and fashion of the day. And the reason is dreadfully simple - humans seem unable to evolve. The species agglommerates into empires, the winners conquer, then they collapse. And so it repeats.

 

So where is our much-loved JSE right now?

 

Here is the last 50 years, tracking the index vs earnings, and showing CPI inflation. The smooth line is the "trend" of where it seems both profits and the index normalise - a geometric compound return of 12.3% (excl dividends). Can we ever get very far from either the earnings line or the trend?

 

alt

 

And here is a zoom in onto the last decade. Notice the average forecasts for JSE earnings, predicting strong growth of 30% then 17%.

And yet we are still some 51% higher than the average earnings multiple would have us trading, and 19% above the multi-decade trend.

 

alt

 

So if you think history may come round again, are the eps forecasts too low? Is sharp profit growth going to get the blue line back up to, or maybe even above, the trend? Or, will it be different, this time?

 

Cheers

Stuart 

 

 

 

 

 


Total votes: 0
Average(Out of 5): 0
Posted: 12 April 2011 - 7 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

As the star in the retail space for some time now, Shoprite has widened margins and shown a stunning shareprice gain.

 

This was observed some time ago,  ( Cause or Effect? ) and the remaining matter is whether to buy, or to leave well alone, at these levels.

 

Well it seems that if profit margins can be held at their current (high) levels, then this company must grow each and every year at 17%. That is a big ask.

 

 

alt

Alternatively, if it can grow at say 12% then it needs to gouge a 6.1% margin - which I suspect is too far ahead of its current levels.

 

So I suggest its value is more at  the R80 level - and I won't buy right now.

 

Stuart

 

(full dcf spreadsheet is exclusively in the Model Portfolio Group ) 


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Posted: 18 March 2013 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

 I have never made money investing in gold shares, and I wonder why?

 

Here is the profile of Anglogold Ashanti - from their notice today about power outages on the West Wits Line

 

About AngloGold Ashanti
AngloGold Ashanti is a global gold mining company and the world's third largest gold producer.
Headquartered in Johannesburg, South Africa, AngloGold Ashanti has 20 operations on four
continents and one of the gold industry's most successful exploration teams which work across both
the established and new gold producing regions of the world. This includes land positions in
Colombia, Guinea and Australia, among others. AngloGold Ashanti produced 3.944Moz of gold in
2012, generating $6.35bn in gold income. As at 31 December 2012, AngloGold Ashanti's Ore
Reserve totalled 74.1Moz.

 

Impressive, not so?

 

For a detailed review of the affairs of gold miners, their managements, and the analyses thereof - please feel free to read this piece by top gold analyst Brenton Saunders  What-s-wrong-with-gold-shares-a-personal-view its a longish read - 4600 words!

 

Or if you lack that much interest, in my simpleton's way I look at it like this:-

 

ANG Gold reserve = 74 million ounces

Annual production = 3.944 million ounces

 

=> Years of life = 74/3.944 = 18 and three quarters years.

 

Payments to shareholders in dividends (cents per share)

Year (final dividend paid early 1997 => fin year 1996 etc)

 

1997     1 002.5

1998         815.0

1999         775.0

2000     1 000.0

2001         700.0

2002         900.0

2003     1 378.1

2004         712.9

2005         341.4

2006         232.0

2007         450.0

2008         143.0

2009         100.0

2010         130.0

2011         145.0

2012         380.0

2013         300.0

 

At a shareprice of R228, that implies years to get price back in dividends:-

 

1997 23

1998 28

1999 29

2000 23

2001 33

2002 25

2003 17

2004 32

2005 67

2006 98

2007 51

2008 159

2009 228

2010 175

2011 157

2012 60

2013 76

 

Yes - at R228 you will pay 76 times your annual dividend income, to own an asset that will run out in 19 years.

 

(And the average price over the last decade of say R250 means its not an unusual state of affairs.)

 

Be my guest - it seems I won't make money out of gold shares for a while yet.

 

Cheers

Stuart

 

 

 


Total votes: 0
Average(Out of 5): 0
Posted: 27 November 2009 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

In one of the best ever presentations of otherwise dry data you will ever see, Hans Rosling shows the virtues of simple clarity to transform data into information into insight.

 

Watch till the end, to gain a better appreciation of the importance of opening data up to public for value adding. Shall we send a copy to the JSE???

 

Cheers

Stuart

 

 


Total votes: 0
Average(Out of 5): 0
Posted: 17 March 2010 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

 

For governments which borrow (all governments)?  A friend – because it pays down the borrowings, by eroding the payback obligation.

 

For the asset management industry?  A friend – because it grows the nominal value of its pool of assets on which fees are based, and often triggers performance fees en route.

 

For you?

 

This article may give you some tips as to how to deal with inflation…

Cheers

 

 

"Embrace Inflation": How to Profit and Protect Your Wealth

by Aaron Task in Investing (Yahoo)

 

Related: TIP, TBT, GLD, SLV, ^GSPC, JNK, ^DJI

"Deflation is a very serious risk [but] inflation is a greater likelihood," Arun Motianey, senior strategist at RGE Monitor, says of the great economic debate of our age.

 

Despite ongoing (and legitimate) concerns that a combination of China's economic risk, debt deleveraging and technology will spur Japan-style deflation in the coming decade, Motianey is more concerned about inflation for a simple reason: "I'm expecting the central banks of the world to embrace inflation," he says.

 

If you think the Fed is easy now, just wait. Motianey predicts the Fed will monetize the public debt in the not-too-distant future, meaning it will print money and buy Treasuries -- well beyond what it's done in the past year. The Fed will also probably require banks to hold a higher level of government debt in order to maintain demand, he says.

 

Unlike the inflation of the 1970s, Motianey predicts we'll soon enter a period of "voluntary inflation," not unlike the 1948-1951 episode when the Fed somewhat surreptitiously helped Uncle Sam inflate its way out of the huge debts incurred during World War II and its aftermath.

 

A big difference between then and now is the sensitivity and sophistication of the financial markets to such Fed maneuvers. In his new book, SuperCycles: The New Economic Force Transforming Global Markets and Investment Strategy, Motianey details how investors should prepare for what he calls a "targeted period of higher inflation," including:

 

--Avoid government bonds: "The so-called risk free bonds ironically will now become the riskiest," he says.

--Hold corporate bonds as a "quasi-equity": A little inflation will provide corporations with pricing power, leading to higher earnings and the cash flow needed to meet their debt obligations, he says.

--Stay long stocks, with a narrow focus on dividend payers, as well as companies that produce natural resources and basic materials.

--Own gold and other commodities, which Motianey predicts will do "extremely well" in this scenario.

 

All this may sound self-evident but deflationary pressures - or the perception thereof - have been driving some market action lately, meaning opportunities are being created for those who believe inflation is the greater long-term threat.


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Posted: 5 July 2010 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

As the market prices and sentiments come and go, it can help to stay objective.

 

Right now, the JSE is priced at almost 14 times earnings - in other words when you buy a share, you are asked to surrender 14 years of profit to pay for the damn thing - rather more than the mulktidecade average of less than 12X.

 

As we pass the middle of this year, the attached table shows what the 'expert' analysts out there are forecasting for growth in earnings per share in the three largest companies in each broad sector/discipline, from now till next July, and for the following year.

 

It does seem that - IF the earnings forecasts come through, then the overall price/earnings (PE) ratio is maybe not too bad! 

 

Cheers

Stuart

 

JSE mid-2010 eps forecasts


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Posted: 17 September 2010 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

OK, so you want to play it safe, and buy an index product.
 
In this piece, two investment professionals Bogan associates and an economics academic from  Princeton  probe a concern in the ETF world - the very link they have to markets makes them sought after hedging tools; and this can lead to a situation where the counterparty from whom you buy a sincere ETF position looking for market exposure may find that while you want your holding, the product issuer has been taken down by an imbalance between real and virtual positions.
 
Could get nasty...
 
Cheers
Stuart

 
September 15, 2010
Andrew A. Bogan, Ph.D., Brendan Connor, and Elizabeth C. Bogan, Ph.D.

 
Like many innovations in finance that emerge from nowhere to explode in popularity with unknown consequences, exchange-traded funds (ETFs) have gone from obscurity when they were first invented in 1993 to making up more than half of all the daily trading volume on American stock exchanges today.  They also made up 70% of all the canceled trades during the Flash Crash on May 6, despite representing just 11% of listed securities in the United States, suggesting that ETFs remain poorly understood by both investors and regulators.
The extraordinary popularity of exchange-traded funds, open-ended mutual funds that trade like stocks on an exchange, is undeniable. However, the source of this popularity would seem to have two very different origins.  ETFs are bought by many retail and institutional investors looking for low cost and highly liquid vehicles with which to buy whole indices in a single trade, and ETFs serve that noble function well.  But, they are also extremely popular with and widely used by hedge funds and other traders looking for a simple way to mitigate broad-market risks, or neutralize beta, with a single trade.  The appeal to a hedge fund manager of being able to short an entire market index or a whole sector with one transaction, instead of say 500 separate stock shorts to span the S&P 500 Index, makes ETFs very widely used as hedging vehicles by short-sellers.  It increasingly looks like many new ETFs are now being designed for the purpose of marketing them to short-sellers. 
These seemingly opposite interests in ETFs make for a large and lucrative market not just for the ETF operators like BlackRock’s iShares and State Street Global Advisors SPDRs, but also for the authorized participants--institutions that can create or redeem large blocks of new shares in an ETF (called creation units) for sale, and countless brokers that profit by trading ETF shares.
While ETFs often appear to be a benign innovation as compared to some of Wall Street’s arcane derivatives, a closer look at the mechanics of short selling ETFs (which have become one of the most prevalent securities to short) raises some serious concerns.  While an ETF owner believes their ETF shares represent ownership of the underlying shares of stock in the index that the ETF tracks, that stock is not always all there.  Because of explosive short interest in some ETFs, owners of ETF shares often far outnumber the actual ownership of the underlying index equities by the ETF operator.  One might ask how that can be possible, but the creation and redemption mechanisms inherent to ETFs mean that short sellers need not be concerned about the availability of shares outstanding when they sell an ETF short—since they can always create new shares using creation units to cover short positions in ETFs in the future.  In essence, there appears to be no risk to being naked short an ETF since the short seller can always “create to cover”.  This has led to some ETFs having shockingly large short interest as compared to their number of shares outstanding and for every additional ETF share sold short, there is another owner of that share.
Take the SPDR S&P Retail ETF (NYSE: XRT) as an example.  The number of shares short was nearly 95 million at the end of June, while the shares outstanding of the ETF were just 17 million.  The ETF was over 500% net short!  Or to look at it from another perspective, the ETF’s operator, State Street Global Advisors, believed that there were 17 million shares of the SPDR S&P Retail ETF in existence and owned shares in the S&P Retail Index portfolio to underlie those 17 million ETF shares.  But, in the marketplace there were another 95 million shares of the ETF owned by investors who had purchased them (unknowingly) from short sellers.  78 million of those ETF shares were naked short--the short seller had promised their prime broker to create those non-existent shares if necessary to cover their short in the future.  In both cases the share buyer, however, is completely unaware his ETF shares were purchased from a short-seller and no doubt assumes the underlying assets in the index are being held by the ETF operator on his behalf, but no such underlying stock is actually held by anyone.  Clearly this creates a serious counterparty risk and quite possibly the potential for a run on an ETF—where the assets held by the fund operator could become insufficient to meet redemptions. 
Even more alarming was the recent rate of redemptions from the SPDR S&P Retail ETF in July and August 2010.  Redemptions occur when more owners wish to sell out of their holding in the ETF than there are new buyers for the existing shares, so unwanted blocks of 50,000 ETF shares each are redeemed through the authorized participants with the ETF operator for cash, or more typically for in-kind shares in the ETF’s underlying index’s stocks.  The SDPR S&P Retail ETF was one of the fastest contracting ETFs in July due to redemptions and as of July 31, it had just 7 million shares outstanding. However, the short interest was little changed—still over 80 million shares short.  Suddenly, 11 times the number of shares outstanding was short, which is even more worrisome than 5 times back in June. By late August, the shares outstanding in XRT had dipped briefly below 5 million shares with 80 million shares still short (16 times the shares outstanding).  Mercifully, net buying interest has rebounded somewhat for the SDPR S&P Retail ETF with the improving outlook for retailers and shares outstanding in XRT had rebounded to 12 million by mid-September.  But if the rate of contraction last month had continued, the ETF was just days away from running out of underlying shares altogether.
So what happens if the recent monthly redemption rates return and 15 million more shares in the ETF were redeemed by the end of this month?  Presumably the SPDR S&P Retail ETF would simply close and cease to exist once its remaining 12 million ETF shares outstanding had been redeemed and all its underlying equity holdings had been delivered to redeeming authorized participants.  But where does that leave all the ETF owners who unknowingly bought their shares in the ETF from naked short sellers?  If the ETF is all out of underlying equities and is essentially shut down, what happens to the remaining owners of the 80 million shares of the ETF?  The ETF operator would have no more underlying shares (or cash) in the fund and the ETF would have essentially collapsed since all the shares outstanding were already redeemed.  At recent prices the unfunded remaining ownership in the marketplace for which nobody currently owns any shares would be over $3 billion for just this one ETF!  Extend this hidden unfunded liability from massive scale short-selling of ETFs (both traditional and naked) across the entire ETF spectrum and it is a $100 billion potential problem.  
Who gets left holding the bag?  Is it the retail account holders who own defunct shares in a closed ETF? The prime brokers that were counterparties to all those short sellers?  The hedge funds that sold non-existent shares in an ETF assuming they could always be created another day?  The ETF operator?  Or the Federal Reserve?

About the authors:

Andrew A. Bogan, Ph.D. is Managing Member
of Bogan Associates, LLC, a global equity fund management firm based in Boston, Massachusetts.

Brendan Connor is an investment analyst in New York City.

Elizabeth C. Bogan, Ph.D. is Senior Lecturer in Economics in the Department of Economics at Princeton University in Princeton, New Jersey.


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Posted: 29 March 2011 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

Calling all (any?) common sense out there please!

 

There was a time when presidential candidates could say "its the economy, stoopid" and us little people felt in awe of these powerful and well informed Washingtonians, and their ability to lead us to a better place.

 

Well, lets take a look at where they have taken our planet's largest economy...

 

And what might this mean?

 

Stuart

 

 

from William A. Sahlman, Professor of Business Administration at Harvard Business School
 
From where I sit as an economist, it's still all about the economy and the long-term impact of the problems laid bare by the Great Recession. During the financial crisis, the world came to the apparently shocking realization that debt financing entails risks. Financial institutions, households, and governments all suffered because they had too much leverage.
 
Though the corporate sector has generally decreased leverage, the same is not true of government, particularly in the United States. Every company and household here and abroad will ultimately be affected by the unabated and accelerating gap between government revenues and spending.
"Every company and household here and abroad will ultimately be affected by the unabated and accelerating gap between government revenues and spending."
 
There is a great deal of confusion in the popular media about the level of the current budget deficit and outstanding debt. To illustrate, most press reports peg the current U.S. deficit at $1.5 trillion, roughly 10% of gross domestic product (GDP). Gross public debt is $14 trillion, or over 95% of GDP. Most observers believe that the government will run a sustained deficit for the next decade that could add over $10 trillion to outstanding federal debt.
 
But closer inspection of government data reveals that these figures grossly understate both the current deficit and level of debt. Consider, for example, that the estimated net present value of obligations under the Social Security system is approximately $8 trillion. As the ratio of retired people receiving benefits to working people paying into the system increases, there will be an ever-increasing deficit confronting the government.
 
Even more problematic is the fact the Medicare system has a vested unfunded net liability of approximately $38 trillion. Once again, the inexorable shift in demographics, combined with high and increasing healthcare costs, will result in a widening gap between tax intake and payment outflow for Medicare.
On another front, the government is also on the hook for insuring bank deposits (including money market funds at the peak of the crisis), pension liabilities, and a wide range of other loans and liabilities. The total value of explicit loan guarantees is well over $10 trillion.
In total, the estimated liabilities of the federal government are in the range of $70 trillion, over five times annual GDP. By implication, the annual deficit is equal to the reported deficit plus the change in the vested, unfunded liabilities incurred in that year (e.g., the change in the Medicare liability) plus the implicit net cost of the annual guarantee for various liabilities. Therefore, the current deficit is more like $4.5 trillion than $1.5 trillion, while the total net revenue for the government was only $2.2 trillion in fiscal 2009. Washington, we have a problem.
 
This kind of leverage is unsustainable. Though some will argue that higher taxes are required, the reality is that the total amount collected each year in personal and corporate taxes (excluding social security and Medicare taxes) is only a bit over $1 trillion. Spending must be cut.
The recent report of The National Commission on Fiscal Responsibility and Reform suggested a number of options for addressing the challenges posed by excessive government leverage. This report, and several others prepared by other objective bodies, must become part of our collective dialogue about the future of the country. Every business leader and every citizen has a responsibility to understand and help address these issues. Otherwise, as some scenarios in Europe have already made clear, the United States will ultimately suffer the same fate as all countries that spend way beyond their means.

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Posted: 30 March 2011 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

Two nice write-ups here.

 

I prefer the first - as follows:-

 

OK - so social networking is here now. The genie is out of the bottle. And that means the old role of middle managers as gatekeepers on information flow is gone. Over. Dead. Does this not tell you something about the old role of investment professionals as gatekeepers in the investment world??.... if not, you will wake suddenly at some stage...

 

Anyway, enjoy them -

Stuart

 

 

 

 

 

Executive Summary:
Harvard Business School professors—former Medtronic chairman and CEO Bill George, and innovation and strategy authority Rosabeth Moss Kanter—offer their thoughts on the most significant business and economic developments from 2010. Key concepts include:
  • Social networking is the most significant business development of 2010, says Bill George, noting that some 600 million people are now active on Facebook—and half of them spend at least an hour per day on the site.
  • Rosabeth Kanter points out that new technology shone in 2010, in spite of the world's economic anxieties. She gives kudos to the Apple iPad, which accelerated the trend toward digital content.
 
Bill George, Professor of Management Practice
"Social networking is the most significant business development of 2010, topping the resurgence of the U.S. automobile industry. During the year social networking morphed from a personal communications tool for young people into a new vehicle that business leaders are using to transform communications with their employees and customers, as it shifts from one-way transmission of information to two-way interaction. That's one reason Time magazine just named Facebook founder Mark Zuckerberg Person of the Year.
"The biggest threat presented by social networks is to middle managers, who may become obsolete when layers of managers are no longer needed to convey messages up and down the organization."
A year ago many people poked fun at Facebook as a place where kids shared their latest party news. Today more than 600 million users worldwide are active on the site. The most rapidly growing demographic is people over forty. More than 300 million people spend at least one hour a day on Facebook. Approximately two hundred million people are active on Twitter in spite of—or because of—its 140-character limitation. Another 100 million use LinkedIn. None of these social networks even existed at the beginning of the decade.
Leaders like IBM's Sam Palmisano, PepsiCo's Indra Nooyi, Apple's Steve Jobs, Microsoft's Steve Ballmer, Carlson's Marilyn Nelson, and Harvard Business School Dean Nitin Nohria are all active social network users. Why? Because these social networks are a unique way of broadly communicating real-time messages to the audiences they want to reach. They can write a message anywhere, anytime, and share it with interested parties without any public relations meddling, speech writers, airplane travel, canned videos, or voicemail messages. Now their words are much more authentic and can be remarkably empowering.
Social networking is also flattening organizations by distributing access to information. Everyone is equal on the social network. No hierarchies need get involved.
The biggest threat presented by social networks is to middle managers, who may become obsolete when layers of managers are no longer needed to convey messages up and down the organization. The key to success in the social networking era is to empower the people who do the actual work—designing products, manufacturing them, creating marketing innovations, or selling services—to step up and lead without a hierarchy.
Consumer marketing companies are lining up to use these networks to reach their tailored demographics with highly personalized messages. Already they are revolutionizing marketing by shifting dollars from purchased media advertisements to building their own outlets and content. Kraft Foods, for example, is now one of the largest publishers of food-related materials. IBM is launching thought leadership communities. PepsiCo uses social networks to reach millions of social entrepreneurs in lieu of advertising at the Super Bowl. From a leadership perspective, social networking is making authentic leadership a reality and a necessity for 21st century leaders. You can't hide on your social network when you're revealing who you are and what you really believe. Transparency is essential here.
Even more important, this new phenomenon is enabling business leaders to regain the trust and credibility they have lost over the last ten years. That's why social networking is the most important business development of the year."
 

 

Rosabeth Moss Kanter, Ernest L. Arbuckle Professor of Business Administration
"In many ways the biggest business developments of 2010 were the things that didn't happen. Big companies with cash didn't spend it. Banks with cash didn't lend it. Small businesses didn't attract capital and thus didn't help reduce unemployment. Europeans were paralyzed by debt crises and transportation shutdowns caused by volcanic ash and disgruntled workers. Americans were paralyzed by fear of a Chinese takeover of the world. Google didn't exactly leave China or prevail in the face-off over government-banned content. The BP oil spill debacle in the U.S. Gulf region didn't destroy the company, didn't stop offshore oil drilling for very long, and didn't produce the political will to push for alternative energy sources.
Yet even in the midst of gridlock in Washington, economic anxiety around the world, and government liquidity crises in Europe, technology marched on, seemingly impervious to global events. Technology companies with the capabilities and courage to innovate were bright spots and signals of important trends for the future.
"Technology companies with the capabilities and courage to innovate were bright spots and signals of important trends for the future."
One enormous continuing development is the exponential growth of social networking media and the increasing use of social media by companies to crowdsource ideas, mount contests to award prizes and gather audiences, and attempt to create dialogues with customers. The year 2010 accelerated the trend toward the use of social networking sites for an increasing number of commercial purposes and gave social networking companies the confidence to remain independent rather than be acquired by existing players (witness upstart Groupon's recent rejection of Google's $6 billion offer, for instance).
And for what it symbolizes, let me add the launch of the Apple iPad in April. This device quickly gained a 95% share of the tablet computer market and a big share of the public mind.
But the iPad represented more than just an extremely successful product launch. It also signified important technological directions that are reshaping other industries. The iPad extends and accelerates the webification of life whereby devices can connect to the "cloud" and provide functions on a mobile, as-needed basis. There is no more need to embed them in the guts of a stationary device. This makes an enormous amount of computing power available to individuals and small businesses and continues the importance of apps that can be accessed directly. The existence of the iPad extends and accelerates the trend toward digital content such as e-books and downloadable newspapers and magazines.
While uncertainty continues to cause wary businesses to wait before investing, innovation and entrepreneurship are invoked by leaders as the one sure way out of economic distress."
 
Bill George is a Professor of Management Practice, Henry B. Arthur Fellow of Ethics, at Harvard Business School.
Rosabeth Moss Kanter is the Ernest L. Arbuckle Professor of Business Administration at Harvard Business School.

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Posted: 10 September 2012 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

There was a lot of grimacing last week when the (administered) fuel prices rose - and at an extra R0.93 per litre so there should have been.

 

But what if you own some Sasol shares - and then share in the other side of the price hike - won't that soften the grimace?

 

To see the full story, here is Sasol's June2012 annual result (link - http://www.sasol.com/sasol_internet/downloads/FY12_Sasol_Booklet_1347257374908.pdf )

 

And what I can easily now do is update my discounted cashflow valuation - after all, fresh data and proof of the most recent growth and margin figures should make it more relevant.

 

Here is the summary:-

 

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alt

 

 

Thats right - pay R380 for a share owith value of R445 - if they can meet targets of 9% turnover growth and 18% profit before tax margin - targets which they meet "met los hande" in the 2012 report.

 

And to see that in context, here is a price chart (blue)  with the imputed DCF trajectory overlain in red...

 

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So, apart from much else, this chart illustrates just how boring fundamental investing is - the red line shows the value path I believe Sasol is on, and the red rings highlight fairly deep opportunities on both sides. If I can add at those times when the price is well below a rising value path and avoid the times when its way above, my clients will appreciate it.

 

And its also worth comparing the value opportunity offered by a Sasol share (15% discount to spot value on an asset which then climbs at 11% yoy, and pays a 4% yearly dividend) with some of the alternatives - some JSE shares are in neutral ground, and some look quite pricey - as these two pictures of Sun International and Shoprite show.

 

Cheers

Stuart

 

Shoprite - too far for me. Was neutral in the circles - now ~30% overcooked.

alt

 

Sun - about on line. Not compelling.

alt

 

 

 

 


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Posted: 18 November 2010 - 2 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

You may have seen a while back the "winners among winners" on total shareholder return (TSR) in Top 100 - Royals.

 

This review (use at your own risk) may help you with the concepts of who could be winners in the next spell.

 

Comments very welcome - Cheers

Stuart

 

 

 

alt


Total votes: 0
Average(Out of 5): 0
Posted: 18 November 2010 - 2 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

You may have seen a while back the "winners among winners" on total shareholder return (TSR) in Top 100 - Royals.

 

This review (use at your own risk) may help you with the concepts of who could be winners in the next spell.

 

Comments very welcome - Cheers

Stuart

 

 

 

alt


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Posted: 17 March 2011 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

 

The Web’s €100 billion surplus
Consumers get the bulk of it with free services like social networks. Will industry dynamics shift as providers and advertisers try to get a bigger share?
JANUARY 2011 • Jacques Bughin
In This Article
Consumers derive significant value from all they do on the Web, and since advertising pays for much of this, it involves no immediate out-of-pocket cost. We all experience these benefits each time we log onto a social network or watch a free Web video.
But how much is all of this Web use worth? About €150 billion a year, according to new McKinsey research involving a survey of 4,500 Web users across Europe and the United States, as well as conjoint analysis of their willingness to pay for various online activities.1
Consumers do pay for some of this: €30 billion for services such as music subscriptions and gaming Web sites. In a sense, they also pay for the “pollution” of their Internet experience by intrusive pop-up advertising and perceived data privacy risks, an amount we estimate to be €20 billion after asking consumers what they would pay to avoid further clutter and privacy concerns. That leaves a substantial consumer surplus of €100 billion a year, a total that we project will grow to €190 billion by 2015 as broadband becomes ubiquitous around the world and as new services and wireless devices come to the fore.
For Web service providers, this is a large parcel of value to leave on the table. In fact, it amounts to more than three times the €30 billion companies pay providers to advertise on their Web sites and is almost as much as the €120 billion consumers pay for wired and wireless broadband access. One reason for this seeming largesse may be that once a Web service is created, the cost of distributing it is very low, and most Web companies are satisfied covering their basic costs with advertising. In the off-line world, things are different, of course: the surplus is more evenly divided between consumers and suppliers, since in many markets—books, movies, or cable TV, for example—consumers pay for content.
Three ways Web economics could shift
Web players may try to recapture some of this large, growing source of value. One not-too-distant example of such a move is how broadcasters gradually shifted service from free programming to pay-TV to capture a bigger slice of value. While it’s not clear how things will play out on the Web, at least three scenarios seem worth contemplating.
 
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Service costs rise
One obvious possibility is that Web players will charge more for services, they already do for certain premium offerings, such as multiplayer video game sites or subscription-based access to unlimited music libraries. So far there’s been strong resistance to this approach from consumers: only about 20 percent of online users pay for some services, and our research shows that expanding the scope of fees to an amount equaling the value of the surplus would reduce usage by as much as 50 percent, torpedoing the economics of Web services.
Advertising grows
Another strategy would be to ramp up Web advertising, and here, the “pollution factor” may be the key. At present, Web companies are reaping more in advertising revenues than consumers are willing to pay to avoid them (€30 billion versus €20 billion). This imbalance suggests that today’s levels of advertising are sustainable and that there could be room for more ads or other monetization plays, such as asking consumers to provide more personal data to access services.
It’s hard to say how much more, though, because there’s no data on how consumers would respond if Web pollution grew a great deal. Is there a tipping point where their willingness to pay to eliminate pollution would increase so dramatically that business models would shift in response? For example, if ad revenue grew to €40 billion or €50 billion, it is not clear whether consumers’ willingness to pay to avoid the new ads would grow so much that Web service providers would be better able to extract more surplus by charging users more, as opposed to selling still more ads.
Monetization by other means
Web players operate in multisided markets that allow them to collect revenues from both their advertisers and their users. They may be betting that by creating a large consumer surplus today with free services and big audiences, they will bolster their online brands, leading to higher profits or market value down the road. The rationale for this approach is pretty compelling, though a for-pay walled garden would work only for premium brands and services. Even for those, reach will be limited—as will companies’ ability to use their Web platforms to launch other businesses.
Preparing for change
Of course, we’re still in the early days of the Web economy, and only recently has the consumer surplus swelled with the rise of blockbusters such as Facebook and always-on connectivity. Clearly, this is a market that’s far from equilibrium, so players should be planning for major change and preparing their strategies accordingly.
Service players trying to stay ahead of market shifts must be attuned to rapid market consolidation: the top 100 providers accounted for 45 percent of Web traffic in 2010, up from only 20 percent in 2007. To stay ahead, leading players are already broadening their base of services on robust proprietary platforms, particularly services that can be offered at low cost via the cloud and mobile devices; Twitter and Facebook are prime examples of such multiuse platforms. As more business and individual activities move online, early movers should be well positioned to capture higher advertising revenues and perhaps, over time, higher service fees.
In turn, advertisers may have better revenue options because of Web innovations. Some are already moving beyond distracting display ads; they’re designing branded content promotions to attract the attention of users and shaping marketing campaigns around messages that travel virally among socially networked “friends,” thus making these campaigns more acceptable to the consumer.
For consumers, the benefits of Web surpluses will continue. Engagement with consumers is the key to value creation in multisided markets, so they should expect continuing service innovations and tolerable advertising levels that keep the prices for Web use and access low.
 
About the Author
Jacques Bughin is a director in McKinsey’s Brussels office.

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