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Posted: 5 October 2011 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Market news

Arab spring. Israeli street sit-ins. UK looting.

 

What has happened of late? People on the ground seem to be rejecting longstanding situations - sometimes in vivid ways.

 

Here in SA, we hear much comment about how "outrageous" it is for a worker on say one or two thousand rand a month to want more than a CPI-indexed payrise. That system would put him on a compound earmings trajectory of say 4-6% per year. And yet we can also hear how marvellous it is for an executive on maybe several millions per month to get pay rises and share options etc all compounding to give her/him a high-based trajectory of around 20% - and often a tax rate of low teens (if CGT predominates) or some years zero (if dividends do). Who is being outrageous here?

 

Maybe the better question is - How long can this go on?

 

And all the talk of job creation - surely that is an unhelpful word, implying that some can do a Godlike wandwave, whereby jobs will appear in a flash of smokey light. Employment typically grows when there is an increase in small business activity. Small enterprises are more vigorous hirers (no "creation" by realists). Big business - the large enterprises who get so much airtime at Davos and similar talkfarms - are generally better at firing!

 

So yes, maybe change is due. The story below highlights how the debate is both vigorous and global:-

 

Cheers

Stuart

 

Belgian executive lockup

http://www.tipnews.info/business/NjYyNTg=/2011/10/04/belgian-workers-hold-arcelormittal-executives-hostage

 

BRUSSELS (AFP)

Belgian workers kept six executives of world steel giant ArcelorMittal locked up in their office for more than 24 hours until Tuesday over union demands for the reopening of blast furnaces. The managers were allowed to leave their fourth-floor office in the southern city of Liege on Tuesday afternoon after angry workers holding a protest had prevented them from leaving since Monday morning.

 

Unions decided to let them go after a "rocky meeting" during which some workers wanted to keep the executives sequestered, David Camerini, an official of Christian Union (CSC), told AFP. One of the executives, Etienne Botton, said they were kept in "terrible" conditions. "We had to sleep on the floor and were woken up regularly," Botton said. "Yesterday, we ordered pizzas but the boxes were empty when they arrived." The executives were not physically attacked and were able to eat Tuesday morning, he added.

 

Camerini said the unions decided to release the executives to prevent tensions from rising but they would continue strikes at ArcelorMittal in Liege, where 3,000 people are employed by the group. Unions want the company to restart activity at two blast furnaces and keep 300 interim workers employed.

Arcelor Mittal wants to keep only 200 workers at the furnaces and said it would only return to the negotiating table when the executives in Liege are freed.

Based in Luxembourg, ArcelorMittal is run by Indian chairman and chief executive Lakshmi Mittal.


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Posted: 6 October 2011 - 2 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

You might think I am not a Sasol fan, after the comments I made about the company's tax generation claims recently...

 

Sasol - Do facts matter?

 

And that's fine - I try not to be too much of a fan of any share.

 

Take a look here at the update I have just done to my DCF valuation of Sasol, based on its financials up to June 2011:-

 

alt

 

(Full working spreadsheet is available to members of the TTK1 Model Portfolio Group )

 

Anyway - what it suggests, is that if Sasol can hold topline growth of 9%, and margin of 18%, then its worth around R400. And it is trading far below that right now.

 

Also, it is instructive to take the current DCF back through time, at the discount rate I am using - and what this suggests is that the DCF has moved along a track something like this:-

Sep-11 400 Sep-10 356 Sep-09 317 Sep-08 282 Sep-07 251 Sep-06 223 Sep-05 199 Sep-04 177 Sep-03 157

 

And to see that possible DCF trajectory against price? OK - here it is, with price plotted in blue and the imputed retrospective DCF in red (a straight line thanks to log scale):-

 

alt

 

So - maybe there is something helpful in this whole value-centric way of looking at investing...

 

Cheers

Stuart

 

 

 

 


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Posted: 12 October 2011 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Market news

 

"There are several well-known signs that you are getting older. The policemen look younger all the time. The pop music is all rubbish. And it gets harder and harder to understand why anyone wants that new gadget that is flying of the shelves.  But there is one other sign that I hadn’t really expected.  The stock gurus aren’t what they used to be either…."

Read Matthew Lynn's whole column at

 

http://www.marketwatch.com/story/stock-gurus-arent-what-they-used-to-be-2011-10-12?siteid=yhoof

 

Cheers

Stuart

 


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Posted: 14 October 2011 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

 

The best performers among large stocks on the JSE over the past year have been:- 
SAB (global beer) up 24%,
Vodacom (local cell) up 31%,
BATS (global cigarette) up 33%,
Exxaro (local coal) up 33% and
Woolies (local retail) up 46%.
This highlights the breadth of exposure available to us here through large cap shares, but it obviously also calls for a question on valuation - how can these shares rise so strongly if the world is truly ending as we speak.
So here is a quick look at Woolies, with the latest financial report (2011 June numbers) giving a steer as to the trajectories for growth and margin.

alt

As you can see, I am not being too bold, assuming a margin of 8%, a full point below what the group did this last year. So it appears that thi sstock is easily worth R35, closeish to its latest price of 38 and change. And it adds a billion of value more than its costs of capital each year. If anything, the price (blue) and retrospective valuation (red) chart be;low shows that this company seems to have been way neglected by market critics for that past few years, and is now far closer to being in equilibrium with Mr. Market. No panic at this price, I suggest.

 

Cheers

Stuart

 

alt

 

 


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Posted: 27 October 2011 - 2 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

There has been some enquiry of late as to the benefits of choosing Satrix RAFI rather than the plain vanilla top 40 product.

 

This picture helps explain. The chart shows RAFI (thicker blue line, right axis) winning by around 11% against the STX40 (thin black line left). And it highlights for the first 7 odd months after the RAFI listed in mid October 2008 there was almost no difference in price action.

 

And below the chart is a table setting out the dividend distributions - 4 a year from the Top40 and 2 a year from RAFI. The RAFI cumulative payout so far is just 3.6% in the three years, against the 6.15% from the Top40 - thus narrowing the gap which the chart reports.

 Presumably the rest of the RAFI dividend went in fees?

 

So the net difference is 8.6%, over three years (before small realities like the costs to re-invest your dividends if that is how you are doing it).

 

SO?

 

It seems the smart thing for capital gain players who don't require yield now may be to go with RAFI - probably on the SATRIX website with dividends automatically reinvested.

 

And maybe a bigger takeout from the comparison is that fundamentals do provide an an edge - albeit modest over this small time frame

 

So it may be worth doing some disciplined work on share selection using fundamentals and not sacrificing the dividends in fees for maintenance and performance to the RAFI service people.

 

Cheers

Stuart

 

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Posted: 31 October 2011 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Market news

Nobody likes to be known as just a number, but if you have a hankering to know where you fall in the seven billion people who will be on Earth in the next few weeks, the link below can provide a pretty good guess.

 

By entering your birthday, they calculate the number you were on the day you were born as well your number in the history of mankind.

Both numbers have been calculated using UN Population Division figures. The first is an estimate of how many people were alive on your date of birth. It is one possible value based on global population figures and estimates of growth rates over time. Data before 1950 is less accurate than figures after that date. The second number includes calculations based on the methodology of scholar Carl Haub, who estimated how many people had been alive since 50,000 B.C. His calculation has been amended by the UN to include additional points in time.

The site also provides information on individual countries and for each gender, so it’s safe to say you could waste a decent amount of time on the site.

 

The World at 7 Billion

 alt

 

Cheers

Stuart

 


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