The ValueHuntr website has put together a collection of previously unpublished papers from the master of value investing - Benjamin Graham. They cover the period 1930-1974 and have put together into one PDF document.

You'll find them here.
 

Conventional thinking says that the strong Rand is all bad news and that it is especially bad for our economy in general and the manufacturing sector in particular (ignoring for the moment the elephant in the room - can anybody do anything about the strong Rand?). But is this not perhaps just the easy thinking - believing things just because we believe them, not because we have interrogated and proved them to be true?

Are we perhaps not just lazy thinkers when it comes to the strong Rand?

This 'strong is bad' view is perfectly illustrated by an article in today's Sunday Time titled Rand is killing manufacturers - written by Guy Harris who  is the public affairs director of Bell Equipment and a member of Manufacturing Circle. In other words he is talking his book when calling for a Tobin tax and a 1.5% interest rate cut next week. Now just because he is talking his book doesn't make him wrong, it merely means we need extra interrogation of what he is saying.

That extra interrogation is provided by Adrian Saville from Cannon Asset Managers who recently wrote a piece titled Cents and Sensibility in which he says a weak Rand is of very little real benefit to our beleaguered manufacturing sector. Now here is a paper that has indepth research on the issue and brings facts to the table rather then rhetoric and lazy thinking.

So is it all stereotypical thinking that a strong Rand is bad? Certainly the case is not nearly as clear cut as many would have us believe?

NOTE: I will be interviewing Adrian Saville about his report on JSEDirect on Tuesday just after 7pm on Classic 102.7.

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The annual list of the world's richest people is up on Forbes. Carlos Slim stays at the top with $74b and he is pulling away from the rest of the pack with Gates worth $56b at #2 and Buffett with $50b at #3.

#100 on the list has $9b, so now we know what to aim for and  # 1000 has some $1.2b - not to tall an ask?

South Africa doesn't crack the top 100. But there are 4 in the top 1000 (not bad I spose?).

# 136 - Nicky Oppenheimer & family @ $7b
# 219 - Johann Rupert & family @ $4.8b
# 336 - Patrice Motsepe @ $3.3b
# 782 - Christoffel Wiese @ $1.6b

The big country winners (aside from the US with 31) are Russia with 16 and India with 7. Surprising on the downside is Germany 6, France 4 and UK 1!

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Who knew the market was so efficient?

Simon Brown

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We've long heard that Africa could be a super power and two articles today play to that theme.
 
The first is a comment from Maria Ramos that the 23 African Stock Exchanges should merge into one. Certainly the JSE would love that idea, as they’d assume to be THE exchange. I kinda like it as it would certainly give us one decent size exchange, the JSE as the continent’s largest is frankly still small with less than 400 listed companies of which maybe 100 are really liquid enough to invest/trade and merging African exchange would increase that number and increase liquidity. That said lots of issues, none-the-least currency and ego.
 
The second is a report from McKinsey & Company titled Lions on the Move: The progress and potential of African economies. This report has some good stories but also some sobering facts such as the fact that the entire economy of Africa is the same size as Russia or Brazil!

So I thought I would look at Capitec price and volume chart to see if there is anything of note. Especially looking to see if we have significantly increasing volume which may have helped push the price higher. In other words institutions getting in on the act in larger volumes and driving the price. Like when a stock transitions from being an undiscovered small cap to larger cap status?

So I got out my trusty excel, pulled out lots of hair and finally worked out the charting function (it was a lot easier in 2003).

Below is the chart, and what does it tell us? Well nothing. Volume has remained pretty much constant. Sure a small uptick in the last 6 months (rights issue maybe?). What we do know is that buyers have been prepared to pay more while sellers have been asking for more, but a significant increase in volume is simple not there.

Of course what is there is significant increase in value traded as the share price has increased, and maybe that would be the better chart - but I know I will see that and maybe my idea is all wrong. Maybe it is value more than volume? In truth volume is meaningless without value?



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A couple of weeks ago on JSEDirect I was chatting to Francois du Plessis from Vega Capital when he mentioned forecast risk. As I phrase I had never heard of it, albeit the concept made sense when he explained it.

What he was talking about was how certain can we be when we’re making a forecast about a company? Investing is about forecasting, we forecast the revenue and expenses of a company to end up with the profit. In some instances forecasting is a lot easier; companies with largely fixed costs for example while other times forecasting is extremely difficult.

Some easy forecasting examples would be;

• A large food retailer where we can expect revenue to grow ahead of food inflation, but not by much.
• Gglobal beer producer in mature markets where beer growth is slow at best
• Large diversified companies with huge operations.

The other side of the coin is the high risk forecasts, such as;

• Mining companies where not only do we have to worry about cost controls, but also the price of whatever it is they mine then added to that the Rand exchange rate forests.
• Construction companies where the issue is not only what new work will they get, can they hang onto current work (or will it be cancelled or delayed) and then what about costs and unexpected delays such as the recent heavy rains being blamed for many companies poorer profits.
• Small companies with only one or two major contracts. Losing one of the contracts, or getting a new contract would markedly change the foreccast.

So the point is not that we can remove the concept of forecast risk, but we have to recognise it and manage it. When making forecasts we have to be honest with ourselves about just what probability our forecast has of being correct and the lower the chance then frankly the lower the attractiveness of the company due to uncertainty.
 

I found a great article by Dr Graeme Codrington from TomorrowToday - After Shock: the five trends disrupting business in the next 5 years.

I have interviewed Graham on JSEDirect and attended his lectures and he raises issues about the generation gap and how people work and interact these days, issue that are worth giving lots of thought to when investing.

If we can work out which companies and sectors are going to get it right - we potentially got some great investment opportunities.
 

A great read that is especially true for investing. Things change and sometimes they change slowly and we don't notice the change and hence get stuck in the old truths.

Futer if we can spot these slow changes early, we can make much better investment decisions.

www.boston.com/bostonglobe/ideas/articles/2010/02/28/warning_your_reality_is_out_of_date/

From late 2009 and for all of 2010 the talk has been of how the stock prices were reflecting good earnings and that February/March 2010 would be the moment of truth as we hit earnings season (for companies with end December interim or final).

So now it is behind us and last night on CNBC Hard Line I was on air with Bronwyn Neilsen, Gerhard Lampen and Paul Theron discussing just this subject.

General consensus was that results were largely in line with expectations but Gerhard made a good point when he said that forward looking statements from CEO's  were probably more cautious then the market would have liked and largely we see this in that the market has been sideways for 2010.

Further I have long been commenting that while 2008 was all about sell anything and 2009 was about buy anything, 2010 is going to be about stock picking. So I did some digging before the show with the idea that the market could tell us which stocks had had better results. The logic is that if we group stocks together looking for those that have out preformed price wise we'd be part of the way to finding the winners.

So here's what I found over the past 1 and 3 months.

• Platinum - IMP has out preformed AMS
• Diversified miners - BIL has out performing AGL
• Banks - SBK has out preformed ASA, NED and FSR
• Large food retailer - SHP has out preformed PIK

No not a sure thing, but a good place to start digging.

Below is how consumers respond to tough times in spending reduction (percentage who say they reduce spending in each area).

Source: Nielsen – from TigerBrands interim results presentation p.7

So I am looking for suggestions of 11 stocks as below for the portfolio and we’ll track it until the next world cup to be held in Brazil in 2014.

I am looking for ideas and suggestions for stocks from readers and will also ask commentators on my radio show (JSEDirect) as well as Standard Online Share Trading forum.

My team sheet break down is;

• 1 goalie (big an boring but reliable)
• 4 defense (blue chips)
• 4 midfield (mature growth stocks or maybe wanna be blue chips)
• 2 strikers (true growth stocks, probably expensive and risky)

Now what we need are the stocks, so send the ideas.

Nedbank launched their BettaBeta ETF in March this year. The methodology was that they would include the same shares as exist in the Top40 index, but rather than using market cap or free float to weight the index each of the 40 shares would have an equal weighting. In other words each share would be 2.5% of the index.

Now that the index has had some time in the market we can check the performance and the results are impressive (as published by Nedbank, find the document here). In short their BettaBeta equal weighted index out preformed (or at least loss less) then the other Top40 indices, including the Rafi.

But surely all this tells us is that resource stocks have been underperforming the other stocks in the index? With the traditional Top40 index being heavily weighted to resource stocks when they underperform the BettaBeta will win, yet when resource stocks are outperforming, then BettaBeta will not be such a winner due to the reduce exposure in the index.

So really the concept for the BettaBeta is that if you want to reduce resource stock weighting, then it is an excellent index. But if you are a resource stocks bull and expect them to outperform, then go for Top40 or even better I guess would be the SatrixResi?

We've known for a long time that global demographics are changing; aging population in Japan, reducing population in Western Europe and the like.

We're now also seeing some major changes in the US and Graeme Codrington from TomorrowToday has written a great post high lighting the US Labor changes in 2010.

As investors we need to put these trends through our beliefs and strateggies.

I keep on getting asked about construction stocks, are they cheap should one be buying them. Then on JSEDIrect last Tuesday Shawn Stockigt from Stanlib commented that they were 'nibbling' at construction stocks.

Hhhmmm, that got me thinking and so I hauled out my trusty PE graph for a first glance.

This is the construction index and we can see an eight year PE that is low at about 8x and a current PE of some 9.5x.

Cheapish.

I suppose the question is if the 2006-2009 boom was a freakish event?
 

Repeatedly since March - a record?

The Rand may be moving stronger, but the Oil price in USD is moving higher at an even faster rate - leaving South African's with a rising petrol price.

Below is a chart of the last 5 years of petrol prices in SA, using the JHB 95 price.

Now if oil does go through $100 (and maybe even $120) as some are suggesting we're certainly going to see R9 again and maybe even R10 (unless the Rand can hit 6 or even 5?)?

Source: http://www.aa.co.za/content/59/fuel-pricing/

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