Trading update

It has been a while since I put something down on this blog. It has been a tough couple of months for traders and investors alike. Market doesn't want to go higher due to the Euro debt crisis despite there clearly being some compelling valuations.

Here are the trades I am still playing with plus one new trade:

Old Mutual at under R14 (ADDED)
I'm not a huge fan of insurers but Old Mutual has a lot going for it. Its being tarred with the Euro crisis but remember that a lot of its profits come from South African operations and a lot of its valuation is linked to its stake in Nedbank. It is battling to kick on at the moment but Goldman Sachs recently upgraded the share to a buy.

Nikkei
As mentioned in the previous post, there has been a pretty predictable 9400 - 9800 band starting to form. Everybody is talking Japan at the moment and how cheap it is. You don't even have to believe in a super rebound in the markets to score. Scale 250 - 350 points each time and you can build a decent return here.

Brait at R17.50
Sure there is a lot of speculation around Brait at the moment, but it has two very solid assets underneath it in the form of Pep and Premier Foods. As it stands you are basically getting these businesses plus some cash and paying next to nothing for the other assets. Sure in some cases you probably shouldn't be paying much for them and without the dividend Brait is a less compelling investment story but if they can stick to generate long-term ROE of 20% odd you are going to find few investments that can match this.

African Bank Investments Limited
I maintain what I said in the earlier post - you get a dividend of 5%, you have a solid and cash generative business on an undemanding price to earnings multiple which doesn't have to support capital intensive investment banking businesses. Simple, stupid kind of investment?

Vividend Income Fund
Another of those investments which slot into the simple, stupid investment category is Vividend. There is nothing complicated about this new property listing. It is ungeared, nice portfolio and with a well respected management. You are picking up about 6% yield after tax and the price is off its highs. Definately worth a nibble.

Nothing else really jumping out at me.

I quite like the new Africa ETN from Standard Bank and have added a debit order for it from next month. Will see how that product evolves.

And all I got was this lousy birth certificate....

The world has woken to the news that public enemy number 1 (well at least the US enemy number 1) - Osama Bin Laden - has been killed in a mansion in Pakistan in a joint special forces attack. It has been almost 10 years since that fateful day since September 11th and you can understand the relief in the US that this fight has been "won".

The cynic in me suggests that this news probably puts paid to Donald Trumps presidential ambitions.... All he could produce was a birth certificate of sorts for Barack Obama....

... no wonder Obama thought he probably was justified in taking a dig at the property billionaire in the press conference yesterday.

So what does this mean for markets and trading?

- I gotta fess up. Friday's spike in Gold burnt me and I was stopped out there.
- Still in with my short oil from $125 and long US$ / short Japanese Yen trade

In my head I had suspected a bit more of a "patriot rally" in terms of the US dollar but lets wait it out. The yen is weakening and as the rest of global markets digest the news, there might be a bit more enthusiasm for the trade.

Oil at $125 is in my humble opinion overbought and being driven by this commodity bubble and being held up unnaturally high with social tensions in places like Libya, Syria, Egypt etc. But there is nothing new in these areas to suggest that this kind of price is justified, especially with economic data suggesting the economy is staggering.

I do agree with the early analysis from STRATFOR that this probably means that the US can hasten its departure from Afghanistan. While the US has made a lot of noise about its humanitarian support / obligations to the region, the fight has been going on for 9 and a half years and Americans are tired of this battle. Since the initial "shock and awe" they've been left fighting for a country which is politically and economically worthless.

With the US elections around the corner, it will do a lot for popularity ratings to show US soldiers packing their bags and heading home to their loved ones. US soldiers departing the Middle East will invariably be good publicity in the near-term.

So for now I'll stay short oil and long the dollar... counter-intuitive maybe but its probably about time the world started to settle down for a bit and put this chapter behind us.

April update

So those dumb-asses at S&P decided to downgrade the US of A this afternoon and caused some proper kak in the markets today. Stocks are down, dollar is down, metals are up… I’m so excited to see a bit of volatility.

Certainly not the prettiest market around at the moment but at least if you’re looking for some long-term value one has to feel some things are opening up.

Here are a couple of things I’m looking at:

The Nikkei at 9400
News out of Japan consistency looks bad, but the amount of money which is going to be sloshed around in the next few years rebuilding is likely to provide a serious catalyst for growth. I reckon you can get a pretty nice band between say 9400 and 9800 in which to trade in the next few weeks.

Brait at R18.50
Said it in the previous post and I maintain it – Brait at under R19 is incredibly tempting if you are a patient investor and looking for some long-term dividend growth.

African Bank Investments Limited at under R36
The sell-off has created an opportunity in local banking group Abil. You still get a dividend of around 4% and decent earnings growth forward.

Altech at R55
If you are looking for an Africa play then Altech is hard to ignore at the moment. The group is an early mover on the technology front onto the continent and with the share having slipped from R68 to R55 its tempting. A historic price to earnings multiple of 11 times earnings and a dividend yield of a tad under 6%.

Dividends, dividends, dividends.....

Happy hunting….

Liking platinum

I have been watching these gold and platinum prices with some interest and this recent sell-off has caught my eye this evening.

Personally I thought gold would hold around the $1320 mark but it went straight through that and maybe $1310 will act as some kind of support level. I think the thing which has surprised me on this front is the reason S&P rating cut in Japan, I thought there might be some money cycled out of there and into precious metal commodities... apparently not yet.

Whatever, I find gold over-rated and really only for the looneys.

The metal which does interest me though is platinum and I've taken a small long position on it at $1790 on the April future. There is nothing complicated about my thinking here... look around SA at the moment, everything is being held together on a shoe-string - roads, traffic lights, rail etc etc. Throw in that the rain has soaked the coal for the power stations and there is now a massive transport strike scheduled for early in February.

If the signs of economic improvement are to be believed and the emphasis on clean energy keeps being punted and that platinum is expected to come out of South Africa then surely you can't go too far wrong backing the metal from here?

On the equity front only two real plays are jumping out at me:

Brait
Rushed up to R26.50 before a cautionary announcement was put out and then the stock slumped to R22 but has subsequently bounced. Good play at these levels considering the dividend

RE:CM & Calibre prefs (RACP)
You can buy RACP at less than the NAV of a cash shell... To me that is simply brain-dead if you believe that Piet Viljoen and his team can generate even the most basic long-term investment return.

With the fun and games in Japan earlier today with the S&P re-rating I reckon Friday could be an interesting day for traders. Let's see who keeps their heads.

Warren Buffett and the Art of Stock Arbitrage: Proven Strategies for Arbitrage and Other Special Investment Situations

I am always trying to look for new investment books for traders and investors to look at to try and find a trading strategy which works.

Came across this ebook from Warren Bufffett - Warren Buffett and the Art of Stock Arbitrage: Proven Strategies for Arbitrage and Other Special Investment Situations - and thought it might be a nice read.

The book is 176 pages so it is not too bad length wise and should appeal to both newbies and more experienced investors.

You can order it online for R163.46 by clicking HERE or on the book cover.

Sasol, the Nasdaq and the Dollar

So we are slowly sliding out of an interesting 2010 and treading with some trepidation into 2011. Markets are interesting at the moment... I wouldn't say tough because I'm still happy being long for the simple reason that there is a sea of liquidity out there desperately seeking places to be parked. I think it is pretty obvious that people are not going to make (or even protect) money by leaving it in the bank.

I have three active trades on the go at the moment:

Sasol
I like this share. Good dividend payer, growth prospects, trades at a discount to its peers and hell its been largely unloved in 2010 despite oil now heading for $100 a barrel. The company started the year at R290 a share and up until September it didn't go anywhere but in the last couple of weeks its been slowly

gaining some momentum and looks like it wants to push aboe R340 a share.

Call me a cynic but the company is widely held by domestic asset managers and I wouldn't be surprised if this stock starts getting some serious media attention in the early half of 2011 as they try and ramp up their portfolios. Sasol also recently announced a $1bn investment in a Canadian project and a lot of its other Gas to Liquids (GTL) plants are coming on line and pushing up production volumes.

All signs are there that Sasol is kicking up a gear so I am comfortable being long Sasol at R335.

The Nasdaq
Technology stocks have been out of favour in the US for a while now but there is lot going for them. The last couple of quarters have been good for telecomms and tech stocks with many indicating share buybacks and dividends were on the cards. I stand under correction but I think Intel has lifted its dividend in each of the last five years.

US companies have sat with alot of cash on their balance sheets over the last two years and at some point they are going to look to deploy that capital. That means investing in new technology, PCs, semi-conductors etc. A Nasdaq at 2600 doesn't seem to be too risky in my books.

The Dollar
Considering how I got smacked around by US currency over the last six months I probably need my head read but here's my logic:

- The US is coming out of recession
- AIG, Bank of America and Citigroup are repaying their debts
- The emerging market story is interesting but it has meant that many of the US companies are offering some seriously good value. I wouldn't be surprised if demand for US assets starts to rise as institutional investors start realising that they get better value for their money in the US rather than directly ploughing money into emerging markets?

I thought about it a bit and decided to go long dollar, short yen. There is some uncertainty in Asia with the Korean spat so I wonder if the basket of Asian currencies might come under some selling pressure?

Let's see how those play out over the next few weeks.... Happy Xmas and New Year folks

The Wire: New offering from Global Trader

I was just forwarded the following announcement from Global Trader and I thought it was quite an interesting idea for day traders / investors. Anybody tried it out? Thoughts?

You can check out the offering here.

The Wire. A Christmas gift worth waiting for

By Charles Savage, CEO of Global Trader

I don’t remember exactly when I first white boarded my vision for Global Traders’ online community offering but it was sometime in 2007. I clearly remember the enthusiasm and excitement with which the IT and marketing teams met my idea, excitement more about the fact that the CEO had finally lost his mind and had nothing to do with my idea at all.

Two Chief Technology Officers later and the work of people best described as wizards, magicians and conjurers and we launched version one of The Wire. The Wire is the name for the new online world we have created and is the centre of our financial community and the platform from which all our community driven services come to life.

It is a closed community in the sense that it is available to our live trading clients only but, beyond this, the restrictions fall away swiftly. The Wire is free to air and it is a radical new approach to delivering meaningful, actionable financial information that enables collaboration and communication and breaks down the barriers between those that trade and those that should trade.

At Global Trader we make it our business to smash down these barriers because we believe that for too long financial markets have unjustifiably been shrouded in mystery and intrigue. It is seen as the realm of engineers, actuaries and rocket scientists that, for the most part, have discouraged you from doing it yourself. To quote Peter Lynch, one of the most successful Wall Street investors of all time, “everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.” The truth is that Global Trader has now made trading simple.

On The Wire you can call yourself whatever you like, talk to traders, publish your research and views, read blogs about investing, technology trends affecting trading and read about how we view the world of investing. You can live vicariously through your trading alias and learn from fellow traders. When it comes to the what, when and how successfully you trade The Wire is an open book.

Do you remember your first casino experience? I do and I’m pretty sure it went something like this. You wondered around the casino halls in awe of the sounds, light and music, stopping occasionally to peer over the shoulder of the confident punters taking up the seats at the machines and tables. You paused and looked on in wonder at the piles of chips in front of some of the players and, after plucking up enough courage, reached forward and placed your chips behind one of them. You won some and you lost some but you learnt from every hand and grew in confidence until finally a seat became free and you pounced on it.

With The Wire’s Twades you can stand behind real live traders, follow their trades, track their success and if you like even put your money behind their portfolio punts until you feel comfortable enough to join them at the table. If you’ve played enough Blackjack, as I have, you will know that it is always good to cover a couple of boxes. Twades is our “first flight” service to launch on The Wire with more first flight services lined up for 2011.

Then there’s She–Ra, my personal favourite financial blogger, who publishes her work on The Wire’s Skirt Length Theory blog. If there is still some youth about you then you are going to love her approach to financial markets. She says of the myth surrounding trading, “Do you see images of a high risk, fast paced environment populated by coked up investment w*nkers or images of old fogies that have made their millions sitting in silk slippers barking orders at their brokers whilst smoking a pipe? If so then you would be only the tiniest bit right and you would also be SO wrong!”

I have no doubt that the launch of the Wire will be reflected on in Global Traders’ history as the defining moment that best demonstrated our commitment to the vision to boldly go where no South African financial service provider has even dared to dream about. Welcome to the New World!

Insider trading just got trumped by Twades! The question is, were you following?

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

I enjoy Matt Taibbi and the "colour" he puts into the story he tells - I don't think anyone will ever forget the now famous paragraph:

"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
The new book from Taibbi was hellishly entertaining, there are some cracking one-liners in it and I still have a good laugh about some of them.

The blurb for the book reads as below:
The dramatic story behind the most audacious power grab in American history The financial crisis that exploded in 2008 isn’t past but prologue. The stunning rise, fall, and rescue of Wall Street in the bubble-and-bailout era was the coming-out party for the network of looters who sit at the nexus of American political and economic power. The grifter class—made up of the largest players in the financial industry and the politicians who do their bidding—has been growing in power for a generation, transferring wealth upward through increasingly complex financial mechanisms and political maneuvers. The crisis was only one terrifying manifestation of how they’ve hijacked America’s political and economic life. Rolling Stone’s Matt Taibbi here unravels the whole fiendish story, digging beyond the headlines to get into the deeper roots and wider implications of the rise of the grifters. He traces the movement’s origins to the cult of Ayn Rand and her most influential—and possibly weirdest—acolyte, Alan Greenspan, and offers fresh reporting on the backroom deals that decided the winners and losers in the government bailouts. He uncovers the hidden commodities bubble that transferred billions of dollars to Wall Street while creating food shortages around the world, and he shows how finance dominates politics, from the story of investment bankers auctioning off America’s infrastructure to an inside account of the high-stakes battle for health-care reform—a battle the true reformers lost. Finally, he tells the story of Goldman Sachs, the “vampire squid wrapped around the face of humanity.”

Definately worthwhile as a read for Christmas. You can buy it from Kalahari for R205 by clicking HERE or on the cover.

The Effective Investor - Franco Busetti

I am reading the book "The Effective Investor" by Franco Busetti at the moment and really enjoying it.

One of the real reasons I am enjoying it, is that it is written for a South African investor, by local investment professionals. You recognise the companies, the challenges (e.g. the Rand) and the strategies in general.

On top of this there is none of this gratuitous "institutional" feel to the comments that I find often makes "investing" aloof.

You can find the book at Kalahari HERE for R350 or you can click on the image and it will take you to the item in their online store.

For the Standard Bank fans out there

Hahahahahahahahah this e-mails is going around made me laugh:

Feedback on JSE trading course?

Has anybody tried this course from Sharenet out?

One of my family members is keen to find an introductory trading course to learn to trade shares on the JSE but I am not sure what these are like. Feedback?

You should be able to click through to the Sharenet site for more info via the banner below.

Let me know - ta!

Too easy

I have just logged into my e-mail and seen dividend notifications for my holdings in Sasol, FirstRand and Discovery as well as a re-investment notification for my Z-Govi holding and it reminded me how much of investing is simply method and repetition.

For sure there is little glamour in simply clocking up the dividends but you have to ask yourself - why work if you don't have to?!

I had a look at the performance of the Satrix Divi Exchange Traded Fund (ETF) product over the last year and I see that you have enjoyed a return of around 33%. Worst case scenario is an annual dividend yield of 4.5% which is not the worst return around and if you are looking for low-cost dividend investment strategies then this might be a product to consider adding to your portfolio.

Speaking of good dividend payers, has anybody been watching the rise in the Brait shareprice? It seems to have had a bit of a kick over October rising from R21 to above R24. This is one of those stocks I've kept in my portfolio primarily for its dividend yield which is sitting at about 6%.

The company did release a trading statement recently saying that earnings would be up sharply for the six months.

Basic eps and heps: 72.8 ZAR cents
Diluted eps and heps: 72.7 ZAR cents

This puts it on a PE multiple of around 14 times earnings and if you buy into the idea that Brait is the "smart money" then this looks attractive, particularly if the private equity portfolio is at the bottom of its cycle.

Another reason which might be contributing to the rise in the Brait share price is the similar rise in the Buildmax counter, in which Brait is a significant investor. Buildmax has risen from 27c to touch 40c this month and it looks like a turnaround plan is in place.

Happy trading investors.

Small cap update - 2 October 2010

Hello fellow traders...

I see it has been a good few months since I last updated this blog which probably does not reflect that well on me.

What DOES however reflect quite well on me is the TrustCo share price over that period.

Let's take a look at some of the small-cap shares that have caught my eye over the last few months and where they are at now.

TrustCo
This share has really done nicely. Since I last blogged it, has risen from the 20's to touch a high of 65c with a lot of media attention. Directors have bought a whole whack of shares as well which has helped the story along.

In September, the company announced transactions with Econet and the International Finance Corporation (IFC) both of which should have an impact on the business.

Still think there is value in it if you are patient.

Interwaste
Share price wise this company has largely gone sideways over the last few months, but it is still up a bit since April.

On the plus side the financial results have shown something of a turnaround from the previous financial year and they have gained a number of new clients - the benefits of which should probably come through in the second half of the year. Guidance from management is that the second half of the year is traditionally stronger as well so let's see what comes through for the full-year.

One thing which needs to be watched a little closely is the cash position of the business.

The company overdraft facility has risen from R4.7m to nearly R30m for the six months ended June 2010. There is also negative cashflow as the business has made some serious capital investments.

For the 12-months, the net cash position had declined to -R21m.

Buildmax
This has been such a mixed bag sometimes I wonder.

The share is up from 27c to 31c and it looks like some serious corrective action is being taken to try and turn this business around.

New management are in place, rights issues have been sorted.

I'm gonna hang on to this one.

IPSA
Little to write home here. The share has gone nowehere.

However this announcement at the end of August will give shareholders some cheer:

"IPSA PLC (AIM: IPSA), the developer, owner and operator of power generation capacity in Southern Africa, announces that its wholly-owned subsidiary, Newcastle Cogeneration (Pty.) Limited has entered into a power purchase agreement ("PPA") with Eskom, the South African electricity parastatal, under the medium term power purchase programme ("MTPPP"). Under the new PPA all electricity output from the plant would be sold to Eskom for the period to 31 March 2015, and is based on 13 MW of capacity."

Again lets see what this translates into operationally.

RE:CM and Calibre
I got my hands on a few of these pref-shares last month and will try and get a few more as time goes by. I like Piet Viljoen in terms of his style of value investing and would like to think he can add value through this vehicle.

The share listed at R10 and has floated somewhere between R10 and R11 but there has been really limited liquidity so that is something that makes this tricky to watch.

Viljoen said that investors should expect "slow and steady" to start with so if you have a long-term investment horizon, then I'd probably be adding a few more of these to the portfolio as well.

Some others to consider
Three other stocks I have nibbled at in the last few months are Nigerian oil and gas group Oando, private equity fund Brait and Paladin Capital.

There seems to be some action happening at Paladin as the share price has risen more than 20% in the last few weeks. However this puts it well above its net asset value which is not always that easy to justify buying at the moment.

Buildmax

This is a stock that I have been talking about for a while but have pretty much sat with egg on my face since making the call.'

Since June the share price has carried on sliding dropping from 50c to as low as 21c. Considering that in September 2007 and the private equity boys at Brait bought in at about 120c this has been a bit of a disappointment.

Anyways a new SENS announcement went out after the close of trade and this one catches my eye:

Buildmax is making a rights offer of 2.31 (two point three one) rights offer shares for every one Buildmax share held at a price of 12.5c per share. Brait and Coronation - two of the better value finders out there - have made an offer to underwrite the deal.

I guess for those who have a longer term investment horizon, this might not be the worst one to sit on....

Small cap update

Two of the small caps that I have been tipping on this blog, and one I have been keeping half an eye on, have been making some waves in recent weeks and thought I would do something of an update on them quickly.

IPSA
A couple of people I have spoken to this week have been a little cynical on this stock but there was an announcement from them released on SENS which says:

"IPSA PLC (AIM: IPSA), the developer, owner and operator of power generation capacity in Southern Africa, announces that, on 23 June 2010, its NewCogen subsidiary re-started production of electricity under an emergency contract with Eskom. Under the contract the plant will provide electricity to support the South African economy during a period of power shortages which coincides with the FIFA World Cup. While the contract is due to end on 30th June, 2010 Eskom has indicated publicly that it may request an extension at least until the WorldCup Final on 11th July. Meantime NewCogen and Eskom are awaiting formal notification from NERSA, the electricity regulator, that a six year MTPPP power purchase agreement has finally been approved. A further announcement will be made on the MTPPP contract as soon as news is available."

Is it a case of IPSA just trying to get some good PR mileage? Maybe... but the fact of the matter is it literally takes a flick of a switch and the Newcastle plant can be delivering electricity when the country needs it.

It would appear that there has been a shift in thinking and Eskom has adopted the role that independant power producers do have a role to play in the new economy. The share price has not responded particularly positively but I maintain that this could be an interesting small cap to consider.

Interwaste
In April I mentioned that Interwaste was one you should be considering for your portfolio. At that time the share was floating around below 50c. It has gradually been ticking up and is now trading around 70c.

Looking back over the SENS announcements a couple of things caught my eye. Firstly at the end of April one of the directors bought a couple of tranches of the shares which gave me a bit of confidence.

The other thing was the announcement that Funani Mojono had joined the board as an independant non-executive. He seems to be quite well connected within ArcelorMittal and this might well have some spin-offs for the company.

TrustCo
This is a little financial services firm that I have been eyeing for a while. Based in Namibia they have yet to set their Johannesburg listing alight. However earlier this week they announced that they had won their court case with the SABC and were due around R24m from the victory including costs.

It is not a massive sum of money but it certainly provides the company with a way forward.

Might be worth a punt - the liquidity just worries me a bit.

Vunani - see through the BS

I noticed this week that empowerment financial services firm Vunani has completed its second acquisition in the last two weeks buying an additional 31% in Peregrine iQ the fund management business held by Peregrine and a 51% stake in something called the Jala Group.

With that in mind I had given it some serious consideration as a potential investment as a bit of a rebound and thought I would take a closer look:

A couple of observations here:

• Peregrine are a very smart bunch of people and in the back of my head I am wondering why they are allowing Vunani to end up with 51% of this business? These two firms have a funny relationship with one another and I wouldn't be surprised if Peregrine were quite happy to turn Vunani into their patsy for something they don't want.
• Peregrine can't really place much value on a business which supposedly has R11bn in assets under management - the transaction didn't even warrant a cautionary or a disclosure of the level of investment. For a tiny little business like Vunani (in the listed sense) that's odd.

But it is this Jala Group thing that really stoked my curiousity and got me digging around a bit...

Ok so here is the deal - 28 May Vunani says it has bought a 51% stake in this thing called the Jala Group.

• This Jala Group thing - a quick Google search doesn't come up with much except a bunch of media whores reproducing the press release that Vunani put out. More curious is that if you go to the website Jala.co.za the page has already been rebranded as Vunani Technology Ventures... but no real sign that there was ever any kind of cached web presence for these guys 20 or 30 days ago. Seems to ring a little hollow. Wonder if there was anything there in the first place?
• For an IT company with a track-record of just 9 months, this is a bit peculiar. If there is one thing IT companies are good at it is in leaving a track record of their transactions and skills on the various search engines.
• The site itself is designed in HTML. I can't think of any graphic designer who would design a new website - it has to be new because it has all been rebranded from Jala to Vunani in the last month - who would design anything in HTML.
• A quick look at the LinkedIn profiles for the directors makes for interesting reading as well. The guys had updated their employment profiles in April 2010 (i.e. before the market was informed of the transaction). Surely there has to be a disclosure issue here?
• Apart from Maree and McKellar who have something of a track record in IT, the associates seem to be a little lightweight. They have a psychologist for some bizarre reason and then they have Alon Hendel whose claim to fame (according to the website) was launching Tycoon.co.za that light-weight entrepreneurs thing for Moneyweb. No offence but we know how that ended up
• I don't put too much faith into Cipro but a quick search reveals that the Jala Group was registered in June last year and provides "Supply of Stationary and Related Services"
• There is no registered business called "Vunani Technology Ventures" or anything along those lines which has a link to Vunani. I appreciate its a new "re-named" venture but still the business needs to be registered.
• For an empowerment company Vunani Technology Ventures seems to have an awful lot of white faces on its board

But the real kicker for me is the claim that Jala / Vunani Technology Ventures has been helping some of its clients since April 2008. That's odd because the business only came into being at the end of last year.

In other words the Jala Group is not really a business. It is a couple of people who get asked for some advice from time to time and may sit on a few boards but there is very little in the way of assets here. The IP for this business sits in the hands of Maree and McKellar and whoever they are mates with and if they decide to walk away there is very little that would be appear to be classified as an "asset" at the moment.

And THIS is the problem with Vunani - they are so busy cobbling together shit that they don't stick to what they could be good at.

As tempting as it is that Vunani is suddenly coming good the numbers still don't give any indication that they are on the recovery path - rather the acquisitions are a case of bullshit trying to baffle brains.

For the year ended 31 December

• Turnover of R121m plus R15 in other income produced an operating profit of R8m
• Cash negative from operations of R135m out the door
• Net cash - R3m in the bank. If Vunani sneezes or has one bad month its screwed
• It obviously didn't use its own cash resources to pay for either of these acquisitions so does that mean more debt has been taken on a group which has just had to restructure?
• Vunani's debt effectively sunk it - there is a note in its March report saying that if its debt wasn't restructured it was effectively game over. The debt got restructured but then it runs around doing odd things rather than getting its house in order.

At first glance this might have the look of an interesting punt but if you peel back the curtain even a little bit the risk-reward trade-off is not even remotely attractive.

RE:CM and Calibre

For those who buy into long-term value investing there is an interesting product listing today on the JSE that might pique your interest.

It is a closed end fund managed by leading value investor Piet Viljoen from RE:CM and is trading under the name RE:CM & Calibre (RAC) on the JSE.

Effectively the fund will be managed by these guys (who hold a high level of ownership in the underlying fund) and they'll be kicking off with R450m in cash.

The mandate for this fund is more flexible than a typical unit trust and can invest in debt, unlisted investments etc.

Don't expect fireworks from it initially but I will probably try and pick up a few during the course of trading today.

Market ramblings

I haven't blogged in a while - been sitting back watching the fun and games on the market and trying to work out where this whole thing is going.

Some very interesting things happening at the moment and volatility seems to be the story of the day.

I battle to find value in this market at the moment. I don't like what is happening in Europe and I think there will be some fall-out to come.

Having said that, the Dow below 10000 almost feels "orderly" rather than out and out panic and that's ok.

There are 3 stocks which catch my eye at the moment and investors might want to consider:

African Bank
Long been a popular choice in my portfolio. Results were not great and the market has turned a little sour on them but they have a lot of positives that could be taken out of these results. Ellerines systems are sorted, they are growing again and the demand for their kind of credit is coming back slowly. But more important than all of that is their ability to generate cash - and quickly!

I would buy it at under R30.

Buildmax
Brait reported earlier this week and they managed to keep this one out of their reporting. This coal mining contractor has been a disaster for the private equity firm falling from R1.15 to 30c and now Brait is having to underwrite a R150m.

35c, a rights issue on the cards. This is a story to watch.

Reinet
I've liked Reinet. Done bugger all except mirror British American since it was listed and its off about 15% in the month but in this market, this might not be the worst defensive play around.

Would be adding this to the portfolio at the moment.

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Another interesting thing I picked up this evening is that Zimbabwe is allowing the establishment of four new newspapers. I think this is a further sign that normality is returning to this country which will have a positive spin for many of our resource operators.

Finger trouble, burning Europe and Abil fried

What an absolutely intriguing few days on world markets.

A bit of random finger trouble at Citi sends the markets into a tailspin and the Dow drops nearly 10% before you can blink. This is summed up by the literal carnage in Greece and then one of our favourite banking stocks (African Bank Investments Limited - Abil) gets smashed today.

Absolutely intriguing!

Finger Trouble
Make no mistake - Thursdays nonsense is going to piss some US politicians off in a big way. Here they are pushing for regulatory change and trying to convince the public that they are hauling some bankers over the coals and one prick can't decide whether he is selling millions or billions of stock and he sinks stockmarkets across the world.

Story for the rest of the year invariably has to be the politicans against the bankers.

I thought Henry Blodget summed it up really well in this post. Things are overcooked at the moment

Europe is in trouble
Ok that's a given, but I don't think it is the debt issue which is the problem but rather the structural issues facing a number of these economies - they cannot create jobs.

If you think about it, a country going broke is a shrug of the shoulder event. Technically the US is broke and will be for eternity.

Iceland very definately is broke as is Greece... but who actually cares? Ireland, Spain, Portugal and Italy... debt is a way of life get over it. The real question is how are they going to tackle their unemployment issues.

Here are some interesting stats which I've dug up around unemployment in a couple of Europes major regions:

• Spain - 20% unemployment
• Italy - 8.6%
• Portugal - 10.10%
• UK - 8%
• Ireland - 12.7%
• France - 10%
• Poland - 12.9%
• And then Germany for some context - 7.5%

While everybody is jumping up and down about the debt issues in the PIGS and Ireland, I actually think that Spain and France are the two flash points to watch.

Greece has a population of 11 million.

In contrast France has around 63 million people while Spain has around 41 million. Look at a map of Europe for a moment. Spain cannot create the number of jobs it needs - the job seekers can only push one way - France.

Without oversimplying it - if you think a couple thousand Greeks know how to riot can you imagine what it will look like with a couple hundred thousand French and Spaniards venting their fury...

I would be watching these two economies very closely for changes in the social landscape.

African Bank Investments Limited (Abil)
This is one of my favoured banking shares in the South African market - great company in a great sector.

Anyway the share got slaughtered today - off about 5.5% to close at R32.15.

Those pricks at Deutsche Bank apparently put out a pretty negative analyst report earlier this week which didn't help sentiment which was a bit of a pre-cursor to the following trading update out of them today:

Shareholders are advised that headline earnings and headline earnings per share for the period are expected to decline by 2% relative to the R937 million and 116.6 cents per share respectively reported for the first six months of the 2009 financial year. The African Bank business unit is expected to report a decrease in headline earnings of 5%, whilst Ellerines is expected to report a 6% increase relative to the results reported for the six months to 31 March 2009.

A whole 2%... how frightening...

Well of course it is down, the country is still losing jobs (190000 in the last quarter). Guess what - you don't get a loan (even from Abil) if you don't have a job.

All these analysts are so focused on Ellerines - guess what trading has actually improved in the last six months... wankers.

Personally I still like the stock. While the rest of the big banks with their investment bankers (who can't even push the right buttons) have to worry about nasty politicians and regulators wanting to check out all their cavities, Abil can get on with the business of lending and THAT is what they are good at.

Long dollar, short euro

"In the next months there will be many demonstrations, nobody knows what really is going to happen, But people know there is no other way than to come down into the streets and protest"...

... that was the message from one of the protesters involved in riots in Greece earlier today.

This is serious kak methinks, and I can't see how it won't spread to at least Portugal and Spain over the next week. I read a report that Spain's unemployment rate is now well over 20%... this is not something that gets addressed quickly and even a hint of panic and people will start pulling money out of the banks.

The Euro I reckon is toast unless the regulators take some serious action to try and co-ordinate their efforts quicker. With that in mind I've gone long dollar, short euro on Friday. I should have entered the trade earlier but I reckon it is now terminal...

The euro recovered a bit late on Friday night on speculation that the Greek bailout will be sorted out over the weekend but if Spain and Portugal fall over early next week then there is going to be carnage.

Not too much else looking that attractive is there?