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….

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.

Saturday morning review

Two quick themes I want to look at again on this bright and cheerful Saturday morning

First up is the power of dividends and the old fashioned "buy and hold"
It has many detractors as a way to wealth but I was sitting here this morning watching the dividend notifications flow into the various portfolios we old and the passive portfolios holding the likes of Sasol, Discovery and FirstRand were nicely topped up this morning.

It is a theme I have repeated a couple of times - if you are getting into investing or simply trying to accumulate a nest-egg, then good old fashioned accumulation of good quality stocks with good dividend track records is hard to beat over the long run.

I was having a look at our old family trust account and it always amazes me in terms of return for us. It comprises 8 core stocks (ATN, PWK, SOL, NPN, MTN, BTI, REM, BVT and SBK) and every quarter I check back to it and I find that it has generated another R10000 in passive dividends.

I use R10k as a measure rather than percentage returns because for that portfolio, after it reaches R10k it will then begin to look at re-investing these funds.

Powerful stuff not to be understimated despite all the trading mumbo-jumpo that goes on.

Sasol and Impala
I exited my long position on Sasol yesterday on the back of a nice run up in the share and saw a handy profit. Could it go up more? Probably - but that's why we old the underlying shares in the portfolio to benefit from that upside. The leveraged position was there to give our portfolios a little something extra.

Anyone following my Twitter feed will know that after cashing out of Sasol I went long Impala Platinum after it was down about 2% on the day... didn't work out ideally after it got smacked down more than 4% in total but I remain long.

• Upfront let me emphasise that I have always prefered Implats (IMP) over Amplats (AMS)
• I maintain that IMP is run for the benefit of shareholders while AMS is run for the benefit of Anglo American and it is a subtle difference but an important one
• The premium I attach to IMP is that when it has its good years, it rewards shareholders with great dividends and special dividends
• From what I have read almost all of the IMP assets in Zimbabwe have been written down to zero

In the last couple of weeks AMS has out-performed IMP by a mile but watching some of the communication out of the various asset management houses there is definately a trend starting to develop where they are advising institutional clients to look at IMP again.

IMP had a very scratchy September with (correct me if I am wrong) but I think they had 3 fatalities - something which is being focused on by a lot by the industry and of course the media. But if you are pragmatic about these things then you also have to recognise that it re-focuses management on operational problems which in turn (one hopes) flows through to a better run platinum business.

I was reading some research out RMB Morgan Stanley released on Friday and this comment by one of their analysts jumped out at me:

"Marking to market, Implats looks more robust: Applying spot values for the rand, PGM and base metals, we estimate that AngloPlat’s NPV would fall 27% to R494, while Implats would fall by 24% to R174. Alternatively, we assess that AngloPlat is pricing in platinum of USD1520/oz or a rand of 8.15/USD. Implats appears more robust, with its NPV pricing in the current spot (R7.40/USD, platinum USD1345.)"

In other words, there is next to no upside being priced into IMP at the moment... which one would assume means its ripe for those cheesy brokers and analysts to start pumping up their "overweight" and "buy" recommendations.

Which brings me to what I think could be drivers for a focusing in on the platinum sector in the next 3 months which will boost the IMP share price:

• Important factor - South Africa dominates global platinum resources. Any sense that the politics or the operating environment (Electricity) - founded or unfounded - and you will see the platinum price move up
• Lonmin have a dispute with their workers who are looking for a 25% wage increase while the company is offering 5%
• Xstrata dumped its bid for Anglo-American which I would take to mean that something else better is on the table. Something in platinum (Lonmin rearing its head again?). If the platinum sector goes through another round of assets shuffles then this catches the imagination of traders and investors who start looking at the sector for opportunities.
  
• From the newsflow I get the sense that IMP seems to be coming into favour - and off a relatively undemanding base, it could be one to watch.