The Contrarian Approach
The adaptation to the "new" world has been difficult for some. We have tried to make it as easy as possible for our clients to continue to get unparalleled levels of service. We strive to always be exceptional in every contact that you have with Gray Capital. While many firms have cut back, we decided to expand. Expand our workforce, expand our product selection, build, test and implement new systems, and foster new relationships.
This contrarian approach we believe will put us at an advantage over the other firms that opted to close the hatches, cut back on staff, and thus affect their service levels.
Timing has never seemed to be my competitive advantage- I joined Liberty Life in July 2008, and if you look at any stock graph (with any market around the world) over that year, you will see that the world was ending- well figuratively anyway. Gray Capitals first operating year, has had more days under lock down than actual working days- However we are able to keep on growing with the support of our amazing clients- So thank you for the ongoing support over the year and the previous years while I was at Discovery.
One of the exciting developments is the addition of The Finance Ghost who will be assisting Gray Capital with weekly news letters. The Finance Ghost's writing style, technical knowledge. and ability to simplify difficult topics will add value to this newsletter, as well as to your understanding of the local and global markets- and he's a bit of a podcast celebrity at the moment. You can listen here -
Regards,
Trent Hodges
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Earnings season is here and that means investors, equity analysts and supernatural bloggers like yours truly will be very busy in coming weeks.
Companies with February and March year-ends are updating us on how spectacularly badly they did in the past 6 months. The June year-end club is releasing final results and facing the music at analyst presentations.
Management teams will be counting every penny...
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A little game of "wait and see"
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The incredible volatility seen in our market over this period is largely over. Many companies are now trading sideways, as investors wait and see what the next few months will hold.
The opportunity for deeper fundamental analysis is there. Companies will be mispriced and great returns can be achieved by identifying companies that could beat market expectations over the next 12 - 18 months. The catalyst for share price jumps will be earnings releases, so keep an eye out on the corporate calendars to see when companies report results.
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Massmart "The Finance Ghost" is Holding on
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Around the start of lockdown, I invested equal amounts in Sasol and Massmart. Anyone who has watched the markets will know that the two positions have deviated in value drastically. I haven't sold out of either one.
True investing is a 3 - 5 year view, otherwise you're a trader. Whilst I may have a loss on paper in Massmart, I believe the company will achieve a reasonable turnaround and my loss will turn into a healthy profit.
The art of investing is to identify opportunities and have enough bravery to act on your view. Sometimes you'll be right and sometimes you'll be wrong. That's how it works.
My goal with The Finance Ghost is to teach you how to fish so that you can do this analysis yourself.
Airbnb Coming to Market
Before lockdown huffed and puffed and blew the Airbnb market debut away, the company was privately valued at $31bn. That's chunky.
The Initial Public Offer (IPO) is back on the table against the backdrop of a bull market in the US and general investor exuberance. It's an incredible bounce back from what must have seemed like a hopeless situation in March.
Keep an eye out for this exciting market debut of a household name in the tech industry. It will likely be finalised before the end of the year on the US market.
An Apple a Day
I've mentioned before that Apple was on a clear trajectory to achieving a $2tn market cap.
The company's latest earnings were so impressive in this economic context that even old-school investors are starting to rethink tech company valuations.
Apple soared through the $2tn mark and kept going. This excellent tweet puts it in context:
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Remember, this is against a backdrop of competition enquiries into Apple's business model in Europe and the US and a dispute with Epic Games, the publisher of Fortnite. I wrote about the dispute last week in case you missed it.
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What have I got for you this week?
- Are Sasol's results as bad as they appear to be or am I hanging on for the ride?
- African Rainbow Capital does another scrappy deal, this time with old favourite Sanlam
- Is Virgin Active a good business or will Brait shareholders continue to bleed?
- Truworths takes a painful impairment on the investment in UK retailer Office
- Understanding the reporting cycle of companies including concepts like trading statements and headline earnings
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Sasol kicks the (oil) can down the road
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The share price is up around 600% since March. After releasing results last week, it fell 14% over three days and then rallied 17% to end the week flat.
The volatility is incredible. Traders are having a field day and a few longer term investors (like me) continue to bravely hang on.
There's almost no point worrying about the impairment. Hakuna Matata - it's in the past and barely matters anymore. The real issue is the debt and the plan to reduce it by $4bn - $6bn.
Management has a plan, but can they avoid a rights issue next year or at least minimise it? There's a lot to consider here and plenty to learn.
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South African Fives:
- A data breach at Experian has exposed essentially the entire South African banked population (24 million people and 800,000 businesses) - watch your bank accounts like a hawk in coming months and be wary of phishing attempts
- Toyota SA has confirmed that R4bn of investment is still on track
- Massmart is expecting a loss of over R1bn for the 6 months ended June 2020 as shareholders anxiously wait for a turnaround in Game
- Nedbank is reporting an uptick in the mortgage market as South Africans take advantage of low interest rates to buy homes at depressed prices
- MTN CEO Rob Shuter is stepping aside to let CFO Ralph Mupita take the top job - he will hope to focus on new revenue streams rather than putting out fires like the Nigerian government dispute that cost R18bn to sort out
Global Fives:
- Ryan Reynolds, not resting on his laurels of being Mrs Ghost's favourite heartthrob, is now even wealthier thanks to the acquisition by Diageo of Davos Brands (which owns his product Aviation American Gin) for $610m
- Online trading platform Robinhood has raised further funding at a valuation of $11.2bn, buoyed by record-breaking trading activity in recent months
- Venture capital legend Peter Thiel's company Palantir may go public this year despite losing $580m in 2019 and having never turned a profit
- Trump is grappling with US lawmakers to provide further unemployment benefits to jobless Americans, with federal payments of $300 per week slow to get off the mark
- The UK debt:GDP ratio has hit 100% for the first time in 60 years, as total debt hits £2tn in the wake of the expensive furlough scheme during lockdown
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View some of Gray Capital's Articles in Moneyweb:
Investment Opportunities:
In our previous newsletter we mentioned that there were ways to capitalise on the downturn of the market, some clients acted on the email, and we are pleased that the suggested investment comprising of the following ETFs and Funds-
- 4th Industrial Revolution Global Equity Fund- Tech Stocks for the 4th Industrial Revolution- Apple, Tesla, Nvidia
- FAANG Plus Equity Fund- Facebook, Amazon, Apple, Alibaba, Netflix, Google(Alphabet)
- EURO STOXX 50- Top 50 European Companies
- FTSE 100 ETF- Top 100 UK Companies
- SS&P 500- Top 500 US Companies
- Sygnia Itrix Top 40 ETF- Top 40 South African Companies
Has generated phenomenal returns of 35.24% since the 25th of March to Date to date.
With market volatility we do not expect the returns to continue to perform as well as they have over the last 5 months, however we do believe that there are investment opportunities with mispriced assets.
You can schedule a meeting via zoom, if you wish to discuss your portfolio, by clicking on the link below-
ZOOM MEETING SCHEDULER
Alternatively we can schedule a meeting to discuss your portfolio.
MEETING AT GRAY CAPITAL OFFICES
MEETING AT A LOCATION OF YOUR CHOICE
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