Mak­ing the right calls on the big pic­ture stuff

Financial Mail - Investors Monthly - - Editor’s Note -

This is my first edi­tion as editor of In­vestors Monthly, and it’s a plea­sure to be able to bring you such sharp in­sights into why money is mov­ing the way it is, thanks to the cream of South African fi­nan­cial jour­nal­ism.

One of the smarter fund man­agers I know said his phi­los­o­phy was that you could af­ford to make the odd wrong call about a stock, but make sure you don’t mis­read the big­ger pic­ture.

Well, in the past month, that big pic­ture has seen some scary moves: China’s stock mar­ket has been sav­aged, the min­ing in­dus­try is on the ropes as com­mod­ity prices are all but flat-lin­ing, and jobs are be­ing slashed al­most ev­ery day.

As some rather bizarre state­ments by ex­ec­u­tives in re­cent days il­lus­trate (the rant from Glen­core CEO Ivan Glasen­berg be­ing a case in point), you know some very im­por­tant peo­ple are hav­ing sleep­less nights.

In this edi­tion, we look at whether Taste CEO Carlo Gon­zaga and Fa­mous Brands CEO Kevin Hed­der­wick have hit on some se­cret po­tion that is al­low­ing them to post grav­ity-de­fy­ing earn­ings num­bers when just about ev­ery­one else can’t seem to budge their prof­its much be­yond the 2% mark.

To hear them tell it, South Africans may be tight­en­ing their belts, but they’re not go­ing to com­pro­mise on pizza — be it from Hed­der­wick’s De­bonairs or Gon­zaga’s Domino’s.

What makes this story com­pelling, be­sides the sim­ple fact that both are out­per­form­ing the wider JSE, is that peo­ple like a good ri­valry.

Think San­lam vs Old Mu­tual, Curro vs AdvTech, Gold Fields vs Har­mony — and in this case, there’s added spice be­cause it ap­pears the two par­ties don’t par­tic­u­larly care for each other ei­ther.

As the rand col­lapses be­yond R12 to the dol­lar and R20 to the Bri­tish pound, we also look at how in­vestors can shield them­selves against a cur­rency col­lapse by buy­ing into the heavy­weights of the JSE with big for­eign ex­po­sure, like SABMiller.

These stocks have a lop­sided im­pact on the JSE. As vet­eran jour­nal­ist Stephen Gun­nion writes, when Naspers has a good day, the JSE has a good day. Which partly ex­plains why, in view of Naspers’s ex­po­sure to China’s Ten­cent, there haven’t been many good days re­cently.

Else­where, Stafford Thomas mounts a strong ar­gu­ment for why in­vestors would do well to cut their losses in Sa­sol, the petro­chem­i­cal gi­ant.

While Sa­sol’s game plan seems rea­son­able enough, and there are cer­tainly rea­sons to be­lieve in its Louisiana plant, there are just too many vari­ables in the oil price to be able to make a sen­si­ble call on the risk in­volved right now.

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