Old Mu­tual vs San­lam

San­lam’s re­sults pre­sen­ta­tion was re­fresh­ingly can­did

Financial Mail - Investors Monthly - - Front Page - Robert Laing

Some sailors con­sider it bad luck to serve on ships whose names had been changed. His­tory shows that it might not just be a silly su­per­sti­tion. Ships with changed names had some­times been in­volved in piracy or some­thing else.

Can this at­ti­tude ap­ply to stock ex­change-listed com­pa­nies as much as to ships?

The fre­quent changes the pro­pri­etor of this pub­li­ca­tion has made to its name makes it hard work to de­tail how its mar­ket cap has dwin­dled while its once smaller ri­val Na­sion­ale Pers thrived. So let’s pick on Old Mu­tual in­stead.

Some may ar­gue that chang­ing the share code from OML to OMU does not con­sti­tute a name change.

While most of us sim­ply called the in­sur­ance group Old Mu­tual both be­fore and af­ter its split from Quil­ter, the com­pany it­self claims to be a new en­tity with a new name.

“With our de­but re­sults as Old Mu­tual Lim­ited, I am pleased to re­port that we are on track to de­liver on the com­mit­ments we have made to in­vestors,” CEO Peter Moyo said in the com­pany’s re­cent in­terim re­sults state­ment.

By chang­ing its share code, Old Mu­tual did cir­cum­vent a prob­lem Gold Fields faced when it un­bun­dled Sibanye. Bid­vest en­coun­tered the same is­sue when it split from Bid­corp, as did Grindrod, more re­cently, when it sep­a­rated from Grindrod Ship­ping. The un­bundling cre­ated an alarm­ing cliff-like drop in the share price graph.

Start­ing afresh with a new share code is an in­el­e­gant way for Old Mu­tual to cir­cum­vent a prob­lem caused by the JSE not pro­vid­ing an “ad­justed close” price. Stock ex­changes in de­vel­oped mar­kets in­clude in their his­tor­i­cal data a col­umn marked “ad­justed close”. The lat­est price given is the same as the clos­ing price, but past prices are changed to in­clude div­i­dend pay­ments and mat­ters such as share splits or con­sol­i­da­tions. This pro­vides a handy way for in­vestors to check how much money they would have made or lost on a share by work­ing back from the cur­rent price to a time in the past.

Ya­hoo, Google and oth­ers used to of­fer stock price data,

The JSE’s prac­tice of mak­ing stock in­vest­ing too ex­pen­sive for or­di­nary peo­ple by charg­ing for data has spread to the rest of the world

down­load­able as spread­sheets, with an “ad­justed close” col­umn. But sadly, the JSE’s prac­tice of mak­ing stock in­vest­ing too ex­pen­sive for or­di­nary peo­ple by charg­ing for data has spread to the rest of the world.

The ris­ing price and fall­ing qual­ity of stock price data are other rea­sons why re­tail in­vestors should stick to in­vest­ing in in­dex-track­ing ex­change traded funds and steer clear of build­ing poorly di­ver­si­fied port­fo­lios out of in­di­vid­ual com­pa­nies.

The old adage that you should buy life in­sur­ers’ shares, not their prod­ucts, comes from a time be­fore the days of ex­change traded funds, when the cheap­est way to in­vest in some­thing with un­der­ly­ing as­sets that were well di­ver­si­fied stocks and bonds was via life in­sur­ers.

For those who are go­ing to in­vest in a life in­surer rather than a well-di­ver­si­fied, global ex­change traded fund, San­lam’s re­cent re­sults pre­sen­ta­tion will have been re­fresh­ing. CEO Ian Kirk spoke can­didly about the mis­takes the group has made, in­clud­ing “larger-than-bench­mark ex­po­sure to Stein­hoff”. He said: “Our port­fo­lios were not well po­si­tioned for the run in the SA mar­ket post the po­lit­i­cal changes at the end of 2017 and the begin­ning of 2018.”

In con­trast, cor­po­rate gob­bledy­gook in re­cent life in­surer re­sults in­cluded “eight bat­tle­grounds” for Old Mu­tual, “strat- egy re­fresh” for Lib­erty and “re­set and grow” for MMI, while Dis­cov­ery’s life in­sur­ance di­vi­sion “con­tin­ued to en­hance the im­pact of the shared-value model”.

In sim­ple English, peo­ple have be­come in­creas­ingly dis­il­lu­sioned with the poor re­turns that are of­fered by as­sur­ance com­pany prod­ucts along with the high sales com­mis­sions their agents charge.

San­lam is some­thing of a hy­brid here, sell­ing both le­gacy prod­ucts such as unit trusts and ex­change trade funds via Sa­trix. Of the life in­sur­ers, San­lam looks like the di­nosaur with the best chances against younger up­starts like Syg­nia.

An ex­cep­tion to the rule that chang­ing names is bad luck for ships was the sec­ond ves­sel to ever cir­cum­nav­i­gate the globe. It set out in 1577 as the Pel­i­can and re­turned three years later as the Golden Hind.

Its cap­tain, Fran­cis Drake, landed in South Amer­ica on the very spot where his pre­de­ces­sor, Fer­di­nand Mag­el­lan, had 58 years ear­lier erected gal­lows to ex­e­cute mu­ti­neers. Drake de­cided this was an ideal spot to amuse his pi­rate crew by be­head­ing the rep­re­sen­ta­tive of their aris­to­cratic fi­nan­cial back­ers.

As Mag­el­lan per­son­ally did not sur­vive his voy­age, Drake prob­a­bly thought the odds of him hav­ing to ac­count for this blood­thirsty act back home was neg­li­gi­ble. But as his ship re­turned from its voy­age around the world packed with Span­ish loot, he de­cided it was best to re­name it af­ter the crest of the fam­ily whose sec­re­tary he had mur­dered.

Drake not only es­caped pun­ish­ment, he got knighted.

The Pel­i­can was not a pi­rate ship be­fore it got re­named, so maybe the usual rule did not ap­ply. But the name change was still a clue that it had some­thing to hide.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.