NEGATIVE RATIOS I WISH YOU’D explain how any company can have a negative price:earnings ratio. I can’t see that at all. All companies have some earnings and all have a share price, so how can the p: e number have a minus sign in front? Also, that upsets my calculations when I try to determine the sector average p:e.
DAVE KERSHAW, Benoni
THE MATTER OF a negative p:e ratio and the distortion it causes to the sector’s average p:e and the market as a whole have long troubled us. Finweek has discussed it with the JSE’s Jannie Immelman, but he’s convinced that it does have some mathematical merit. The international literature shows that you can calculate 8/-2, but the result is meaningless for the purposes of p:e. The greater the loss, the lower the negative p:e becomes; and the smaller the loss, the larger the negative p:e. It makes no sense.
However, the JSE assures us that the averages for a sector are calculated by adding all the different rand profits and losses of the companies in the sector and then dividing by the total rand capitalisation of the sector. That obviates the problem of only calculating the average where there are negative p:es. PRICED OUT IN A RECENT report on saving to buy retailers in September, Vic de Klerk’s chart didn’t include Mr Price. Was there any specific reason for that or would your report still apply?
CALVIN FENNELL, Durban
MR PRICE IS a wonderful share. We wanted to restrict the table to 10 shares, and it fell just short in terms of market capitalisation. If I had to choose my favourites, Mr Price would certainly be in the top three. SATRIX SAFE AS EVER FINWEEK RECENTLY SANG the praises of Satrix investments. I’ve been investing in Satrix 40 on a monthly basis since 2001. The value of my investment is now around R200 000. I also have investments in other stock exchange-linked products (via a recognised consulting firm). I’m a pensioner and I receive a monthly pension from an established pension fund.
Recent reports about the Fidentia debacle and the possible involvement of Satrix funds have disturbed me. Is there a real danger and should I get rid of my investment?
EDDIE STRYDOM, Via email
ONE OF FIDENTIA’S subsidiaries did some administrative work for Satrix. That’s now ended and Satrix is just as safe as ever. To set your mind at rest, go to satrix.co.za and see Satrix CEO Mike Brown’s full explanation there. There’s nothing to be worried about.