Making the right calls on the big picture stuff

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.