| Thursday 06 January 2022 Good morning Voornaam,
In highly unfortunate news, Pepco (a subsidiary of Steinhoff) announced that CEO Andy Bond has stepped down for health reasons. Back in March 2020, a proposed listing of Pepco was shelved due to Covid volatility and Bond's illness (which I cannot find any further details on). With an incredible career in retail behind him, Bond's decision to stop working is the first negative news for Steinhoff in a while. It is presumably a serious issue and my best wishes go out to him and his family.
Sanlam is in the process of implementing a couple of deals with Alexander Forbes. Sanlam is acquiring 100% of the Alexander Forbes Individual Client Administration business and is selling the stand-alone retirement fund administration business to Alexander Forbes. As these are small related party transactions under JSE rules, Sanlam needed to appoin t an independent expert to opine on whether the terms are fair to Sanlam shareholders. Deloitte has confirmed that the terms are fair, so that's a major condition precedent out of the way for this deal.
Director dealings announcements are often rather boring (acceptances of equity awards etc.) - often, but not always. I've been watching Purple Group with great interest. The company owns a 70% stake in EasyEquities, the brokerage that has introduced an army of South African investors to the market (a truly wonderful legacy). As always, one needs to separate the emotional admiration from the investment decision.
It speaks volumes that Purple is the most-selected stock in David Shapiro's Cristal Challenge, in which many of the prominent names on Twitter (and a number of relative newbies) pick their five favourite stocks for the year. Out of 75 participants, 21 included Purple for 2022.
Investment books wi ll tell you to be careful when too many people are climbing into a stock. It's therefore notable that the CFO of Purple Group has sold over R1.8m worth of shares on the open market at a time when many are rushing in. I don't have a position in Purple and I will be very interested to see how it plays out in 2022.
As it was an extremely quiet day on the JSE for news, there's some space in InceConnect this morning to touch on international news.
Alibaba was comfortably my worst stock last year. It warms my (aching) heart to see Charlie Munger (Warren Buffett's right-hand man) doubling down on his investment in Alibaba. Perhaps he's just taking more risk at his ripe old age of 98, having recently celebrated his birthday. Either way, I hope he can sprinkle some magic on a Chinese tech stock that had a shocking year. Chinese tech has also had a poor start to 2022, so there are no green shoots yet.
Beyond Meat also injected some love into its share price after KFC announced a test programme to add plant-based chicken to its menus for a limited time. In some parts of South Africa, chicken is already considered a vegetable at the braai.
European wholesale gas prices rose more than 400% in 2021 and they aren't slowing down yet. Natural gas is hugely important to UK businesses and households, which means businesses like UK restaurant chains are extremely worried about their margins. The words "national crisis" are finding their way into UK news headlines. If you have any exposure to European (and especially UK) companies, be sure to consider the impact of higher energy prices.
Today's one and only feature article is on the mandatory offer by A2 Partners for Novus. There are some interesting learnings from this deal and solid insights into the shareholder base at Novus. Since there's only one article today, you can comfor tably read it here while your coffee is still warm.
The Magic Markets podcast returns next week. In the meantime, don't miss the opportunity to listen to our discussion on our winners and losers from our personal portfolios in 2021. Hosted by yours truly and Mohammed Nalla, Magic Markets gives us a platform to talk about our mistakes and sharing those learnings with you. Listen to Episode 57 here.
Have a great day!
The Finance Ghost
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