Sharenet Views - February 2018

Dear Readers

Welcome to first issue of the Views newsletter for 2018.

Well, well, well. The year has already started with a bang. If the Steinhoff scandal wasn’t enough turmoil for last year, the fund managers who exposed them are back with a report on Capitec, a firm favourite amongst investors for a number of years now. Markets are still digesting the news (i.e. running for cover), so we’ll have to wait and see before the full ramifications of this latest report are felt.

In the meantime, as one of the top five stock picks identified by Stephan Maritz in his article below, Capitec may just have to be struck from his list of shares to invest in this year - or at least put on hold. The selection filters for his list have otherwise revealed a diversified basket of stocks with a bias towards local shares from a range of sectors. At the time of selection, the shares were trading at a significant discount to their NAV (or target price) and are likely to outperform their sector peers. Read Stephan’s post below for more details.

Top 5 Stock Picks For 2018

If you didn’t already know, the author of our next featured article is a professor of finance at Brighton University in the UK. AJ Cilliers is a home-grown expert and long-time contributor to SharenetViews, and his articles are well researched, well crafted, and often entertaining. His article below explores the approach of financial journalist, Chris Dillow, who put together six simple portfolios to put accepted finance theory to the test. Some of the results are quite astonishing, and force us to think harder about the "financial rules" we blindly follow. Investing may be a lot simpler than the "experts" make it out to be.

No-Brain Investing: The Surprising Results

This month we welcome Ricki Allardice to the SharenetViews family. His articles are tutor-style that start with the essential elements that you need to know before investing. His first post (featured below) looks at the topic of wealth planning for a financially free future. If you haven’t started saving for retirement (whenever you hope that will be) or if you’re merely putting the minimum away in a retirement fund, do yourself a favour and find out what you really need to do to achieve the lifestyle you want.

The Basics Of Wealth: Part 1

Wishing you a successful month on the markets,

Natalie Mayer

Editor

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On the 30th January 2018, fund managers Viceroy, who exposed accounting fraud in Steinhoff last year, published a report on Capitec, describing the company as a "loan shark with massively understated defaults - masquerading as a community finance provider". The share price plunged to a low of R705.00 on the day, but closed at R915.92.

Graph: Capitec’s performance from 26th January to the morning of the 31st, showing the plunge following the release of the Viceroy report on the 30th. Note how the share price was already on the decline a few days before, suggesting some already knew about the pending report. (Graph source: Sharenet)

The South African Reserve Bank (SARB) came out in support of Capitec, saying that according to all the information available, Capitec is solvent, well capitalised and has adequate liquidity, and that the bank meets all prudential requirements. (www.resbank.co.za)

It remains to be seen how Capitec will defend itself, and whether the Viceroy report will stand up under closer scrutiny.

Q: Have you saved enough for retirement? Generating a passive income should get you retiring comfortably.

A: Passive income is the fruits of investments you have made that pay you a recurring income, without decreasing the value of the investments. In a perfect world these investments would keep paying you forever. Sounds beautiful, right?

In reality, building a sizable passive income stream takes a phenomenal amount of hard work, timing, business acumen, investment savvy, fortune and most importantly: time. The point I’m making is that if you want to be able to retire one day, you better get investing ASAP.

Read more here: The Basics Of Wealth Part 2

Source: Ricki Allardice, Sharenet Wealth Manager

Need advice or guidance on investments best suited for your needs? Contact our Wealth division, for a free consultation.

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