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Welcome to the Sharenet Daily Equity Report
 Issue: 03 February 2011 20:00

Investing When Markets are Volatile

There is no doubt that one of the greatest destroyers of long term value to uneducated investors is volatility in the market. Educated investors, however, realise that volatility should be treated as a friend. It is Warren Buffett’s adage that you should be greedy when other investors are fearful and fearful when other investors are greedy. In times when other investors are greedy they look over potential problems, and when they’re fearful ALL that they can see are those potential problems.

You may be asking how you, as an investor, can use volatility as your friend?

There is an index on the JSE called the SAVI (South African Volatility Index) which essentially measures the implied volatility in the market at any given point in time. (As an aside the index is calculated by working out the cost of options on the market. The cheaper the option is, the less volatile the market is assumed to be, and vice versa). When investors are fearful we see the index going up, and when they are complacent it generally goes down.

Over short periods (two months used in the chart below) we can see that the performance of the ALSI (red in the chart below) is inversely related to the level of the SAVI (blue) which is fairly intuitive. This isn’t much use as an investor though, as the market has already fallen as the volatility has risen. It does make a nice chart, but that’s about it!

Far more insightful is to track the market return over a longer period (in this case I’ve used 2 years) AFTER the SAVI has hit a high level (I used 35) and what it has been after it has hit a low level (I used 20). The chart below shows what the investment outcome would have been.

A few things to notice:
• 2 year returns after high volatility have been good
• 2 year returns after low performance have been poor
• The SAVI was only started in February 2007, and therefore doesn’t have a long track record
• The SAVI is only above 35 or below 20 for a small percentage of the time

The third point is important and raises an important caveat to this analysis. In an extended bull market investors could very well see good performance from low volatility levels. Equally, in an extended bear market a starting point of high volatility might not necessarily generate great returns. Nonetheless this could be an interesting tool to investigate to compliment valuation work.

Take care,

Mike Browne
021 9144 966

Thu, 03 Feb 2011

South Africa's rand weakened more than 1.7 percent to near six-month lows against the greenback on Thursday, pushing through its long-term moving average as offshore hedge funds drained dollars off the market.  Full story
The Southern Africa Customs Union (SACU) is considering a major overhaul of revenue-sharing that will see South Africa keeping a far bigger slice of pooled customs receipts, according to a policy document.  Full story
Rental revenue grew to R720.8 million (R613.7 million) and profit attributable to ordinary shareholders of the company rose to R976.4 million (R655 million). However, headline earnings per unit fell slightly to 75.60cpu (79.69cpu). Income distribution A cash distribution of 31.78 cents  Full story
South Africa's rand fell 1 percent to five-month lows against the dollar on Thursday, partly weighed down by reduced investor appetite for emerging market assets in the face of political strife in Egypt.  Full story

The Johannesburg Stock Exchange will move to a new trading platform for equities this year, to ramp up speed and avoid. . .  Full story
Royal Dutch Shell is facing opposition to its plans to seek shale gas in South Africa's semi-desert Karoo region, as farmers. . .  Full story
Revenue from continuing operations decreased to AUD365 000 (2009: AUD630 000) . Loss is attributable to owners of the company increased. . .  Full story
South Africa's business confidence index dipped to 87.4 in January from 87.6 in December, the South African Chamber of Commerce (SACCI). . .  Full story

Trading Statistics


Major Moves Up
SharenameSaleMove% MoveVolume
1 TRADEH  75019033.93.%10000
2 SABVEST-N  7009916.47.%50000
3 TREMATON  133119.02.%8200
4 ARB  330154.76.%45430
5 SPANJRD  390154.00.%2500
6 KELLY  450173.93.%108700
7 NASPERSN  4009514953.87.%3995419
8 AME  41501503.75.%86
9 ARCMITTAL  89003143.66.%1218966
10 CAPITEC  165505513.44.%105626
11 ANOORAQ  1090353.32.%36734
12 AQUARIUS  44491363.15.%128456
13 AFRO-C  16553.13.%52362
14 RBPLAT  67451952.98.%67447
15 EASTPLATS  1285362.88.%18674
16 PARACON  18552.78.%539674
17 OPTIMUM  3390902.73.%72820
18 TRUWTHS  65751742.72.%2354458
19 PINNACLE  688182.69.%286435
20 ZEDER  26872.68.%178740

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Major Moves Down
SharenameSaleMove% MoveVolume
1 YORK  351-24-6.40.%30622
2 VERIMARK  161-9-5.29.%10500
3 GBGOLD  1875-84-4.29.%10145
4 TRNSHEX  225-10-4.26.%31568
5 REDEFINTL  600-25-4.00.%1235664
6 REDEFINE  725-25-3.33.%10226960
7 PANPROP  1825-61-3.23.%1093182
8 JASCO  130-4-2.99.%872617
9 PALCAP  296-9-2.95.%24000
10 ALTRON  2720-80-2.86.%245902
11 PUTPROP  549-16-2.83.%10000
12 LONAFRIC  180-5-2.70.%800
13 GOLDONE  220-6-2.65.%379114
14 WESCOAL  113-3-2.59.%398456
15 ILIAD  780-20-2.50.%115368
16 RESILIENT  3008-76-2.46.%380276
17 AVUSA  2150-50-2.27.%467670
18 STEFSTOCK  1075-20-1.83.%264390
19 SANLAM  2735-50-1.80.%4005251
20 HYPROP  5330-97-1.79.%376979

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New Highs
SharenameSaleHighMove% MoveVolume
1 TREMATON  133133119.02.%8200
2 AME  415041501503.75.%86
3 CERAMIC  14800148003702.56.%5023
4 BATS  27851278516852.52.%833068
5 BILLITON  29378293784781.65.%4989200
6 ANGLO  38151382656011.60.%5660059
7 EHSV  913294011321.47.%5023
8 ASSORE  2070020949-100-0.48.%567830

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New Lows
SharenameSaleLowMove% MoveVolume

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Spot Prices
NameTimeRPMove% Move
JSE Overall17:0032794.84307.230.95%
JSE Top 4017:0029609.47335.251.15%
JSE Gold17:002594.83-4.37-0.17%
JSE Financial17:0021680.5927.800.13%
JSE Industrial17:0032077.95290.220.91%
JSE Indust 2517:0026788.17284.931.08%
JSE Resource17:0059716.74793.301.35%
DJ Futures19:4011988.003.000.03%
DJ Ind19:1512031.42-10.55-0.09%
SP 50018:401300.84-3.19-0.24%
FTSE 10018:355983.34-16.73-0.28%
All Ords07:454919.3021.400.44%
NZSE 5006:363349.89-2.41-0.07%
NameTimeRPMove% Move
Gold/R kg19:5631664790282.93%
Brent Crude19:56101.69.080.08%
Rand / Dollar19:597.26890.11291.58%
Rand / Pound19:5511.71400.15061.30%
Rand / Euro19:559.92890.03990.40%
Rand / NZD19:585.62310.08911.61%
Rand / AUD19:557.38200.14722.03%
Yen / Dollar19:5981.4300-0.1100-0.13%
Euro / Dollar19:550.73240.00831.15%
Dollar / Euro19:591.3651-0.0150-1.09%
Pound / Dollar19:550.61900.00140.23%

Click here for the Sharenet Spot Price page
Index Summary
Index NameRPMove% Move
Top 4029,609.47335.251.15%
Mid Cap41,457.39-100.78-0.24%
Small Cap32,343.60-4.17-0.01%
Resource 2059,716.74793.301.35%
Industrial 2526,788.17284.931.08%
Financial 158,244.7922.380.27%
Financial & Ind. 3030,253.28282.110.94%
All Share32,794.84307.230.95%
Oil & Gas 27,359.70627.772.35%
Mining 39,547.39472.181.21%
Gold Mining2,594.83-4.37-0.17%
Platinum Mining80.93.630.78%
Oil & Gas Producers 14,710.81337.552.35%
Basic Materials 33,186.06382.841.17%
Chemicals 13,480.1765.440.49%
Forestry & Paper 14,165.6739.770.28%
Industrial Metals 30,145.37315.061.06%
Industrials 28,750.29-8.08-0.03%
General Industrials 77,710.19-187.50-0.24%
Consumer Goods 26,425.77146.210.56%
Automobiles & Parts 2,828.319.060.32%
Household Goods157.0421.27%
Health Care 31,667.82-139.94-0.44%
Beverages 83,546.88577.510.70%
Food Producers 47,850.3118.380.04%
Index NameRPMove% Move
Personal Goods 396.011.600.41%
Consumer Services 52,522.10887.021.72%
General Retailers 38,309.2469.590.18%
Travel & Leisure 4,043.43-33.13-0.81%
Media 88,064.083165.943.73%
Support Services 2,525.69-1.28-0.05%
Telecommunications 64,289.011201.321.90%
Financials 21,680.5927.800.13%
Banks 40,954.41211.060.52%
Non-life Insurance 30,202.2512.130.04%
Life Insurance 15,932.64-67.56-0.42%
General Financial 2,384.3619.150.81%
Technology 20,892.78196.550.95%
SHARIAH TOP40 3,370.05461.38%
FTSE/JSE SHARIAH ALL3,418.58431.28%
COAL MINING21,311.902721.29%
FTSE JSE Fledgling 4,707.02280.60%
FTSE/JSE Alt X 1,095.05-24-2.14%
CAPPED PROPERTY 302.86-1.18%
RESOURCE 32,854.104361.35%
DIVIDEND PLUS169.7700.01%
FTSE/JSE RAFI 406,870.06600.88%
Capped Top 4015,298.381641.09%
Capped All Share16,440.451480.91%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
04 Feb 2011GFIELDSDecember 2010 (Q)
04 Feb 2011GFIELDSPDecember 2010 (Q)
04 Feb 2011JASCODecember 2010 (Interim)
04 Feb 2011JASCOPDecember 2010 (Interim)
04 Feb 2011RESILIENTDecember 2010 (Final)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
FOORDCMPS11-01-2011-02-0411-02-14R 0.5385
DIALOGUE11-01-1311-02-1811-02-28R 0.1238
SBRJSEP1110-12-1511-03-0411-03-15R 1.4100
WINHOLD10-11-2911-02-1111-02-21R 0.1000
UCS10-11-2311-02-0411-02-14R 0.0500
Ex Div**
Share NameDec-DateLDTPay-DateAmount
SBR00310-11-0511-01-2811-02-07R 1.6000

Upcoming AGMs**
CodeCompany NameDateStatus
OCTOctodec Investments Ltd04/02/2011Confirmed
RLPReunert Ltd08/02/2011Confirmed
RLZPReunert Ltd08/02/2011Confirmed
RLOReunert Ltd08/02/2011Confirmed
MIPMerchant - Industrial Properties Ltd08/02/2011Confirmed

Stock Exchange News Service
03/02/201117:48GEN - General - Replacement of announcement sent at 16:46 - Kansai`s offer to
03/02/201117:35 Thabex Limited - Update to shareholders
03/02/201117:12 PSG Group Limited - Dealing in securities by the PSG Group Limited
03/02/201117:00 Capital Property Fund - Condensed audited results and income
03/02/201116:48 Capital Shopping Centres Group Plc - Notification of transactions of
03/02/201116:46GEN - General - Kansai`s offer to the shareholders of Freeworld Coatings Limited
03/02/201116:19 Wesizwe Platinum Limited - Platinum Group Metals exercises option to
03/02/201116:01 Aveng Limited - Update on competition commission investigations
03/02/201116:01 Pangbourne Properties Limited - Notice of scheme meeting of Pangbourne
03/02/201116:00 Pan African Resources plc - Trading update
03/02/201115:59 Pangbourne Properties Limited - Notice of scheme meeting of Pangbourne
03/02/201115:57 Pangbourne Properties Limited - Salient Dates announcement: scheme of
03/02/201115:55 Capital Property Fund - Salient dates announcement: Capital`s offer to
03/02/201115:28 Ellies Holdings Limited - Correction of dealing in securities announcement
03/02/201115:00 British American Tobacco p.l.c - Notification of transactions of
03/02/201114:46 Trustco Group Holdings Limited - Cautionary Announcement Relating To
03/02/201114:32 Great Basin Gold Limited - Great Basin Gold Announces $75 Million
03/02/201113:28 Brikor Limited - Withdrawal of interim results/Appointment of new
03/02/201112:39 Capital Shopping Centres Group Plc - Notification of major interests in
03/02/201112:16 Gooderson Leisure Corporation Limited - Directors Dealings in Securities
03/02/201111:47 Hyprop Investments Limited - Renewal of cautionary
03/02/201111:38 Capitec Bank Holdings Limited - Dealing in securities by a director
03/02/201111:11 Resource Generation Limited - Interim Financial Results
03/02/201111:00 Nampak Limited - Exercise of share options and the allotment of shares to
03/02/201110:00 SABMILLER PLC - Director/PDMR Shareholding
03/02/201109:51SCIB/TOPSKV - Standard Bank of South Africa Limited - Termination of Listing
03/02/201109:14 Anglo Platinum Limited - Trading Statement
03/02/201109:00 Central Rand Gold Limited - CRG the gold mining company with assets in
03/02/201109:00 DiamondCorp plc - Operational Update
03/02/201109:00INL/INP - Investec Limited/Investec plc - Interim Management Statement released
03/02/201108:54STANSX - STANLIB SWIX 40 Fund - Listing of additional STANLIBSX securities
03/02/201108:34 Ellies Holdings Limited - Dealing in securities by a director
03/02/201107:59 Metorex - Change of company secretary and change of registered address
03/02/201107:52FSRP - FirstRand Limited - Dividend declaration of 313.545 cents per variable
03/02/201107:49 Firestone Energy Limited - Coal Off-take agreement - Detailed
03/02/201107:05 First Uranium Corporation - First Uranium announces financial results
03/02/201107:05 BHP Billiton PLC - Transaction in shares
03/02/201107:05 Northam Platinum Limited - Directors` dealings: acceptance of options
03/02/201107:05 Optimum Coal Holdings Ltd - Reviewed group financial results for the six

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