Thursday, 21 July 2011 - 20:00
Sharenet is pleased to announce the launch of our new publication, The Sharenet Daily. We have built on the success of our Daily Equity Report, while adding more content and helpful information. The result is a publication that gives readers a quick, easy to read and informative synopsis of market activity, company results and news on the JSE for the day, as well as an overview of what transpired on important overseas markets.
The Sharenet Daily includes helpful charts that give a graphical impression of events, and our news content is sourced from a number of contributors, including Reuters. In addition, Sharenet's popular price information is available in our Spot Price format which provides a snapshot of the JSE and world indices, currencies and commodities.
All the JSE trading statistics; major movers; latest dividends; upcoming AGM dates and more are provided to insure that you keep abreast of market developments. The Sharenet Daily is published at 8pm each day on the website and also distributed via email for your convenience. As always, we welcome your comments, feedback and suggestions at support@sharenet.co.za
Charts
Lessons from the Yale Endowment Every year Yale produces an excellent report on their endowment fund (found here). This Endowment has arguably been one of the best performing investment pools over a sustained period, so we therefore take stock of their views and processes on an annual basis, and see if there is any relevance for Seed or our clients.
The definition of a typical endowment is a pool of investments bequeathed to an institution to provide an income stream (for a stated cause) into perpetuity. An endowment typically needs to provide a level of income to the institution while retaining real purchasing power.
Time Horizon
The first striking quality that is evident is the Endowment’s extremely long term investment horizon (they discuss an investment horizon measured in decades or even centuries). Clearly the nature of an Endowment fund requires the long term horizon, but it is pleasing to see that the managers are matching this long term horizon with long term decisions. Yale’s long term horizon has enabled them to generate superior returns.
Investors that take a longer term horizon can invest a greater portion of their assets into more volatile growth assets than those with a short term horizon. Over short periods long term investors could have worse performance than short term investors, but as your investment horizon increases the likelihood of the short term investor outperforming the long term investor decreases.
Contributions
Through gifts, Yale has been able to grow the size of the Endowment far quicker than through natural market growth. The difference in amounts in the chart below is a result not only of the additional gifts to the endowment, but also growth on the gifts.
It is important for investors to consistently add to their investments (while they are still generating income). While the above example is an extreme illustration, the difference between an investor who purely reinvests an early pension payout and one who continues to save for retirement (in addition to reinvesting the payout) will be significant over a 30 year period.
Drawdown
The annual withdrawal (drawdown) percentage from one’s pool of investments will give a good indication of the longevity that can be expected from that pool. The lower the drawdown rate, the longer one can expect the portfolio to last and vice versa. Since the Endowment should retain its purchasing power into perpetuity it will typically have a lower drawdown than most investors – who can eat into their principle.
Yale has recently set their drawdown limits at 4.5% and 6% of Endowment assets. Any drawdown below this should result in real growth of the investment portfolio, and higher than 6%, on a sustained basis, will most likely result in the portfolio losing purchasing power. Investors should attempt, where possible, to limit the rate of the drawdown from their portfolios.
Income Stability
Setting a targeted drawdown rate is important, but investors need a large degree of certainty in their income levels. Large fluctuations in portfolio value (notably decreases) coupled with a fixed drawdown rate can result in an unpleasant experience for investors dependant on income from their portfolio. The Endowment therefore applies a smoothing method to its distributions which gives Yale relative certainty in the amount of income they will receive from year to year.
While the drawdown percentage is an important metric, income stability is arguably more important. Investors need to balance getting a dependable income from their investments while not eroding their capital aggressively. By blending the prior year’s income with a percentage of current investment size, investors will be able to blend these two (often competing) needs. The Yale Endowment pays out 80% of last year’s income (adjusted for inflation) plus 5.25% of the Endowment’s current market value. This gives the university a smooth income profile without putting undue pressure on the real value of the Endowment.
Asset Diversification
An important part of any portfolio is to have some sort of diversification. In this way one is able to reduce the idiosyncratic risks inherent in specific asset classes/securities. Yale’s Endowment targets asset class weightings of between 4% and 33% across 6 asset classes. Of these 6 asset classes, 5 can be considered as growth assets (i.e. produce significant real growth over time) and the lone ‘diversifier’ is US Bonds – with a target of only 4%. Interestingly they only target a weighting of 11% to traditional US marketable securities (i.e. US Equity and Bonds)
At Seed we invest the majority of medium to high risk clients across a broad range of assets that we expect to generate positive real returns. Ideally there is a low correlation between the performances of the asset classes which will mitigate, to a certain extent, the risk of large capital losses. Asset classes like cash and bonds have a tactical place to preserve capital in the event that expected returns from the growth assets is low – there will also be isolated times where these assets will offer good prospective returns, which the manager needs to take advantage of. When looking at valuations we believe that an investment’s domicile isn’t important. We seek to find undervalued assets irrespective of their domicile – regulations clearly limit our ability to implement these ideas across some of our portfolios.
There are many other lessons that we have taken from this report, and we will most likely review some of them in the future. Chief among the lessons is that nothing in investments is static, from alterations in optimal asset allocation to changes in drawdown level and methods.
At Seed we realise that this is the case and while our investment principles and processes are unlikely to change we will look to continually improve them on an incremental basis. Equally it is important for investors to regularly assess their portfolio versus their goals and aspirations – ensuring there is a decent fit is important to avoid disappointment.
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Take care,
Mike Browne
info@seedinvestments.co.za
www.seedinvestments.co.za
021 9144 966
Thu, 21 Jul 2011
Top News
South Africa's government is appealing a decision by its own regulators to allow Wal-Mart to buy control of local retailer Massmart, a move that could tarnish the nation's credentials as an investor-friendly emerging market. Full story
South Africa's government bonds gained on Thursday after a dovish Reserve Bank statement that suggested interest rates could stay at 30-year lows throughout 2011. Full story |
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A Japanese man was sentenced to life imprisonment on Thursday for raping and killing Briton Lindsay Hawker and burying her naked body in a sand-filled bathtub, in a case that horrified Japan and sparked a media frenzy. Full storyAt least 18 people have been killed in clashes between police and demonstrators during violent nationwide protests against President Bingu wa Mutharika, the Malawian health ministry said on Thursday. Full storyThe space shuttle Atlantis returned from NASA's final shuttle mission on Thursday, ending a 30-year era that opened the space frontier, exposed its dangers and established a toehold for future endeavours beyond Earth. Full story |
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Markets | European shares closed at their
highest in nearly two weeks on Thursday on investor optimism
about a plan for a wide-ranging response to. . . Full story | | U.S. stocks advanced on
Thursday led by banks after Morgan Stanley reported
better-than-expected results and as details of a new Greece
rescue plan emerged.. . . Full story | | World stocks and the euro
rose on Thursday after news of a plan to use the European
bailout fund to make cheap loans. . . Full story | | Financials drove gains on
Britain's top share index on Thursday, as hopes a solution could
be found to Europe's sovereign debt crisis boosted. . . Full story |
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| Gold held near $1,600 an ounce
on Thursday as caution over the outlook for the European debt
crisis lingered after draft proposals from. . . Full story | | Australian shares firmed 0.1
percent on Thursday but were knocked back from session highs
after data showed China's factory sector contracted for the
first. . . Full story | | The Nikkei stock average on
Thursday held on to most of its strong gains made the day
before, bolstered by hopes that a. . . Full story | | Hong Kong and Shanghai shares
edged lower on Thursday as data showing the factory sector
shrank in July in China added to slowdown. . . Full story |
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SA Business | South Africa's Reserve Bank left its repo rate unchanged as expected on Thursday, saying a forecast that inflation would now breach. . . Full story | | Brewer SABMiller reported a rise in first-quarter beer volumes, led on continued growth in emerging markets, but kept the market guessing. . . Full story | | South African miner Kumba Iron Ore is scouting west Africa for new projects and acquisitions as it seeks to expand and. . . Full story | | Miner Lonmin, the world's third-largest platinum producer, raised its outlook for production costs after a strike in May hit output at. . . Full story |
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| Sudan's parliament passed a
revised 2011 budget on Thursday that included a new deficit
outlook and incorporated expected income from oil transit fees
to. . . Full story | | Employers in South Africa's coal sector have been served with a strike notice on Thursday after talks with unions the previous. . . Full story | | South Africa's maize futures closed lower on Thursday, in line with global markets and hit by a stronger rand, while wheat. . . Full story | | South Africa's main fuel sector union and employees at state power utility Eskom said on Thursday they had rejected the latest. . . Full story |
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| South Africa would not be able to escape an escalated European crisis unscathed, Finance Minister Pravin Gordhan said on Thursday, adding its direct economic exposure to the countries affected was reasonably low.. . . Full story |
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Company News | Grindrod shareholders are advised that at the Special General Meeting of shareholders held on 20 July 2011, the special resolution pertaining. . . Full story | | BCX shareholders are referred to the pre-listing statement relating to the listing of BCX "A" shares (""A" shares") on the exchange. . . Full story | | Shareholders were advised that after 17 years of serving on the board of Altron, Mr Peter Curle has retired as an. . . Full story | | Unitholders are hereby advised that the requisite majority of unitholders approved all ordinary resolutions tabled at the annual general meeting of. . . Full story |
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| Great Basin announced that Mr. Gerry Robbertze has resigned as a non- executive director of Great Basin with effect from 15. . . Full story | | Shareholders of Mvela Group were advised that the company has disposed of a further 1 500 000 Life Healthcare ordinary shares. . . Full story | | Pretoria Portland Cement Company Ltd ("PPC") is pleased to acknowledge that it achieved the highest overall ranking in the Nkonki/Financial Mail. . . Full story | | Rockwell announced the results of an independent valuation of the company and the support of a key strategic shareholder in the. . . Full story |
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Company Results | Investment income dropped to R42.8 million (R46.7 million) but profit attributable to ordinary shareholders more than doubled to R5.5 million (R1.5 million). Earnings per share soared to 62.5cps (17cps).
Interest payment
A debenture. . . Full story | | Revenue for the year ended 31 April 2011 increased by 13.8% to R1.316 billion (2010: R1.156 billion). Profit before depreciation, amortisation, interest and taxation ("EBITDA") rose by 20.7% to R159.8 million. . . Full story | | Revenue for the interim period ended 30 June increased to R24.1 billion (2010: R17.8 billion). Operating profit grew to R16.9 billion (2010: R11.2 billion), while profit attributable to owners of Kumba. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 32125.79 | 69.73 | 0.22% | JSE Top 40 | 17:00 | 28767.58 | 58.62 | 0.20% | JSE Gold | 17:00 | 2534.88 | -29.66 | -1.16% | JSE Financial | 17:00 | 21778.23 | 220.36 | 1.02% | JSE Industrial | 17:00 | 33552.52 | 37.51 | 0.11% | JSE Indust 25 | 17:00 | 28178.94 | 21.55 | 0.08% | JSE Resource | 17:00 | 53826.90 | -18.86 | -0.04% | DJ Futures | 18:40 | 12630.00 | 157.00 | 1.26% | DJ Ind | 18:37 | 12742.50 | 170.59 | 1.36% | SP 500 | 18:36 | 1339.64 | 13.80 | 1.04% | Nasdaq | 18:36 | 2828.42 | 14.19 | 0.50% | FTSE 100 | 17:35 | 5899.89 | 46.07 | 0.79% | DAX | 17:56 | 7290.14 | 68.78 | 0.95% | CAC40 | 17:46 | 3816.75 | 62.15 | 1.66% | Nikkei | 08:36 | 10010.39 | 4.49 | 0.04% | Shanghai | 09:32 | 2765.89 | -28.31 | -1.01% | Hang-Seng | 10:26 | 21987.29 | -16.40 | -0.07% | All Ords | 08:36 | 4626.20 | 7.80 | 0.17% | NZSE 50 | 07:32 | 3421.34 | 29.32 | 0.86% |
| | Name | Time | RP | Move | % Move | Gold | 19:59 | 1588.00 | -13.34 | -0.83% | Gold/Rand | 18:48 | 10795.18 | -187.45 | -1.71% | Gold/R kg | 18:56 | 347164 | -2845 | -0.81% | Silver | 19:59 | 39.1020 | -.9860 | -2.46% | Platinum | 19:59 | 1783.00 | 13.15 | 0.74% | Palladium | 19:59 | 803.75 | 10.92 | 1.38% | R157 | 17:06 | 7.36 | -.06 | -0.81% | R204 | 17:06 | 8.12 | -.06 | -0.73% | Brent Crude | 18:56 | 118.79 | 1.74 | 1.49% | Rand / Dollar | 19:59 | 6.7786 | -0.0804 | -1.17% | Rand / Pound | 19:59 | 11.0215 | -0.0319 | -0.29% | Rand / Euro | 19:59 | 9.7494 | -0.0101 | -0.10% | Rand / NZD | 18:48 | 5.8431 | -0.0329 | -0.56% | Rand / AUD | 19:59 | 7.3523 | -0.0237 | -0.32% | Yen / Dollar | 19:59 | 78.5400 | -0.3300 | -0.42% | Euro / Dollar | 19:59 | 0.6951 | -0.0078 | -1.11% | Dollar / Euro | 19:59 | 1.4379 | 0.0159 | 1.12% | Pound / Dollar | 19:59 | 0.6131 | -0.0057 | -0.92% |
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The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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21/07/2011 | 169 | 170 | 91 | 430 | 302,114,410 | R14,088,158,282 | 90533 | 2065784 | 20/07/2011 | 152 | 155 | 99 | 406 | 277,636,986 | R15,179,334,279 | 96527 | 1814527 | 19/07/2011 | 185 | 163 | 77 | 425 | 256,784,102 | R12,959,878,392 | 80841 | 1291078 | 18/07/2011 | 113 | 226 | 66 | 405 | 268,259,384 | R13,081,537,721 | 89804 | 1752887 | 15/07/2011 | 196 | 131 | 78 | 405 | 286,101,528 | R11,859,925,617 | 80609 | 1783025 |
Index Summary Index Name | RP | Move | % Move | Top 40 | 28,767.58 | 58.62 | 0.20% | Industrial | 33,552.52 | 37.51 | 0.11% | Mid Cap | 42,709.25 | 164.87 | 0.39% | Small Cap | 32,292.83 | -107.41 | -0.33% | Resource 20 | 53,826.90 | -18.86 | -0.04% | Industrial 25 | 28,178.94 | 21.55 | 0.08% | Financial 15 | 8,184.84 | 95.85 | 1.18% | Financial & Ind. 30 | 31,248.73 | 130.41 | 0.42% | All Share | 32,125.79 | 69.73 | 0.22% | Oil & Gas | 27,022.82 | 142.16 | 0.53% | Mining | 35,329.37 | -55.68 | -0.16% | Gold Mining | 2,534.88 | -29.66 | -1.16% | Platinum Mining | 66.93 | -.53 | -0.79% | Oil & Gas Producers | 14,529.67 | 76.44 | 0.53% | Basic Materials | 29,999.80 | -66.78 | -0.22% | Chemicals | 14,074.91 | 93.22 | 0.67% | Forestry & Paper | 14,399.61 | -45.61 | -0.32% | Industrial Metals | 30,914.69 | -506.75 | -1.61% | Industrials | 28,325.27 | -10.14 | -0.04% | General Industrials | 78,329.37 | -88.74 | -0.11% | Consumer Goods | 28,136.66 | -30.09 | -0.11% | Automobiles & Parts | 3,835.99 | 24.91 | 0.65% | Household Goods | 148.71 | 3 | 1.96% | Health Care | 33,537.30 | 87.19 | 0.26% | Beverages | 87.30 | -.35 | -0.40% | Food Producers | 49,863.35 | -45.77 | -0.09% |
| | Index Name | RP | Move | % Move | Personal Goods | 444.05 | -.10 | -0.02% | Consumer Services | 53,591.43 | 297.52 | 0.56% | General Retailers | 42,958.16 | 205.45 | 0.48% | Travel & Leisure | 3,801.59 | 49.22 | 1.31% | Media | 81.81 | .07 | 0.09% | Support Services | 2,360.85 | -17.03 | -0.72% | Telecommunications | 70,538.54 | 357.08 | 0.51% | Financials | 21,778.23 | 220.36 | 1.02% | Banks | 40,283.55 | 443.82 | 1.11% | Non-life Insurance | 31,766.31 | .00 | 0.00% | Life Insurance | 16,105.89 | 189.68 | 1.19% | General Financial | 2,335.87 | 29.65 | 1.29% | Technology | 23,264.43 | 133.05 | 0.58% | SHARIAH TOP40 | 3,170.94 | 1 | 0.03% | FTSE/JSE SHARIAH ALL | 3,233.46 | 1 | 0.03% | COAL MINING | 24,502.38 | 113 | 0.47% | FTSE JSE Fledgling | 4,598.81 | -13 | -0.28% | FTSE/JSE Alt X | 1,142.56 | -8 | -0.68% | SA LISTED PROPERTY | 388.06 | | 0.24% | CAPPED PROPERTY | 319.83 | | 0.24% | RESOURCE | 29,727.29 | -20 | -0.07% | DIVIDEND PLUS | 172.47 | 1 | 0.41% | FTSE/JSE RAFI 40 | 6,685.37 | 31 | 0.47% | Capped Top 40 | 15,030.96 | 33 | 0.22% | Capped All Share | 16,195.70 | 37 | 0.23% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | BTI | BRITISH AM. TOBACCO PLC | BUY | 19 Jul | KIO | KUMBA IRON ORE LTD | SELL | 19 Jul | CPL | CAPITAL PROPERTY FUND | BUY | 19 Jul | VOD | VODACOM GROUP LIMITED | HOLD | 19 Jul | NPN | NASPERS LIMITED | BUY | 19 Jul |
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Results Expected** Expected | Company Name | Fin. Date | 25 Jul 2011 | AMPLATS | June 2011 (Interim) | 25 Jul 2011 | ANGLOPLATCCP | June 2011 (Interim) | 25 Jul 2011 | HULAMIN | June 2011 (Interim) | 25 Jul 2011 | HULAMINA | June 2011 (Interim) | 25 Jul 2011 | HULAMINB | June 2011 (Interim) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | FOORDCMPS | 11-07-20 | 11-08-04 | 11-08-15 | R 0.3000 | AFROX | 11-07-19 | 11-10-14 | 11-10-24 | R 0.2200 | MAS | 11-07-15 | 11-07-29 | 11-08-12 | R 0.0214 | REUNERT5.5 | 11-07-11 | 11-07-22 | 11-08-01 | R 0.0550 | HUDACO | 11-06-29 | 11-08-12 | 11-08-22 | R 1.3000 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | LEWIS | 11-05-23 | 11-07-15 | 11-07-25 | R 2.0700 | PERGRIN | 11-06-01 | 11-07-15 | 11-07-25 | R 0.3500 | NETCARE | 11-05-16 | 11-07-15 | 11-07-25 | R 0.2200 | NICTUS | 11-06-30 | 11-07-15 | 11-07-25 | R 0.0950 | AMECOR | 11-06-29 | 11-07-15 | 11-07-25 | R 0.0800 |
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Upcoming AGMs** Code | Company Name | Date | Status | OAS | Oasis Crescent Property Fund | 21/07/2011 | Confirmed | IFC | IFCA Technologies Ltd | 21/07/2011 | Confirmed | HULB | Hulamin Ltd | 21/07/2011 | Confirmed | HULA | Hulamin Ltd | 21/07/2011 | Confirmed | HLM | Hulamin Ltd | 21/07/2011 | Confirmed |
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