Tuesday, 11 March 2014 - 20:00
Charts
Seed Weekly - Value Investing the Buffett Way (Part 5 1998 ? 2002)
The period 1998 to 2002 was an exceptionally interesting five years including the Dotcom bubble, its subsequent bursting and a small market dip following 9/11. After outperforming the S&P500 consecutively for 18 years, Berkshire underperformed in 1999.
During the bubble, Warren Buffett was heavily criticised for his underperformance. Unperturbed by media critics, he stuck to his convictions and stayed out of tech companies. Although he shared the general view that society would be transformed by the tech industry’s products and services, he could not gain insights as to which participants possessed a truly durable competitive advantage. The valuations were outrageous and the companies simply brought nothing to the table when it came to patents, manufacturing processes, or geological prospects. Warren Buffett remained true to his philosophy to only invest into companies that he understood.
At the height of the Dotcom bubble, Berkshire had the worst absolute performance of Mr Buffett’s tenure and, compared to the S&P500, the worst relative performance as well. “It was as if some virus, racing wildly among investment professionals as well as amateurs, induced hallucinations in which the values of stocks in certain sectors became decoupled from the values of the businesses that underlay them.”
In retrospect, the coincidence is that the Dotcom bubble peaked on 10 March 2000 when the NASDAQ hit its all-time high whilst Berkshire shares traded at their lowest price since mid-1997. As markets fell, Berkshire made substantial purchases (being greedy when others are fearful). As one can expect, performance quickly picked up again.
One can learn a lot from Mr Buffett’s unaffected behaviour towards market sensationalists. Unless substantially large, they don’t comment on any specific investment actions they make for a perfectly good reason. “Our never-comment-even-if-untrue policy in regard to investments may disappoint “piggy backers” but will benefit owners: Your Berkshire shares would be worth less if we discussed what we are doing. Incidentally, we should warn you that media speculation about our investment moves continues in most cases to be incorrect. People who rely on such commentary do so at their own peril.”
Warren Buffett seems to be the perfect head for his company. His interests are completely aligned with those of his shareholders whilst he constantly reassures investors that he would keep at least 99% of his net worth in Berkshire Hathaway. His view on being a CEO is also quite interesting:
1. Eliminate all ritualistic and non-productive activities that normally go with the job of CEO. Our managers are totally in charge of their personal schedules.
2. Give each a simple mission: Just run your business as if:
a. you own 100% of it;
b. It is the only asset in the world that you and your family have or will ever have;
c. You can’t sell or merge it for at least a century. As a corollary, we tell them they should not let any of their decisions be affected even slightly by accounting considerations.
During 2002 Berkshire experienced a banner year, outperforming the S&P 500 by nearly 20%. It was in this years’ newsletter that Warren Buffett gave this next piece of advice to his investors:
1. Beware of companies displaying weak accounting.
There is seldom just one cockroach in the kitchen.
2. Unintelligible footnotes usually indicate untrustworthy management. If you can’t understand a footnote or other managerial explanation, it’s usually because the CEO doesn’t want you to.
3. Be suspicious of companies that trumpet earnings projections and growth expectations.
It is these fundamentals that successfully carried Berkshire through the Dotcom bubble. They stayed invested for the long term in well managed businesses, irrespective of the short term bumps, and focussed on their overall results. Berkshire recently released their latest annual report – which is well worth the read for any aspiring investor.
Kind regards,
Lourens Rabé
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 11 Mar 2014
Top News
South African stocks ended in the black on Tuesday led by e-commerce giant Naspers and after a resurgence by gold and platinum shares. Full story
Local markets
The JSE All Share closed 0.61% higher by end of trade on Tuesday, with resource shares leading gains. Full story |
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Malaysia's military
believes a jetliner missing for almost four days turned and flew
hundreds of kilometres to the west after it last made contact
with civilian air traffic control off the country's east coast,
a senior officer told Reuters on Tuesday. Full storyLibya's navy
opened fire on Tuesday on a tanker carrying oil from a
rebel-held eastern port and Italian vessels are helping to
secure the now-stationary vessel, a Libyan military spokesman
said. Full storyUkraine's interim leaders established a new National Guard on Tuesday and appealed to the United States and Britain for assistance against what they called Russian aggression in Crimea under a post-Cold War treaty. Full story |
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Markets | U.S. stocks fell in afternoon
trading on Tuesday after swinging between gains and losses for
most of the session as the lack of. . . Full story | | Britain's top share index
steadied on Tuesday after hitting a three-week low, with some
investors seeing value in beaten-down stocks, although the
market remained. . . Full story | | German shares rose on Tuesday,
outperforming European stocks more broadly, as strong trade
data from the region's largest economy revived investor appetite
for. . . Full story | | Gold rose on Tuesday as fears
of a slowdown in Chinese economic growth and worries about the
crisis in Ukraine sapped appetite for. . . Full story |
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| Major world equity markets
were mostly steady on Tuesday, the euro edged down and gold rose
as traders kept a wary eye on. . . Full story | | U.S. stocks opened with
slight gains on Tuesday as investors continued to be cautious
amid persisting tensions in Ukraine, while the S&P 500. . . Full story | | Britain's top equity index
steadied on Tuesday from losses in the previous session that
pushed it to a 3-week low, as a recovery. . . Full story | | European shares rose in early
trade on Tuesday, reversing some of the previous session's
losses, helped in part by robust German imports and. . . Full story |
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SA Business | South Africa is likely to have adequate electricity supply in around two years, Finance Minister Pravin Gordhan said on Tuesday, less than a week after the first rolling blackouts in Africa's biggest economy since 2008.. . . Full story | | South African bourse operator JSE posted a 36 percent jump in full-year earnings on Tuesday, helped by demand for equities that sent stock prices to record highs.. . . Full story |
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| South Africa's rand weakened against the dollar on Tuesday, tracking the euro lower amid broadly poor investor sentiment towards emerging markets.. . . Full story | | Platinum holdings of physically backed exchange-traded funds hit a record high this week after inflows into products in London and Johannesburg,. . . Full story | | | | South Africa's rand was steady against the dollar on Tuesday and is likely to trade range-bound in the absence of market-moving. . . Full story |
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| Swiss sanitary equipment maker
Geberit named Christian Buhl as its new chief
executive on Tuesday as it published fourth-quarter net profit
that met expectations.. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 47612.81 | 290.35 | 0.61% | JSE Top 40 | 17:00 | 43055.99 | 320.61 | 0.75% | JSE Gold | 17:00 | 1573.43 | 14.90 | 0.96% | JSE Financial | 17:00 | 33618.75 | -99.77 | -0.30% | JSE Industrial | 17:00 | 62386.66 | 403.38 | 0.65% | JSE Indust 25 | 17:00 | 55359.42 | 441.46 | 0.80% | JSE Resource | 17:00 | 55603.52 | 656.02 | 1.19% | DJ Futures | 10/03 | 14331.64 | -100.36 | 0.00% | DJ Ind | 19:54 | 16372.41 | -46.27 | -0.28% | SP 500 | 19:54 | 1871.22 | -5.95 | -0.32% | Nasdaq | 19:54 | 4323.95 | -10.50 | -0.24% | FTSE 100 | 18:35 | 6685.52 | -3.93 | -0.06% | DAX | 19:08 | 9307.79 | 42.29 | 0.46% | CAC40 | 19:08 | 4349.72 | -21.12 | -0.48% | Nikkei | 08:28 | 15224.11 | 103.97 | 0.69% | Shanghai | 09:28 | 2001.16 | 2.10 | 0.11% | Hang-Seng | 10:30 | 22269.61 | 4.68 | 0.02% | All Ords | 07:49 | 5429.30 | -1.50 | -0.03% | NZSE 50 | 06:48 | 5101.94 | -15.90 | -0.31% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1347.72 | 8.45 | 0.63% | Gold R | 19:58 | 14616.99 | 226.62 | 1.57% | Gold R/kg | 19:54 | 469902 | 5636 | 1.21% | Silver $ | 19:59 | 20.8000 | -.0140 | -0.07% | Platinum $ | 19:59 | 1462.90 | -9.10 | -0.62% | Palladium $ | 19:59 | 770.60 | -2.40 | -0.31% | R157 | 16:37 | 7.05 | .02 | 0.36% | R186 | 16:37 | 8.56 | .01 | 0.12% | R204 | 16:37 | 7.92 | .01 | 0.19% | R207 | 16:37 | 8.20 | .02 | 0.24% | Brent Crude | 19:48 | 108.18 | -.82 | -0.75% | Rand / Dollar | 19:59 | 10.8496 | 0.1041 | 0.97% | Rand / Pound | 19:55 | 17.9973 | 0.1318 | 0.74% | Rand / Euro | 19:55 | 15.0351 | 0.1156 | 0.77% | Rand / NZD | 19:58 | 9.1957 | 0.0886 | 0.97% | Rand / AUD | 19:55 | 9.7483 | 0.0459 | 0.47% | Yen / Dollar | 19:59 | 102.9860 | -0.3250 | -0.31% | Euro / Dollar | 19:55 | 0.7212 | 0.0009 | 0.12% | Dollar / Euro | 19:59 | 1.3864 | -0.0012 | -0.09% | Pound / Dollar | 19:55 | 0.6014 | 0.0009 | 0.15% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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11/03/2014 | 182 | 168 | 72 | 422 | 209,987,335 | R14,952,123,296 | 162283 | 1195191 | 10/03/2014 | 138 | 227 | 65 | 430 | 179,105,164 | R13,929,955,888 | 156002 | 1134524 | 07/03/2014 | 188 | 188 | 70 | 446 | 187,641,820 | R14,225,576,507 | 158383 | 348124 | 06/03/2014 | 220 | 138 | 58 | 416 | 201,584,426 | R15,537,671,662 | 157346 | 262660 | 05/03/2014 | 177 | 152 | 78 | 407 | 204,111,799 | R14,478,231,354 | 149026 | 1075920 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 43,055.99 | 320.61 | 0.75% | Industrial | 62,386.66 | 403.38 | 0.65% | Mid Cap | 58,668.35 | -43.57 | -0.07% | Small Cap | 51,149.79 | -181.41 | -0.35% | Resource 20 | 55,603.52 | 656.02 | 1.19% | Industrial 25 | 55,359.42 | 441.46 | 0.80% | Financial 15 | 12,871.20 | -37.20 | -0.29% | Financial & Ind. 30 | 58,506.82 | 341.13 | 0.59% | All Share | 47,612.81 | 290.35 | 0.61% | Oil & Gas | 44,272.64 | 399.56 | 0.91% | Mining | 33,114.08 | 402.53 | 1.23% | Gold Mining | 1,573.43 | 14.90 | 0.96% | Platinum Mining | 49.22 | .77 | 1.59% | GENERAL MINING | 9,480.58 | 122.02 | 1.30% | Oil & Gas Producers | 23,804.58 | 214.83 | 0.91% | Basic Materials | 29,435.10 | 315.83 | 1.08% | Chemicals | 24,149.93 | -151.26 | -0.62% | Forestry & Paper | 33,010.42 | 481.41 | 1.48% | Industrial Metals | 20,834.25 | -1192.95 | -5.42% | Industrials | 41,616.50 | 94.52 | 0.23% | General Industrials | 130.51 | .68 | 0.52% | Consumer Goods | 57,304.40 | 168.99 | 0.30% | Automobiles & Parts | 9,818.69 | -99.64 | -1.00% | Household Goods | 366.36 | -4 | -1.01% | Health Care | 73,382.64 | -910.02 | -1.22% | Beverages | 178.68 | -.62 | -0.35% |
| | Index Name | RP | Move | % Move | Food Producers | 63,979.24 | 409.34 | 0.64% | Personal Goods | 1,058.09 | 11.19 | 1.07% | Consumer Services | 12,034.01 | 283.16 | 2.41% | General Retailers | 55,745.53 | -30.99 | -0.06% | Travel & Leisure | 5,306.27 | -30.29 | -0.57% | Media | 295.49 | 10.73 | 3.77% | Support Services | 2,622.41 | 13.19 | 0.51% | Telecommunications | 9,770.69 | 2.63 | 0.03% | Financials | 33,618.75 | -99.77 | -0.30% | Banks | 56,439.89 | -229.02 | -0.40% | Non-life Insurance | 48,522.82 | 30.63 | 0.06% | Life Insurance | 32,907.44 | -146.87 | -0.44% | General Financial | 3,347.18 | 4.30 | 0.13% | Technology | 43,457.32 | -13.20 | -0.03% | SHARIAH TOP40 | 4,098.61 | 27 | 0.66% | FTSE/JSE SHARIAH ALL | 4,187.46 | 23 | 0.55% | COAL MINING | 17,761.67 | -568 | -3.10% | FTSE JSE Fledgling | 6,572.96 | 26 | 0.40% | FTSE/JSE Alt X | 1,197.33 | 5 | 0.40% | SA LISTED PROPERTY | 478.23 | | -0.51% | CAPPED PROPERTY | 420.18 | | -0.33% | RESOURCE | 30,443.31 | 352 | 1.17% | DIVIDEND PLUS | 204.98 | -1 | -0.69% | FTSE/JSE RAFI 40 | 9,465.45 | 61 | 0.65% | Capped Top 40 | 22,797.79 | 169 | 0.75% | Capped All Share | 24,109.37 | 146 | 0.61% | JSE TABACO | 7,434.38 | 38 | 0.51% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | FSR | FIRSTRAND LIMITED | BUY | 10/03/2014 | IPL | IMPERIAL HOLDINGS LTD | SELL | 10/03/2014 | REM | REMGRO LIMITED | HOLD | 10/03/2014 | RCL | RCL FOODS LIMITED | HOLD | 10/03/2014 | AVI | AVI LTD | BUY | 10/03/2014 |
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Results Expected** Expected | Company Name | Fin. Date | 12/03/2014 | CONTROL | December 2013 (Final) | 12/03/2014 | EOH | January 2014 (Interim) | 12/03/2014 | FERRUM | December 2013 (Interim) | 12/03/2014 | GIYANI | December 2013 (Final) | 13/03/2014 | AFGRI | December 2013 (Interim) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | A-V-I | 10/03/14 | 28/03/14 | 07/04/14 | ZAR 1.2000 | SASOL | 10/03/14 | 04/04/14 | 14/04/14 | ZAR 8.0000 | STANBANK-P | 06/03/14 | 28/03/14 | 07/04/14 | ZAR 3.2994 | STANBANK6.5 | 06/03/14 | 28/03/14 | 07/04/14 | ZAR 0.0325 | STANBANK | 06/03/14 | 04/04/14 | 14/04/14 | ZAR 3.0000 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | KUMBA | 11/02/14 | 07/03/14 | 17/03/14 | ZAR 19.9400 | DSY B PREF | 20/02/14 | 07/03/14 | 17/03/14 | ZAR 4.2849 | TRUWTHS | 20/02/14 | 07/03/14 | 17/03/14 | ZAR 2.1600 | TRANSCAP | 17/02/14 | 07/03/14 | 17/03/14 | ZAR 2.1000 | CITYLDG | 13/02/14 | 07/03/14 | 17/03/14 | ZAR 2.0200 |
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Upcoming AGMs** Code | Company Name | Date | Status |
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