Tuesday, 27 May 2014 - 20:00
Charts
Seed Weekly - Characteristics of Winning Shares
The May 2014 edition of the Bank Credit Analyst produced a very useful report, discussing some of the merits of active versus passive fund management.
Firstly this is not an “either or” debate. While it is impossible for the average active fund manager to outperform a passive index after fees are taken into account, there will always be successful stock pickers that do systematically deviate from their benchmark and successfully outperform the market on an ongoing basis.
An active manager is one that relies on analytical research, forecasts, and their own judgement in order to decide which portfolio to construct. Passive investors, on the other hand, tend to construct a portfolio close to a given index – typically a market cap weighted index.
Active managers will find more success where prices deviate substantially from their fundamental fair values. Two areas where this is often found are the small cap and emerging market universe.
The report defined characteristics of superior active managers and then went on to define certain characteristics of winning stocks as follows.
Firstly, small cap shares (i.e. size characteristics) have been associated with alpha (typically defined as the excess return above a benchmark index). Since 1926 small cap stocks have outperformed large caps by an average of 2.8% per year.
Value
BCA notes that value stocks have also outperformed and when ranking stocks by price to book ratio, those with low ratios (i.e. value stocks) have outperformed those with high ratios by an average of 4.8% per annum.
BCA found that other value metrics have also been useful in predicting relative returns for stocks globally. These are criteria such as low versus high price to earnings, low versus high price to cash flow and high versus low dividend yields.
Value stocks tend to outperform more in market downturns and underperform when markets are up strongly, offering a partial hedge against market risk.
Momentum
When looking at price momentum, an investor must consider the time horizon. Evidence suggests that over a short term horizon of one month, momentum is negative so that stocks that performed well last month tend to underperform this month (price reversion).
Over medium term periods of 2 to 12 months momentum turns positive so that past winners continue to outperform, turning negative again over one to five years.
Some of the reasons for shares, which have done well over the last year, continuing to outperform can be ascribed to institutional investors scaling in and out of positions, the persistency of buying and selling over several months, especially for large cap shares, and also a case of equity prices not immediately reflecting new information about a company.
While a traditional passive fund tracks an index that is constructed using a market cap weighting, the independent research from BCA indicates that it makes a lot more sense to construct a portfolio using value and momentum factors. Indeed, this is exactly how we have designed the Seed Equity Fund. A value portfolio, using the four value criteria noted above, is systematically constructed and then equally combined with a momentum portfolio using price and earnings momentum.
The result is a Fund that has the attributes of an actively managed portfolio and the proven ability to outperform traditional indices over time, yet at a lower cost.
Kind regards,
Ian de Lange
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 27 May 2014
Top News
World stock markets edged up
while the euro softened against the dollar and yen on Tuesday
following strong U.S. economic data and on expectations of more
rate cuts from the European Central Bank. Full story
South Africa's rand fell 1 percent against the dollar on Tuesday to its softest level in nearly a week, after the release of data showing the economy shrunk in the first quarter of the year, raising the spectre of a recession. Full story |
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Egypt's presidential election was extended by a day on Tuesday in an effort to boost lower than expected turnout that threatened to undermine the credibility of the frontrunner, former army chief Abdel Fattah al-Sisi. Full storyBoko Haram gunmen attacked a Nigerian military base and adjacent police barracks simultaneously in the northeastern town of Buni Yadi, killing at least 31 security personnel, security sources and witnesses said. Full storyVietnam and China traded accusations on Tuesday over the sinking of a Vietnamese fishing boat not far from where China has parked an oil rig in the disputed South China Sea, as tensions fester between the two countries over the giant drilling platform. Full story |
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Markets | U.S. stocks advanced on Tuesday
after the S&P 500 touched a record high, buoyed by the latest
round of merger activity and as. . . Full story | | European shares rose to
multi-year highs on Tuesday, bolstered by U.S. economic data,
mergers and acquisitions talk and expectations of more policy
easing by. . . Full story | | Britain's main equity index
climbed on Tuesday, lifted by gains in chip designer ARM
and InterContinental Hotels Group (IHG), which pushed
the market. . . Full story | | European shares climbed to
multi-year highs on Tuesday, with encouraging U.S. economic
data, mergers and acquisitions talk and expectations of more
policy easing by. . . Full story |
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| World share markets climbed
closer to record levels on Tuesday on expectations the European
Central Bank will extend its easy monetary policy, while. . . Full story | | Gold slipped 2 percent to a 3-1/2
month low on Tuesday, extending losses after strong U.S. data
lifted optimism about the economy, while. . . Full story | | Britain's main equity index
advanced on Tuesday, led by InterContinental Hotels Group (IHG)
, which became the latest stock to gain ground on
potential. . . Full story | | U.S. stocks edged higher on
Tuesday as merger activity and expectations for rates cuts by
the European Central Bank stoked bids for equities. . . Full story |
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SA Business | The new boss of South Africa's Adcock Ingram announced an overhaul of the struggling drugmaker to allow its different businesses to. . . Full story | | South Africa raised its maize output forecast for this year by 4 percent on Tuesday, putting the country on track for. . . Full story | | New South African mining minister Ngoako Ramatlhodi pledged on Tuesday to mediate in a crippling platinum miners strike now in its. . . Full story | | Gold held steady below $1,300 an
ounce on Monday after ending flat for two straight weeks, but a
Ukraine presidential election win by. . . Full story |
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| South Africa's economy shrank in the first quarter of this year, the first quarterly contraction since a recession five years. . . Full story | | Zambia and Botswana will start building a $259 million bridge in June to replace the ferry service between the two states,. . . Full story | | South Africa's biggest apparel retailer, Mr Price Group Ltd, broadly met forecasts with a 22 percent rise in full-year profit on. . . Full story | | South African packaging firm Nampak reported a 10 percent rise in first-half profit on Tuesday, helped by rising demand in. . . Full story |
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| South Africa's treasury sold 2.35 billion rand ($227 million)worth of its 2030, 2037 and 2048 bonds on Tuesday.. . . Full story | | Ethiopia has pushed the door
ajar for foreign retailers keen to enter the fast-growing market
of 90 million people, welcoming them as managers but keeping the
state in control.. . . Full story | | South Africa's second-biggest drugmaker Adcock Ingram posted close to a $4 million first-half loss on Tuesday, hit by rising raw materials prices and costs related to a failed $1.2 billion takeover. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 49824.45 | -197.27 | -0.39% | JSE Top 40 | 17:00 | 44859.43 | -146.45 | -0.33% | JSE Gold | 17:00 | 1385.49 | -61.32 | -4.24% | JSE Financial | 17:00 | 36522.22 | -317.22 | -0.86% | JSE Industrial | 17:00 | 65447.25 | -98.39 | -0.15% | JSE Indust 25 | 17:00 | 57940.45 | -77.65 | -0.13% | JSE Resource | 17:00 | 56473.24 | -264.80 | -0.47% | DJ Futures | 19:38 | 16630.00 | -4.00 | -0.02% | DJ Ind | 19:58 | 16663.18 | 56.91 | 0.34% | SP 500 | 19:58 | 1909.03 | 8.50 | 0.45% | Nasdaq | 19:58 | 4221.12 | 35.31 | 0.84% | FTSE 100 | 17:35 | 6844.94 | 29.19 | 0.43% | DAX | 18:08 | 9940.82 | 48.00 | 0.49% | CAC40 | 18:08 | 4529.75 | 2.82 | 0.06% | Nikkei | 08:52 | 14636.52 | 34.00 | 0.23% | Shanghai | 09:28 | 2034.57 | -6.91 | -0.34% | Hang-Seng | 10:28 | 22944.30 | -18.88 | -0.08% | All Ords | 08:57 | 5490.80 | .40 | 0.01% | NZSE 50 | 07:48 | 5145.85 | -7.83 | -0.15% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1267.00 | -25.79 | -2.00% | Gold R | 19:59 | 13260.95 | -107.80 | -0.81% | Gold R/kg | 19:58 | 426222 | -3146 | -0.73% | Silver $ | 19:59 | 19.0770 | -.3420 | -1.76% | Platinum $ | 19:59 | 1462.30 | -9.20 | -0.63% | Palladium $ | 19:59 | 832.00 | 1.50 | 0.18% | R157 | 15:37 | 6.61 | -.00 | -0.08% | R186 | 15:30 | 8.18 | .06 | 0.74% | R204 | 15:35 | 7.45 | .03 | 0.34% | R207 | 15:35 | 7.67 | .04 | 0.52% | Brent Crude | 19:58 | 110.01 | -.53 | -0.48% | Rand / Dollar | 19:59 | 10.4679 | 0.1237 | 1.20% | Rand / Pound | 19:55 | 17.5422 | 0.1447 | 0.83% | Rand / Euro | 19:55 | 14.2555 | 0.1351 | 0.96% | Rand / NZD | 19:59 | 8.9347 | 0.0867 | 0.98% | Rand / AUD | 19:55 | 9.6718 | 0.1031 | 1.08% | Yen / Dollar | 19:59 | 102.1050 | 0.1790 | 0.18% | Euro / Dollar | 19:59 | 0.7343 | 0.0014 | 0.19% | Dollar / Euro | 19:59 | 1.3619 | -0.0025 | -0.18% | Pound / Dollar | 19:55 | 0.5954 | 0.0019 | 0.32% |
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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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27/05/2014 | 146 | 193 | 69 | 408 | 188,790,050 | R11,594,875,341 | 138781 | 266322 | 26/05/2014 | 177 | 183 | 62 | 422 | 136,855,749 | R6,522,480,329 | 96981 | 419402 | 23/05/2014 | 194 | 159 | 77 | 430 | 202,248,285 | R12,554,387,510 | 159565 | 1415954 | 22/05/2014 | 220 | 133 | 73 | 426 | 250,332,163 | R14,377,439,070 | 167079 | 1600113 | 21/05/2014 | 154 | 210 | 63 | 427 | 194,307,265 | R10,939,949,470 | 145092 | 1706794 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 44,859.43 | -146.45 | -0.33% | Industrial | 65,447.25 | -98.39 | -0.15% | Mid Cap | 63,113.59 | -545.31 | -0.86% | Small Cap | 53,755.97 | -173.92 | -0.32% | Resource 20 | 56,473.24 | -264.80 | -0.47% | Industrial 25 | 57,940.45 | -77.65 | -0.13% | Financial 15 | 14,038.26 | -139.70 | -0.99% | Financial & Ind. 30 | 61,509.95 | -175.52 | -0.28% | All Share | 49,824.45 | -197.27 | -0.39% | Oil & Gas | 44,700.21 | -551.66 | -1.22% | Mining | 33,605.73 | -135.43 | -0.40% | Gold Mining | 1,385.49 | -61.32 | -4.24% | Platinum Mining | 48.92 | -.63 | -1.27% | GENERAL MINING | 9,823.74 | 17.16 | 0.17% | Oil & Gas Producers | 24,034.48 | -296.62 | -1.22% | Basic Materials | 29,728.49 | -90.87 | -0.30% | Chemicals | 24,189.29 | -149.82 | -0.62% | Forestry & Paper | 32,040.29 | 348.49 | 1.10% | Industrial Metals | 19,616.53 | -138.79 | -0.70% | Industrials | 46,024.32 | -291.70 | -0.63% | General Industrials | 144.64 | -1.02 | -0.70% | Consumer Goods | 61,386.40 | 198.77 | 0.32% | Automobiles & Parts | 9,057.83 | -47.56 | -0.52% | Household Goods | 367.04 | -3 | -0.83% | Health Care | 80,480.24 | -898.74 | -1.10% | Beverages | 198.72 | .77 | 0.39% |
| | Index Name | RP | Move | % Move | Food Producers | 72,968.70 | -441.77 | -0.60% | Personal Goods | 1,095.34 | 8.19 | 0.75% | Consumer Services | 11,730.29 | -78.41 | -0.66% | General Retailers | 64,001.40 | -820.20 | -1.27% | Travel & Leisure | 5,865.45 | -9.76 | -0.17% | Media | 260.96 | -1.15 | -0.44% | Support Services | 2,761.48 | 19.51 | 0.71% | Telecommunications | 10,611.89 | -24.89 | -0.23% | Financials | 36,522.22 | -317.22 | -0.86% | Banks | 63,467.98 | -988.68 | -1.53% | Non-life Insurance | 55,383.19 | -597.22 | -1.07% | Life Insurance | 35,134.09 | -167.01 | -0.47% | General Financial | 3,639.52 | -32.15 | -0.88% | Technology | 41,799.67 | 96.07 | 0.23% | SHARIAH TOP40 | 4,209.87 | -17 | -0.41% | FTSE/JSE SHARIAH ALL | 4,319.33 | -21 | -0.48% | COAL MINING | 17,713.63 | -130 | -0.73% | FTSE JSE Fledgling | 6,758.51 | -17 | -0.25% | FTSE/JSE Alt X | 1,228.15 | 5 | 0.37% | SA LISTED PROPERTY | 503.29 | | -0.39% | CAPPED PROPERTY | 439.60 | | -0.24% | RESOURCE | 30,865.35 | -173 | -0.56% | DIVIDEND PLUS | 223.59 | -2 | -0.77% | FTSE/JSE RAFI 40 | 9,896.23 | -61 | -0.61% | Capped Top 40 | 23,759.41 | -88 | -0.37% | Capped All Share | 25,231.20 | -104 | -0.41% | JSE TABACO | 7,935.29 | 10 | 0.12% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | SAB | SABMILLER PLC | HOLD | 23/05/2014 | SPP | THE SPAR GROUP LTD | SELL | 22/05/2014 | BAW | BARLOWORLD LIMITED | SELL | 21/05/2014 | GLN | GLENCORE XSTRATA PLC | BUY | 20/05/2014 | PFG | PIONEER FOODS GROUP LTD | HOLD | 20/05/2014 |
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Results Expected** Expected | Company Name | Fin. Date | 28/05/2014 | ADCORP | February 2014 (Final) | 28/05/2014 | CHROMETCO | February 2014 (Final) | 28/05/2014 | DIAMONDCP | December 2013 (Final) | 28/05/2014 | FIUUNIT | March 2014 (Final) | 28/05/2014 | IMUNITI-P | March 2014 (Final) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | CHEMSPECPREF | 26/05/14 | 12/06/14 | 23/06/14 | ZAR 0.0160 | ILLOVO | 26/05/14 | 27/06/14 | 07/07/14 | ZAR 0.6000 | VUKILE | 26/05/14 | 12/06/14 | 23/06/14 | ZAR 0.7168 | TONGAAT | 26/05/14 | 12/06/14 | 26/06/14 | ZAR 2.1000 | WILDRNESS | 23/05/14 | 06/06/14 | 26/06/14 | BWP 0.1000 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | JSE | 11/03/14 | 23/05/14 | 02/06/14 | ZAR 3.5000 | OCTODEC | 06/05/14 | 23/05/14 | 02/06/14 | ZAR 0.8860 | PREMIUM | 06/05/14 | 23/05/14 | 02/06/14 | ZAR 0.8450 | JSE | 11/03/14 | 23/05/14 | 02/06/14 | ZAR 0.5000 | OASIS | 06/05/14 | 23/05/14 | 02/06/14 | ZAR 0.4205 |
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Upcoming AGMs** Code | Company Name | Date | Status | ACL | ArcelorMittal South Africa Ltd. | 27/05/2014 | Confirmed | MLAP | ArcelorMittal South Africa Ltd. | 27/05/2014 | Confirmed | SNT | Santam Ltd. | 27/05/2014 | Confirmed | MTN | MTN Group Ltd. | 27/05/2014 | Confirmed | ADH | ADvTECH Ltd. | 27/05/2014 | Unconfirmed |
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