Tuesday, 27 October 2015 - 20:00
Charts
Seed Weekly - Investment Horizon
When investing, it is imperative to match your investment strategy with your investment horizon. Investors who are able to accurately match these two (and who can refrain from acting on emotion in the interim) will increase the probability of their investment experience matching their investment goals.
For the purpose of this report, I have used the local stock market (ALSI) since 1960 (i.e. just over 55 years) to display how an investor’s experience would range depending on their starting point and investment horizon.
Interestingly, ‘investors’ (more like speculators) with a one day horizon will only generate a positive return just over 50% of the time, which means that the odds of success aren’t very high! As investors take a longer horizon, their probability of success increases and the variability of their returns decreases. In the below analysis I have loosely defined ‘success’ as a positive return. Inflation and dividend reinvestment haven’t been taken into account as their long term history is not readily available. These factors would influence the end result, but the broad concept would remain unchanged.
The chart below displays the historic probability of generating a positive return over various time periods on the ALSI. Simplistically, based on this chart, one should have an investment horizon of at least 3 years in order to be confident of generating a positive return ‘most’ of the time (i.e. nearly 90% of the time).
While the above chart shows how often one would generate positive and negative returns, it does not quantify the range of investment returns received. For investment periods of 1 year and longer I have looked at the possible range of annual returns an investor would have received in the chart below.
Naturally, the variability in returns reduces as one’s investment horizon increases. Here it is interesting to note that while a 3 year investment horizon would have generated a positive return 88% of the time, an investor that got their timing wrong would have experienced a return of -18% pa over the 3 year period! From the above chart it would seem wise to have an investment horizon of at least 5 years when investing into local equities.
By overlaying a simple valuation metric (market PE ratio) for an investor with a 5 year investment horizon, the return experience can be greatly enhanced. By investing when the market was cheap (lowest 25% of PE observations) an investor was not only able to improve their average return by 8% per annum but also greatly improve their ‘worst case scenario’. Likewise, investors who invested when the market was expensive (high PE) both lowered their average return and increased the probability of generating a negative return. The chart below shows the investor experience over the entire period, low PE, normal PE, and high PE scenarios.
At Seed we view investing as a process of continuously improving the probability of generating satisfactory returns. We therefore ensure that there is a match between the assets and investment horizons of our various Funds. We further attempt to improve our probability of success by taking valuations into account in our investment process. In this regard, with the ALSI PE a shade under 20, our multi asset unit trusts (Seed Flexible and Seed Absolute Return) currently have extremely low weightings to local equity (relative to their long term averages).
Take care,
Mike Browne
Tel +27 21 914 4966
Fax +27 21 914 4912
Email info@seedinvestments.co.za
Seed is hiring: Visit the Seed Analytics LinkedIn profile to view vacancies.
www.seedinvestments.co.za
Tue, 27 Oct 2015
Top News
Revenue increased to R2.2 billion (R2.1 million). Net operating income jumped to R133.6 million (R111.2 million). Total profit attributable to equity holders shot up 23.1% to R92.5 million (R75.2 million). In addition, headline earnings per share increased by 22.1% to 428.6cents per share (3 Full story
Local markets
The JSE All Share ended 0.70% lower on Tuesday, with 2.94% losses in resource shares leading the downward slide. Full story |
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The body of the first Russian serviceman confirmed dead in four weeks of air strikes in Syria was delivered on Tuesday to his parents, who said they were not convinced by the military's account that their 19-year-old son had hanged himself. Full storyThe Taliban encouraged aid groups to help victims of the massive earthquake in northern Afghanistan and Pakistan as rescuers struggled to form a clear picture of the damage caused by the disaster as the death toll passed 300. Full storyA hospital in north Yemen run by medical aid group Medecins Sans Frontieres (MSF) was bombed in Saudi-led air strikes, wrecking the facility and lightly wounding two staff members, the group said on Tuesday. Full story |
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Markets | Global equity markets retreated
on Tuesday as investors showed restraint in advance of earnings
from Apple and a U.S. Federal Reserve policy statement, while
crude prices slumped to multi-week lows on worries about
oversupply.. . . Full story |
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SA Business | South African maize farmers intend to plant 2.55 million hectares of the staple grain in the 2016 season, its lowest level since 2011 due to drought, the country's Crop Estimates Committee. . . Full story | | South Africa has launched an association for young, mainly black entrepreneurs to boost the processing and manufacturing of rough diamonds, the mines ministry said on Tuesday.. . . Full story | | South Africa's rand was slightly weaker against the dollar on Tuesday, trailing its emerging market peers as ongoing student protests against the high cost of university education highlight the myriad of. . . Full story |
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| For many people,
suggestions that meat may cause cancer are a case of doctors
spoiling the party; in South Africa, where cooking it. . . Full story | | South African furniture retailer Lewis Group will pay 67.1 million rand ($4.91 million) to customers it had mistakenly sold loan insurance,. . . Full story | | South Africa's unemployment rate rose to 25.5 percent of the labour force in the third quarter of the year from 25. . . Full story | | South Africa's cash-strapped national oil and gas company, PetroSA, is looking to sell up to 49 percent equity stakes in around. . . Full story |
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Company News | In terms of the Listings Requirements of JSE Limited, companies are required to publish a trading statement as soon as they. . . Full story | | Lewis is refunding R44.1 million to a group of its customers for the cost of loss of employment insurance mistakenly sold. . . Full story | | Lewis Group is refunding R44.1 million to a group of its customers for the cost of loss of employment insurance mistakenly. . . Full story | | Shareholders are referred to the cautionary announcements dated 31 July and 14 September 2015 regarding the potential combination of Barclays Bank. . . Full story |
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| In terms of the provisions of section 45(5) of the Companies Act, 2008 (Act 71 of 2008), as amended (ôCompanies Actö), and pursuant to the special resolution passed at the annual general meeting of the Company held on 7 November 2014. . . Full story | | Shareholders are advised that Mr MEE Sassoon has been appointed as an executive director to the Company with effect from 23 October 2015, while Mr MG Lane, following his promotion to Acting Chief Risk Officer has resigned as alternate director with. . . Full story |
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Company Results | Revenue for the year lowered to NGN424.7 billion (NGN449.9 billion). Gross profit rose to NGN69.2 billion (NGN59.3 billion). Operating loss was. . . Full story | | Revenue for the quarter was NGN33.0 billion. Gross profit came in at NGN13.4 billion). Operating loss was NGN4.0 billion. Loss attributable. . . Full story | | Revenue for the year was higher at NGN60.3 billion (NGN55.7 billion). Gross profit dived to NGN23.7 billion (NGN40.8 billion). Operating loss. . . Full story | | Revenue for the interim period increased to R587.2 million (2014: R480.2 million), profit from operations rose to R433.5 million (2014: R324.5. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 53770.29 | -380.41 | -0.70% | JSE Top 40 | 17:00 | 48231.26 | -338.00 | -0.70% | JSE Gold | 17:00 | 1102.44 | 9.19 | 0.84% | JSE Financial | 17:00 | 45506.35 | -172.60 | -0.38% | JSE Industrial | 16:50 | 80058.79 | -515.17 | -0.64% | JSE Indust 25 | 17:00 | 72254.47 | -264.12 | -0.36% | JSE Resource | 17:00 | 34385.35 | -1040.79 | -2.94% | DJ Futures | 19:58 | 17501.00 | -30.00 | -0.17% | DJ Ind | 19:58 | 17559.81 | -63.24 | -0.36% | SP 500 | 19:58 | 2060.11 | -11.07 | -0.53% | Nasdaq | 19:58 | 5016.39 | -18.31 | -0.36% | FTSE 100 | 17:26 | 6390.22 | -26.80 | -0.42% | DAX | 19:08 | 10692.19 | -109.15 | -1.01% | CAC40 | 19:08 | 4847.07 | -50.06 | -1.02% | Nikkei | 08:28 | 18777.04 | -170.08 | -0.90% | Shanghai | 08:28 | 3396.65 | -32.93 | -0.96% | Hang-Seng | 10:30 | 23142.73 | 26.48 | 0.11% | All Ords | 07:41 | 5384.60 | -1.70 | -0.03% | NZSE 50 | 06:50 | 6001.02 | 30.35 | 0.51% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1166.29 | 3.51 | 0.30% | Gold R | 19:58 | 15944.88 | 99.16 | 0.63% | Gold R/kg | 19:58 | 512593 | 3740 | 0.73% | Silver $ | 20:00 | 15.8500 | .0110 | 0.07% | Platinum $ | 19:59 | 986.68 | -6.82 | -0.69% | Palladium $ | 19:59 | 678.40 | -.60 | -0.09% | R186 | 15:01 | 8.41 | .06 | 0.78% | R204 | 15:01 | 7.40 | .06 | 0.75% | R207 | 15:01 | 7.68 | .03 | 0.39% | Brent Crude | 16:18 | 46.69 | -1.30 | -2.71% | USD / ZAR | 19:58 | 13.6705 | 0.0438 | 0.32% | GBP / ZAR | 19:55 | 20.8842 | -0.0152 | -0.07% | EUR/ ZAR | 19:55 | 15.0891 | 0.0189 | 0.13% | NZD/ ZAR | 19:58 | 9.2693 | 0.0345 | 0.37% | AUD / ZAR | 19:55 | 9.8422 | -0.0381 | -0.39% | USD / JPY | 20:00 | 120.3700 | -0.6560 | -0.54% | EUR / USD | 20:00 | 1.1037 | -0.0015 | -0.14% | GBP / USD | 20:00 | 1.5304 | -0.0043 | -0.28% |
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The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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27/10/2015 | 101 | 230 | 52 | 383 | 251,769,621 | R20,589,245,893 | 208783 | 1394144 | 26/10/2015 | 192 | 156 | 76 | 424 | 251,330,991 | R17,853,219,239 | 232859 | 1595480 | 23/10/2015 | 262 | 96 | 58 | 416 | 250,191,228 | R20,534,312,049 | 229587 | 1857775 | 22/10/2015 | 205 | 145 | 52 | 402 | 256,625,947 | R16,661,057,196 | 222125 | 1970996 | 21/10/2015 | 149 | 182 | 68 | 399 | 237,499,614 | R16,313,691,266 | 212983 | 1846121 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 48,231.26 | -338.00 | -0.70% | Industrial | 80,058.79 | -515.17 | -0.64% | Mid Cap | 69,090.30 | -622.44 | -0.89% | Small Cap | 59,288.82 | -35.97 | -0.06% | Resource 20 | 34,385.35 | -1040.79 | -2.94% | Industrial 25 | 72,254.47 | -264.12 | -0.36% | Financial 15 | 16,950.34 | -60.10 | -0.35% | Financial & Ind. 30 | 76,400.37 | -266.15 | -0.35% | All Share | 53,770.29 | -380.41 | -0.70% | Oil & Gas | 9,735.34 | .00 | 0.00% | Mining | 20,467.66 | -614.09 | -2.91% | Gold Mining | 1,102.44 | 9.19 | 0.84% | Platinum Mining | 19.25 | -.40 | -2.04% | GENERAL MINING | 6,047.67 | -223.31 | -3.56% | Oil & Gas Producers | 52,345.13 | .00 | 0.00% | Basic Materials | 20,767.61 | -467.66 | -2.20% | Chemicals | 21,880.57 | -321.80 | -1.45% | Forestry & Paper | 51,067.50 | 117.80 | 0.23% | Industrial Metals | 4,661.48 | -344.56 | -6.88% | Industrials | 45,989.63 | -311.29 | -0.67% | General Industrials | 169.03 | -1.05 | -0.62% | Consumer Goods | 78,129.37 | -97.08 | -0.12% | Automobiles & Parts | 6,849.99 | 45.29 | 0.67% | Household Goods | 588.90 | 1 | 0.25% | Health Care | 9,725.81 | -91.08 | -0.93% | Beverages | 279.70 | -.27 | -0.10% |
| | Index Name | RP | Move | % Move | Food Producers | 9,315.12 | -118.41 | -1.26% | Personal Goods | 1,158.57 | .60 | 0.05% | Consumer Services | 17,719.57 | 56.83 | 0.32% | General Retailers | 8,244.54 | -71.99 | -0.87% | Travel & Leisure | 5,970.65 | -47.88 | -0.80% | Media | 452.64 | 4.89 | 1.09% | Support Services | 2,816.67 | -24.56 | -0.86% | Telecommunications | 8,438.62 | -307.20 | -3.51% | Financials | 45,506.35 | -172.60 | -0.38% | Banks | 7,494.63 | -37.41 | -0.50% | Non-life Insurance | 56,455.12 | -714.63 | -1.25% | Life Insurance | 42,173.51 | -278.65 | -0.66% | General Financial | 4,914.11 | -47.95 | -0.97% | Technology | 59,623.69 | -76.48 | -0.13% | SHARIAH TOP40 | 3,226.67 | -74 | -2.23% | FTSE/JSE SHARIAH ALL | 3,462.19 | -67 | -1.90% | COAL MINING | 7,376.47 | -259 | -3.39% | FTSE JSE Fledgling | 6,692.42 | -24 | -0.35% | FTSE/JSE Alt X | 1,537.15 | -17 | -1.10% | SA LISTED PROPERTY | 664.82 | | -0.13% | CAPPED PROPERTY | 597.45 | | 0.10% | RESOURCE | 18,588.60 | -557 | -2.91% | DIVIDEND PLUS | 204.57 | -3 | -1.62% | FTSE/JSE RAFI 40 | 9,346.50 | -126 | -1.33% | Capped Top 40 | 25,599.37 | -195 | -0.76% | Capped All Share | 27,269.51 | -193 | -0.70% | JSE TABACO | 10,204.83 | -31 | -0.31% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | SHP | SHOPRITE HOLDINGS LIMITED | HOLD | 21/10/2015 | NPK | NAMPAK | HOLD | 20/10/2015 | SGL | SIBANYE GOLD LIMITED | HOLD | 19/10/2015 | MND | MONDI LIMITED | BUY | 19/10/2015 | BVT | THE BIDVEST GROUP LIMITED | HOLD | 19/10/2015 |
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Results Expected** Expected | Company Name | Fin. Date | 28/10/2015 | ACSION | August 2015 (Interim) | 28/10/2015 | IMBALIE | August 2015 (Interim) | 28/10/2015 | NET1UEPS | September 2015 (Q) | 28/10/2015 | NET1UEPSP | September 2015 (Q) | 28/10/2015 | NET1UEPSPP | September 2015 (Q) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | DELPROP | 26/10/15 | 13/11/15 | 23/11/15 | ZAR 0.4289 | ECSP C | 23/10/15 | 06/11/15 | 16/11/15 | ZAR 1.0356 | FRONTIER | 23/10/15 | 06/11/15 | 16/11/15 | GBP 0.0305 | ECSP A | 23/10/15 | 06/11/15 | 16/11/15 | ZAR 0.7671 | ECSP C2 | 23/10/15 | 06/11/15 | 16/11/15 | ZAR 1.0356 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | NTC PREF | 01/10/15 | 23/10/15 | 02/11/15 | ZAR 3.8651 | EOH | 16/09/15 | 23/10/15 | 02/11/15 | ZAR 1.5000 | PHUMELELA | 02/10/15 | 23/10/15 | 02/11/15 | ZAR 0.6000 | BOWCALF | 29/09/15 | 23/10/15 | 02/11/15 | ZAR 0.2300 | BARWORLD6%P | 05/10/15 | 23/10/15 | 02/11/15 | ZAR 0.0600 |
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Upcoming AGMs** Code | Company Name | Date | Status | SVB | SilverBridge Holdings Ltd. | 27/10/2015 | Confirmed | AEG | Aveng Ltd. | 27/10/2015 | Confirmed | AEGCB | Aveng Ltd. | 27/10/2015 | Confirmed | DST | Distell Group Ltd. | 28/10/2015 | Confirmed | HCI | Hosken Consolidated Investments Ltd. | 29/10/2015 | Confirmed |
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