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Tuesday, 19 March 2013 - 20:00
Charts
Earnings Weakness At the beginning of each month we take an in depth look at the valuations of a variety of asset classes. We mostly have standard valuation metrics that we look at – we want our process to be as consistent as possible – but, from time to time when anomalies arise, we also look at other factors (or the same factors from different angles). When there are anomalies in the output, we perform the extra research in an attempt to get a better understanding of the factors at play. Ultimately the human touch is important in an investment process – you can’t solely rely on output exported into an Excel spreadsheet when managing investments.
The results at the beginning of March proved a case in point. In February the market was down nearly 2%, but rather than being cheaper than the previous month (when using the market PE ratio as the valuation technique) it was significantly more expensive (PE of 16.6 at the end of February compared to 15.2 at the end of January).
Fortunately the PE ratio is a simple formula. If P is down and the PE ratio is up, it simply means that E (earnings) must be down. When I took a closer look, I saw that the market’s earnings were down over 10% during February, with the vast majority of the fall coming on 15 February – see Chart 1 below. It just so happened that Anglo American (AGL) reported a 55% (in USD) drop in earnings on the 15th. Essentially Anglo’s poor results had a major impact on the market’s earnings falling (and consequently an increasing PE).
Chart 1: ALSI Earnings during February
This surprised me, so I decided to take a closer look at the market’s earnings over time. I was interested to see that there have been some significant earnings drawdowns over the past 27 years. But while earnings have fallen significantly over this period – see Chart 2 below, the market has typically fallen more. The market falls/crashes have also typically occurred before the fall in earnings (lending support to the fact that the market is forward looking and anticipates poor earnings).
Chart 2: Drawdown of ALSI (P) and ALSI (E), i.e. Fall in Price vs Fall in Earnings
When looking at this is data from some other directions I saw that earnings are typically half as volatile as the price and that there’s not much correlation between the monthly returns and the monthly earnings growth. Over a rolling 12 month period the largest gain in earnings has been 49% for the 12 months ending 31 July 2001 and the worst period ended on 28 February 2010 with earnings contraction of 32%.
Interesting, February 2013 was the biggest monthly contraction in earnings over this 27 year period, the previous worst being -9.7% in August 2009. While this kind of analysis doesn’t give us all of the answers, it does at least help us understand where the change in valuation has come from.
Into March we have used the rising market to reduce our allocation to local equities across our unit trusts and range of portfolios. For more information on the Seed Flexible and Seed Absolute Return Funds, you can download the latest (February) fact sheets by clicking here.
Take care,
Mike Browne
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 19 Mar 2013 Top News
South Africa's benchmark share index fell for the third straight day on Tuesday, weighed down by mining companies as worries about the euro zone debt crisis dented metal prices. Full story
Striking workers at five collieries owned by South African mining group Exxaro Resources Ltd rejected a cash offer to return to work, prolonging an illegal stoppage that could eventually hit electricity supplies. Full story |
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Global stock markets fell on
Tuesday, extending the previous day's decline as investors
continued to fret about a bail-out plan for Cyprus and the
possible effect on the euro zone should it collapse.
Markets have been volatile, with U.S. stocks opening lower
and then briefly rebounding as investors used strong housing
data as an opportunity to pick up beaten down shares. In midday
trading, however, shares returned to negative territory.
European stocks, along with the euro and oil, had b Full storyCyprus's government proposed
to spare small savers from a divisive levy on bank deposits but
said it expected parliament to reject the measure, needed to
secure an international rescue and avoid a default that would
shake the euro zone. Full storyPope Francis set the tone for a new, humbler papacy at his inaugural Mass on Tuesday where he called for the Church to defend the weak and protect the environment. Full story |
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Markets | European shares fell for a
second day on Tuesday, with investors spooked by the possibility
that Cyprus could reject a bailout, likely leading. . . Full story | | Britain's top share index fell
on Tuesday, extending losses in afternoon trade as concerns that
the Cypriot parliament will reject a bailout package. . . Full story | | U.S. stocks fell on Tuesday
as a planned tax on bank accounts to help pay for Cyprus's
bailout appeared doomed in parliament, fueling. . . Full story | | Gold reversed earlier losses on
Tuesday, hitting a 2-1/2 week high above $1,610 on renewed
flight-to-safety investment ahead of an imminent vote in. . . Full story |
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| European shares extended
losses, hitting session lows in late trade on Tuesday, with
traders citing growing expectation that Cyprus will reject its
bailout plan,. . . Full story | | U.S. stocks erased earlier
gains on Tuesday, with the S&P and Nasdaq turning negative while
the Dow was flat, as investors continued to. . . Full story | | Pan-European stock indexes
turned positive in afternoon trade on Tuesday, cheered by
stronger-than-expected U.S. housing data and by U.S. futures
pointing to a higher. . . Full story | | European shares fell in choppy
trade by midday on Tuesday as investors tried to hold their
nerve after Cyprus's bailout package stoked anxiety. . . Full story |
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SA Business | Procter & Gamble Co., the world's biggest household products maker, is spending $450 million upgrading and building new factories in Africa,. . . Full story | | Employment in South Africa's formal, non-farm sector edged up 0.3 percent in the fourth quarter of 2012 compared with the previous. . . Full story | | South African diversified miner Exxaro said striking workers at five of its collieries had refused a one-off offer of 2,000 rand. . . Full story | | South Africa's rand is likely to trade in a narrow range on Tuesday as a cautious market awaits consumer inflation data. . . Full story |
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| South Africa's Treasury sold a total 2.1 billion rand of its 2036, 2041 and 2048 government bonds on Tuesday. Yields for the 2036 and 2041 paper edged lower, but that for. . . Full story | | South African power utility Eskom said on Monday that available spare supply on its electricity network had fallen to just over 1 percent of total capacity due to a sharp increase. . . Full story | | South African fixed-line operator Telkom SA said on Monday it had won a court dispute with an affiliate of China's ZTE Corp that had put on hold its planned network overhaul.. . . Full story |
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Company News | Further to the cautionary announcements, the last of which was dated 5 February 2013, shareholders are advised that discussions are still. . . Full story | | Shareholders are advised that, at the general meeting of Sentula held on 19 March 2013, convened in terms of the notice. . . Full story | | Shareholders are advised that Ms Ayanda Sisulu- Dunstan has resigned as an independent non executive director of the Group, effective 19. . . Full story | | Textainer Group Holdings Ltd. (NYSE: TGH), in which Trencor has a 48.5% beneficiary interest, has filed its Form 20-F (annual report. . . Full story |
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| ChemSpec advised its shareholders that it has acquired the manufacturing contract for Jack's Paints' exclusive decorative paint brands- Panache, Coverkote and. . . Full story | | Datatec, (the "group", JSE and LSE: DTC), the international Information and Communications Technology ("ICT") group, is published a year-end trading statement. . . Full story | | Resgen has released a webcast with the following details:
*Resource Generation, Funding update
*Speaker: Mr Paul Jury, Managing Director
*Live. . . Full story | | Shareholders were advised that Resgen has issued a funding update presentation. The presentation may be viewed under the ASX announcements section. . . Full story |
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Company Results | Revenue increased to R5.3 billion (R4.3 billion) whilst gross profit rose to R1.2 billion (R917.4 million). Operating profit grew to R668.4. . . Full story | | Revenue for the year ended 31 December 2012 increased by 5% to R1.7 billion (2011: R1.6 billion). Operating profit was down. . . Full story | | Revenue for the year ended 31 December 2012 increased to R4.5 billion (2011: R4.2 billion). Earnings before interest, taxation, depreciation and. . . Full story | | Revenue declined to R103.4 million (R174.2 million). LBITDA was smaller at R7.5 million (loss of R39 million). The net attributable loss. . . Full story |
World Markets (Spot Prices)
| Name | Time | RP | Move | % Move | | JSE Overall | 17:00 | 40346.17 | -123.00 | -0.31% | | JSE Top 40 | 17:00 | 35809.56 | -144.00 | -0.40% | | JSE Gold | 17:00 | 1932.08 | -7.00 | -0.41% | | JSE Financial | 17:00 | 30720.53 | 237.00 | 0.78% | | JSE Industrial | 17:00 | 49854.06 | -110.00 | -0.22% | | JSE Indust 25 | 17:00 | 43125.72 | -95.00 | -0.22% | | JSE Resource | 17:00 | 49426.18 | -618.00 | -1.24% | | DJ Futures | 19:42 | 14310.00 | -80.00 | -0.56% | | DJ Ind | 19:58 | 14401.55 | -50.51 | -0.35% | | SP 500 | 19:58 | 1541.04 | -11.06 | -0.71% | | Nasdaq | 19:58 | 3209.76 | -27.83 | -0.86% | | FTSE 100 | 18:35 | 6441.32 | -16.60 | -0.26% | | DAX | 19:10 | 7947.79 | -62.91 | -0.79% | | CAC40 | 19:10 | 3775.75 | -49.72 | -1.30% | | Nikkei | 08:32 | 12468.23 | 247.60 | 2.03% | | Shanghai | 09:28 | 2257.43 | 17.42 | 0.78% | | Hang-Seng | 10:30 | 22041.86 | -41.50 | -0.19% | | All Ords | 07:43 | 5004.40 | -23.00 | -0.46% | | NZSE 50 | 06:48 | 4345.04 | 4.02 | 0.09% |
| | | Name | Time | RP | Move | % Move | | Gold $ | 19:59 | 1612.67 | 8.19 | 0.51% | | Gold R | 19:58 | 14946.50 | 253.24 | 1.72% | | Gold R/kg | 19:58 | 480743 | 8242 | 1.74% | | Silver $ | 19:59 | 28.9220 | .0440 | 0.15% | | Platinum $ | 19:59 | 1554.00 | -18.75 | -1.19% | | Palladium $ | 19:59 | 729.00 | -32.00 | -4.20% | | R157 | 16:52 | 5.44 | .06 | 1.02% | | R204 | 16:52 | 6.15 | .06 | 0.90% | | R207 | 17:31 | 6.40 | .05 | 0.79% | | Brent Crude | 19:58 | 107.56 | -2.55 | -2.32% | | Rand / Dollar | 19:59 | 9.2643 | 0.1074 | 1.17% | | Rand / Pound | 19:55 | 13.9684 | 0.1531 | 1.11% | | Rand / Euro | 19:55 | 11.9234 | 0.0464 | 0.39% | | Rand / NZD | 19:58 | 7.6299 | 0.0603 | 0.80% | | Rand / AUD | 19:55 | 9.6030 | 0.0650 | 0.68% | | Yen / Dollar | 19:59 | 94.9140 | -0.3540 | -0.37% | | Euro / Dollar | 19:55 | 0.7772 | 0.0057 | 0.74% | | Dollar / Euro | 19:59 | 1.2877 | -0.0086 | -0.66% | | Pound / Dollar | 19:55 | 0.6619 | 0.0002 | 0.03% |
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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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| 19/03/2013 | 184 | 174 | 69 | 427 | 222,443,805 | R15,668,812,627 | 150002 | 1263754 | | 18/03/2013 | 125 | 236 | 66 | 427 | 198,532,248 | R14,108,049,205 | 165172 | 1361088 | | 15/03/2013 | 159 | 186 | 76 | 421 | 391,530,562 | R29,875,451,138 | 184721 | 1368568 | | 14/03/2013 | 160 | 173 | 92 | 425 | 224,196,440 | R15,505,140,688 | 160136 | 1261899 | | 13/03/2013 | 143 | 211 | 74 | 428 | 218,554,885 | R16,400,426,842 | 176070 | 1759023 |
* Includes all listed instruments on the JSE
Index Summary | Index Name | RP | Move | % Move | | Top 40 | 35,809.00 | -144.00 | -0.40% | | Industrial | 49,854.00 | -110.00 | -0.22% | | Mid Cap | 55,761.00 | 32.00 | 0.06% | | Small Cap | 43,530.00 | 264.00 | 0.61% | | Resource 20 | 49,426.00 | -618.00 | -1.24% | | Industrial 25 | 43,125.00 | -95.00 | -0.22% | | Financial 15 | 11,561.00 | 109.00 | 0.96% | | Financial & Ind. 30 | 46,875.00 | 16.00 | 0.03% | | All Share | 40,346.00 | -123.00 | -0.31% | | Oil & Gas | 31,329.00 | .00 | 0.00% | | Mining | 31,020.00 | -434.00 | -1.38% | | Gold Mining | 1,932.00 | -7.00 | -0.41% | | Platinum Mining | 49.00 | .00 | -0.14% | | GENERAL MINING | 8,394.00 | -140.00 | -1.65% | | Oil & Gas Producers | 16,845.00 | .00 | 0.00% | | Basic Materials | 26,975.00 | -362.00 | -1.33% | | Chemicals | 19,087.00 | -113.00 | -0.59% | | Forestry & Paper | 21,412.00 | 117.00 | 0.55% | | Industrial Metals | 24,585.00 | -873.00 | -3.43% | | Industrials | 40,216.00 | 143.00 | 0.36% | | General Industrials | 117.00 | 1.00 | 1.07% | | Consumer Goods | 47,019.00 | -136.00 | -0.29% | | Automobiles & Parts | 8,308.00 | 211.00 | 2.61% | | Household Goods | 171.00 | -2 | -1.44% | | Health Care | 60,245.00 | 133.00 | 0.22% | | Beverages | 165.00 | 3.00 | 1.96% |
| | | Index Name | RP | Move | % Move | | Food Producers | 68,821.00 | -1134.00 | -1.62% | | Personal Goods | 747.00 | -21.00 | -2.79% | | Consumer Services | 80,797.00 | -876.00 | -1.07% | | General Retailers | 61,816.00 | 350.00 | 0.57% | | Travel & Leisure | 5,259.00 | 30.00 | 0.59% | | Media | 128.00 | -4.00 | -3.37% | | Support Services | 2,339.00 | -42.00 | -1.79% | | Telecommunications | 82,206.00 | 690.00 | 0.85% | | Financials | 30,720.00 | 237.00 | 0.78% | | Banks | 52,936.00 | 705.00 | 1.35% | | Non-life Insurance | 49,640.00 | -127.00 | -0.26% | | Life Insurance | 28,829.00 | 257.00 | 0.90% | | General Financial | 2,833.00 | -1.00 | -0.05% | | Technology | 35,954.00 | -76.00 | -0.21% | | SHARIAH TOP40 | 3,398.00 | -36 | -1.07% | | FTSE/JSE SHARIAH ALL | 3,526.00 | -31 | -0.90% | | COAL MINING | 20,449.00 | -522 | -2.49% | | FTSE JSE Fledgling | 5,924.00 | -7 | -0.12% | | FTSE/JSE Alt X | 882.00 | 9 | 1.12% | | SA LISTED PROPERTY | 515.00 | | -0.02% | | CAPPED PROPERTY | 414.00 | | 0.42% | | RESOURCE | 27,198.00 | -324 | -1.18% | | DIVIDEND PLUS | 215.00 | 0 | 0.17% | | FTSE/JSE RAFI 40 | 8,247.00 | -7 | -0.10% | | Capped Top 40 | 18,900.00 | -66 | -0.35% | | Capped All Share | 20,427.00 | -56 | -0.28% | | JSE TABACO | 6,262.00 | 84 | 1.37% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** | Code | Company Name | Status | Updated | | IPL | IMPERIAL HOLDINGS LTD | HOLD | 21/01/2013 | | BIL | BHP BILLITON PLC | HOLD | 21/01/2013 | | TRU | TRUWORTHS INTERNATIONAL L... | SELL | 21/01/2013 | | AMS | ANGLO AMERICAN PLATINUM C... | HOLD | 21/01/2013 | | ANG | ANGLOGOLD ASHANTI LIMITED | HOLD | 21/01/2013 |
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Results Expected** | Expected | Company Name | Fin. Date | | 20/03/2013 | URONE | December 2012 (Final) | | 21/03/2013 | BIOSCI | December 2012 (Interim) | | 21/03/2013 | LONRHO | December 2012 (Final) | | 21/03/2013 | MICROMEGA | December 2012 (Final) | | 21/03/2013 | SABLE | December 2012 (Interim) |
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Recent Dividends** | Share Name | Dec-Date | LDT | Pay-Date | Amount | | METAIR | 18/03/2013 | 05/04/2013 | 15/04/2013 | R 0.9500 | | ADVTECH | 18/03/2013 | 05/04/2013 | 15/04/2013 | R 0.1400 | | BELL | 18/03/2013 | 05/04/2013 | 15/04/2013 | R 0.4000 | | ILIAD | 18/03/2013 | 12/04/2013 | 22/04/2013 | R 0.2000 | | PUTPROP | 13/03/2013 | 12/04/2013 | 22/04/2013 | R 0.1800 |
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Ex Div** | Share Name | Dec-Date | LDT | Pay-Date | Amount | | SANTAM | 27/02/2013 | 14/03/2013 | 25/03/2013 | R 4.1000 | | GRINDROD PREF | 27/02/2013 | 14/03/2013 | 25/03/2013 | R 3.7900 | | PSGFIN PREF | 28/02/2013 | 14/03/2013 | 25/03/2013 | R 3.5124 | | CAPITEC-P | 28/02/2013 | 14/03/2013 | 25/03/2013 | R 3.5124 | | MASSMART | 28/02/2013 | 14/03/2013 | 25/03/2013 | R 2.7500 |
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Upcoming AGMs** | Code | Company Name | Date | Status | | REB | Rebosis Property Fund Ltd. | 20/03/2013 | Confirmed | | SDH | SecureData Holdings Ltd. | 20/03/2013 | Confirmed |
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![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnews_images_sn%252F1317717632.jpg "Man walks past the Johannesburg stock exchange offices in Sandton")
![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnewsimages%252F2013-03-19T064402Z_1_AJOE92I0IPF00_RTROPTP_3_OZABS-SAFRICA-PALABORA-20130319.JPG "A mine worker is seen underground in South Deep mine outside Johannesburg")
