JSE Direct with Simon Brown

Podcast: Should I buy it?

In JSE Direct, Latest by Simon Brown


Simon Shares

  • Fidelity in the US is no offering two of its index funds at zero fee. They do this partly perhaps as a loss leader but also they can generate revenue via script lending. I think we’ll see negative fee funds (they’ll pay you to hold) in time and even locally in South Africa zero fee funds are possible in time.
  • Local July tractor sales came in at 525 units vs. 508 in July 2017.
  • MTN (JSE code: MTN) results looked bleak. Even if you add all the ‘one off issues’ back into HEPS it’s only 280c. As Ian Stiglingh pointed out on Twitter, we knew it would be a large miss as expectations (consensus) was for a large increase in HEPS and anything above 20% requires a trading update. So no update meant a miss.
  • Apple (NYSE code: AAPL) is now worth $1trillion having listed in 1980 with a $1billion valuation and since then done almost 20% a year annualised return excluding dividends. On a PE of some 18x it is not even expensive compared to others such as Amazon on a PE some 5 times higher. I know Apples and Amazons, not really comparable and Apple has had it’s ups and downs along the way.
  • Wealth for three generations in one tax-free account
  • Upcoming events

Is it a buy?

No it is not. I have been asking and been asked this question for twenty-three years. Way back in the late 90’s whenever somebody mentioned a stock on IRC or the email / user groups I belonged to I would ask if it was a buy. Mostly the answer was no, but even when it was yes – I never bought. So I totally understand the question.

These days when I Tweet about a stock I get the question and my answer is at best no. Even if it is a stock I am buying my answer would be “I am buying” (and my portfolio is online here). But that does not mean anybody else should be buying.

Here’s why even shares I am buying are not always for anybody else.

  • What’s my risk profile compared to yours?
  • What’s my overall portfolio construct compared to yours?
  • Our respective ages and so the list goes on.

What’s my expectation and valuation compared to yours?

But I understand where the question comes from, heck I have asked it often enough of people. The market is frankly large, scary and unknown for everybody, especially a newbie. As a newbie we want some certainty and the ‘experts’ can in theory give us that certainty. Unless of course it is all those experts telling you to buy Steinhoff before the fraud news broke out into the open, and even then many rated it a buy stating that the assets were worth at least 2500c a share.

An important point here, just because a stock has fallen does not mean it is a buy. Again witness Steinhoff. But even with MTN. I don’t like the sector or the stock regardless of price, so for me it is never a buy. Of course I could be wrong about the sector and the stock – that’s what makes a market, different views.

Of course even if the ‘expert’ says yes buy it, one doesn’t rush out and buy because we discover that that does not reduce the fear, the fear of losing money.

So here’s how to get in as a newbie.

  • Firstly get your tax-free account going. Buy some Exchange Traded Funds (ETFs) and forget about them.
  • Then get some free cash for buying individual shares. Decide on sectors you think will be good investments and start digging around the shares in those sectors.
  • Then when somebody says a stock is great (be it David Shapiro on BusinessDay TV, me on Twitter or whoever), you don’t buy, but rather you use this as a trigger to do deeper research into that stock.
  • You’re still not buying, but you’re learning and you’re also building a list of shares worth keeping an eye on. You’re tracking their prices and their results – all the while your tax-free portfolio is working away in the background.

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JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

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