Hate it when foreigners sell out
(literally)…
Every market player has been pointing fingers at Russian based
Renaissance Capital for creating a scrip overhang on many counters including
Econet Wireless, Delta, Innscor and CBZ.
The Moscow based equities player was reportedly unwinding its Zimbabwe
equities position after 3 years of aggressive buying premised on the Zimbabwe
recovery story post the September 2008 signing of the Global Political
Agreement (GPA). The firm has reportedly since closed the Zimbabwe office.
Bullish Thoughts feels pity for them as some of their holdings had a
holding period return of almost 0% or sub 10% if you like. Consider that the
firm did get exposure to Delta in 2009 around prices of 60c and exited in 2012
around prices of 65c-70c. You can do the maths and realize that there was some
serious opportunity costs considering solid performance from some of the
African bourses. You can extend the portfolio to counters like Econet which
once hit an all-time high c551c and has never traded at those levels since.
Whilst the market witnessed October 2012 net inflows as foreigners bought $23.7m
shares against sales of $9.9m, the ratio of foreign sales at 30% is way too
high considering the minority role played by Zimbabwean investors. Total market
value of trades for October was $37.86m and if we look at the value of trades
coming out of foreign investors, it is clear that as it stands, there is
absolutely nothing bullish about foreigners exiting the local market.
The bourse has benefited immensely from foreign trades both in terms of
liquidity and general market depth and one can only hope the ratio of sales to
total foreign trades hovers somewhere around 10%.
Perhaps, going forward, it will be a different picture now that there
is no more RenCap to talk about after it unwound most of its holdings save for
a small parcel in CBZ.
Renaissance Capital is an
investment banking firm that operates in high-opportunity emerging markets. It
is a top-ranked investment bank for M&A, equity and debt capital markets, as well as
securities sales and trading. Renaissance Capital focuses exclusively on emerging
markets, including Russia, the Commonwealth of Independent States (CIS),
and the frontier markets of MENA and sub-Saharan Africa.
The positive side from RenCap
exit…
However, the benefit from the Renaissance Capital exit was a sudden
shortage of scrip which drove share prices to crazy levels. As you read this,
some investor is offering Delta at 100c, yes, 100c!
Most share prices skyrocketed with even perennially undervalued Econet
Wireless touching 500c, Innscor 81c, SeedCo 95c during the stock market bull run
cum bubble…which has since burst
anywhere.
The interesting bit though is that Bullish Thoughts did receive so many
emails from existing investors complaining of having sat on their brains while
the market was going up stratospherically.
They never took profit. Econet came back to 480c post its 1HY2012
results, Delta to the 80s while Innscor is now below 74c.
Delta is up again at 90c and the same investors are still
confused….should they take a profit or not? Bullish Thoughts will not attempt
to be the know it all advisor suffice to say, any investor should have a pre-decided exit point when they buy
into a stock. Revisit your target price and execute the rule obviously taking
cognizance of the fundamentals. Did the fundamentals materially change to
warrant a review of your target price upwards? If not, then execute your rule
whether it’s a hold or buy or sell!
Also remember like Bullish
Thoughts has always said before: "Bulls make money, bears make money,
pigs get slaughtered"
This simply means, do not let
greed affect your judgment. If your target price on Innscor is 85c and the
price reaches 81c, do you start hallucinating that the price will reach 90c and
possibly 100c? Or Econet will suddenly hit 551c allowing you to break even
(excluding opportunity costs if you bought at that price in 2010), or that
Delta will hit the psychological 100c mark?
Bullish Thoughts encourages you not
to be punished by the markets just because your greed is causing you to have unreasonable
expectations. Doing well now might cause you to hold onto stocks past the
optimal time to sell them or overpay for new holdings.
This mistake commonly occurs in bubbles.
Also note that the market can
punish you if decide to be the Greater Fool who chase performance.
Investors who buy what has done
well recently (hot sectors/stocks e.g., Delta, Econet, Innscor, OK Zim) can often find
that they underperform the market.
Yesterday's biggest winners are
often not tomorrow's. Not to say the above cited stocks are bad…but if you did
not get in when Delta was 65c, Econet 385c, Innscor 54c and Ok Zim 10.5c, is it
proper to get in at 30%+ capital gain a
month down the line?
Greed kills, it can kill an
investor's returns by making them act in haste. The best investor is the one
who is intellectually flexible and dispassionate in analysis when it comes to
investing.
The critical determinant in an
investor's success is not intelligence or skill but temperament. Bullish
Thoughts hope you will Invest Wisely!
Vimpelcom & The Telecel
shareholder curse…
Shareholder wrangles usually result in the shafting of minorities. It’s
perhaps good that Telecel Zimbabwe is not listed otherwise shareholders would
have been victims of unparalleled share price volatility.
VimpelCom will sell several of its emerging market businesses in Africa
and Asia as part of a rationalisation of its global telecoms operations to
focus on core growth areas.
The Russian telecoms group, which is the world’s sixth largest by
customer numbers, has spoken to potential buyers of its sub-Saharan African
units from Burundi and the Central African Republic.
It is also expected to sell its Zimbabwean business – Telecel Zimbabwe
– after resolving outstanding ownership and licensing issues.
The three businesses could be valued at more than $60m, according to
one person with knowledge of the situation, with about $94m of revenues
generated from about 2.8m mobile subscribers across the businesses.
The move is part of a strategy to focus on more mature markets such as
Russia and Italy, which make up about 70 per cent of the group’s business.
Bullish Thoughts can only say Telecel has had shareholder wrangles and
changes more than it has had mind blowing product launches. The market wishes
the shareholder issues can be resolved once and for all.
Manchester United signs on Mark
Clattenburg as Webb looks destined for the bench…
Webb, however indicated that he would fight for his place and would not
warm the Manchester United bench for too long.
He might just be lucky if the FA finds Clattenburg guilty of
inappropriate language use againt Mata and Mikel.
Afre Corp rights offer
approved allows management to focus on business growth now and recapitalization
of the Botswana unit would be interesting given that NBFRA has law mandating
insurers to exhaust local reinsurance capacity first before taking risk cross
border. Bullish Thoughts is interested
in knowing your take on the direction of the Afre share price without rights or
post closing date of the rights offer . Depending with your take, would you recommend
investors to buy or sell and what is the evaluation period?
TPH posted weak financials
which were blamed on Puzey & Payne. Bullish Thoughts is interested in
seeing the number of people driving Peugeot vehicles on Zimbabwean roads. He is
also interested in knowing if that franchise can be sold on the local market
where Autoworld, Croco, AMC, Clover Leaf rule? Still on TPH & Zimplow,
without speculating ratios on share TPH delisting and potential cash payouts,
what is your take on the post consolidation Zimplow investment wise? It may
become a good company but will it be a good stock? Will Tetrad hold on to it? In the meantime, Bullish Thoughts wishes Nhamo
Nyambuya well as he tries new things after 24 years of the same thing!
Invest Wisely!
