Beautiful week for Zimbabwe
The current week could be dubbed the wonder week for Zimbabwe in 2010. Joyce Meyer is in town. If you watch the God Channel, you will know that she is an evangelist par excellence, an epitome of positive women influence. India Cricket team is also around for the ODIs and Zimbabwe is currently ahead by 2 games. Cricket to India is what football is to Brazil. The Samba boys were also in town on Tuesday & Wednesday (never mind the cost of having the Brazilians in the country) though Bullish Thoughts had to see the game on TV. But this indeed was a wonder week. We can only hope that Zimbabwe comes back on the global tourism map. With the Tourism Index at 31.61 points (100 points on February 19, 2009), an improvement in the foreign arrivals and spend would be a welcome development to improve the sector’s financial performance and investor ratings.
How we almost ended up with Afrofoods Grand Challenge Promotion
Bullish Thoughts was convinced that this year we were going to see either an Afrofoods Grand Challenge Promotion (Spar has already done the Tankard) at the Borrowdale race course. Afrofoods has literally taken Harare by storm occupying every square inch of vacant spaces focusing on the convenience shop model. It has even gone further by assuming control of CFI’s Town and Country brand.
When OK and TM Supermarkets were downsizing, Afrofoods was expanding and gaining the loyalty of consumers.
However, OK seems to have found a new lease of life from the Investec underwritten debt placement and rights offer and has come back with a bang. Bullish Thoughts has seen amazing activity at OK First Street. OK is offering 13 Mazda vehicles among other prizes. Afrofoods has taken it further by offering 21 Nissan vehicles while TM Supermarkets is pursuing the 6 hours of extended shopping at reduced prices.
With the intense competition inducing pressure on margins, we wait to see the impact on 1HY2011 results for OK.
The share price has traded in a narrow band for some time now with a support around 6c and resistance at 7c. Not much for speculative trading unless you are peddling at least $500k of the stock. Good counter for exposure to food retail though but the dividend might not come any time soon due to finance charges and squeezed margins.
For the FY2010, OK Zim total revenue was $187.5m and operating profit $2.5m, giving an operating margin of 1.4%. This exposes the impact of high fixed overheads & stiff competition in the retail market space. We wait to see if management can regain the market leadership but we bet that if Afrofoods were listed, it would be a worth buy
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Not so sweet?
Hippo Valley Estates has a lot of work to do. Bullish Thoughts wonders how in a difficult 2008, output was 170k tones and in a dollarized environment it shrank to 88k tones. Whilst P/E of 7.65x appears undemanding, the market appears to want more from Hippo management because a 50% decline in production during times of high global sugar prices is not so sweet.
CEO dilemma: When everything that can go wrong does go wrong
BP has failed to “plug that damn hole” in the Gulf of Mexico. The environmental cleaning and spill containment bill has exceeded $1bn already. Even if the spill is effectively contained, which could be sometime in September 2010, there will be other penalties from the Obama administration and litigations by affected business owners for lost profits. It seems everything that could go wrong, has gone wrong for BP. Bullish Thoughts feels sorry for BP chief executive Tony Hayward. BP share price has already shed 38% as of 3 June since the spill began almost a month ago with 2,703,000 litres of crude spewing into the sea every day. Will BP recover from this tragedy with fresh crude already on shore in many areas? Some analysts say with a cash balance of $6bn, the impact will be minimal but Bullish Thoughts says the market has already voted with its feet.
Warren Buffet caught flat footed by credit crunch
The Oracle of Ohama, Warren Buffet admitted before a US congressional hearing that he was also caught flat footed by the credit crunch bubble. His firm, Moody’s, gave AAA rating to mortgages that went bust a few months later. Bullish Thoughts says, you can’t beat the market always and reputation alone doesn’t make you the best investor.
StreetDogs: Some vital lessons in the psychology of trading from an old hand
Bullish Thoughts has been reading a lot these days. Here is one of the articles he came across which might be of interest to you:
GEORGE Slezak is an investment advisor with more than 30 years experience in the markets. To assist traders with what he calls the blind side of trading — what you learn only through experience — Slezak has published a 48-page memo titled Principals and Psychology of Day Trading in which he discusses 36 ideas and common mistakes.
These range from common advice to more obscure gems. Among the former: “never add to a losing position”; “buy the rumour, sell the news”; and “when everyone is in, it is time to get out.” Among the latter:
Remember the power of a position. Never make a market judgment when you have a position. It will totally bias your judgment.
Confidence kills. Remember, you really don’t know anything. Expect the unexpected. Always know your position and exit your trade when you feel uneasy.
When you’re hot, you’re hot. When you’re not, you’re not. Don’t stop trading when you’re on a winning streak. Don’t turn three losing trades in a row into six in a row. When you’re off, turn off the screen and do something else.
If the trade isn’t going the way you expected … get out at the market price. Don’t make the mistake of thinking you can suddenly pick a price.
It’s always easier to enter a losing trade. Don’t you just hate that!
News is only important when the market doesn’t react in the direction of the news. It’s the market’s reaction to the news that’s important.
Don’t fret about a missed opportunity. There is always another just around the corner. Besides, several just happened that you didn’t even know about.
Don’t look for market secrets. You will find only those things that no one cares about. Use conventional tools.
Never ask for another’s opinion, they probably did not do as much homework as you.
Never say but. When the market is going up, say the market is going up. When the market is going down, say the market is going down — with no buts attached. You’ll be amazed at how hard it is to say what is going on in front of you when your mind is full of preconceived opinions.
Don’t have an opinion. I’ve never had an opinion I didn’t like. Trading requires flexibility. Do your homework not to develop a market opinion, but rather to understand the potential for both sides of the market.
When you make a mistake of discipline, whine like a fool. Errors in discipline are mistakes you will keep making. Wearing ashes and sack cloth may help extend the time before you do it again.
When you wake up, your instincts are wrong. What comes naturally is usually the wrong thing to do when it comes to trading. If it was the other way around 90% of those playing the game would win as opposed to lose.
If you trade long enough you will recognise that only you, not the market, can make mistakes.
Invest Wisely!
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Faith Capital (Pvt) Ltd (c) 2009 Web: www.bulls.co.zw Email: bulls@bulls.co.zw / bulls@econetmobile.co.zw Tel: +263 4 2927658 Cell: +263 91 344 1674
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