Following on from last week's article where I quoted Sir John Templeton as saying “tell me where there is the most pessimism and I will tell you where to invest”. That describes global equity markets now and more accurately the South African market. Most investors are bearish and pessimism is high. But that doesn't mean you should be buying every stock making 52-week lows or in bargain territory.
We could see another bout of panic selling like we did last week, giving patient investors another chance to allocate capital.
Most investors are disillusion by the poor performance of the JSE. The JSE All Share Index is back to levels seen in 2015. And if you haven't had Naspers and a number of other rand hedge shares you have significantly underperformed.
Investors should still be investing with caution and avoid panicking when everyone else is. Panicking (and letting your emotions guide you) at the wrong time is what affects investor returns. As was shown by Peter Lynch's analysis of his Magellan fund.
The Magellan fund managed by Peter Lynch achieved a remarkable 29% annualised return between 1977 to 1990 but the average investor in that fund lost money. They did the hard work of selecting the best performing fund, but the easier task of riding out the bad times was too much for them. This adds substance to the adage it's not TIMING the market but TIME IN the market that delivers the best returns for investors.
Investors willing to ride out the tough times will be rewarded handsomely. A number of clients have been overweight cash and we're accumulating shares for our clients following our managed portfolios.
Firstrand and Discovery are two shares that are very attractive at these levels. And investors who by below R60 and R105 respectively will make over 20% return within the next 12 months.
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The week ahead:
• Local: PPI (29/08); Money Supply (30/08)
• Local Results Due: BLUETEL, BUFFALO, NET1UEPS, WORKFORCE (26/08); HOMCHOICE, IMPERIAL, SUPRGRP (27/08), ADVANCED, DISTELL, GRINSHIP, M&R-HLD, MASTDRILL, MOTUS, RAVEN (28/08); ADCOCK, ADVTECH, ALPHAMIN, AVENG, BIDCORP, HYPROP, MASSMART, ONELOGIX, SIBANYE, STELLAR, WOOLIES (29/08); ARM, BAUBA, CAXTON, GO LIFE, HERIOT, MUSTEK, SANTAM, TOWER (30/08)
• International Earnings Results: BHP Billiton (21/08); China Life Insurance (22/08)
• LDT: QUILTER, REINET, TRANSCEND, SABVEST, CAPCO, HAMMERSON, LIB-HOLD, MTN GROUP, NEDBANK-P (27/08)
Other Economic data releases of interest…
• Monday: G7 Meetings (All); Core Durable Goods (USA)
• Tuesday: MPC Member Tenreyro Speaks (UK); RBA Deputy Gov Debelle Speaks (AUS); CB Consumer Confidence (USA)
• Wednesday: Crude Oil Inventories (USA)
• Thursday: German Prelim CPI (EU); Prelim GDP (USA); ANZ Business Confidence (NZL); Private Capital Expenditure (AUS)
• Friday: Building Approvals (AUS); GDP (CAN); Personal Spending, Chicago PMI (USA); CPI Flash Estimate (EUR)
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