Money with a dash of Funny

Monday, 13 April 2015

Naspers clocks 2000

"Naspers had a market capitalisation of 813 billion Rand at the open today, up 3.7 percent as I write this in early morning trade which equals 843 billion Rand. The difference between what the stake in Tencent is worth, relative to what the JSE buyers are willing to pay is roughly 8 billion Rand. Effectively, the South African asset management community is telling you that the people of Hong Kong, or the folks valuing Tencent on a 53 multiple are overpaying."

To market, to market to buy a fat pig. Another jam packed weekend of kids stuff for me, it was fun as ever! Another Lions victory, the ~~home~~ team from the coast was beaten under raining skies, unseasonable at this time of the year, not so? Markets across the vast Atlantic Ocean ended around half a percent higher on Friday, closing near the highs of the session. Locally it was a pretty broad based rally, resource stocks lagged, gold stocks popped hard as the precious metal price ran through 1200 Dollars a fine ounce. What? This is starting to sound like a market report, I must stop this immediately at once.

I had a look at the market capitalisation tables, there are only 22 companies that have a market cap of more than 100 billion Rand. In Dollar terms with the exchange rate at 12 to the US Dollar, there are only 18 companies with a market cap of more than 10 billion Dollars. There are less than 100 companies with a market cap of over 1 billion Dollars here in South Africa. 97 to be exact, Curro Holdings (which has been on a tear, the share price that is) just sneaks in and out of that list. If I apply the same criteria to the NYSE, there are 1903 companies with market capitalisations greater than 1 billion Dollars. Greater than 10 billion Dollars? 553 companies. Imagine if our listed companies were part of that massive pool of investments? Going a little further, there are 61 meg caps listed on the New York Stock Exchange, the choice of monster businesses is actually enough.

The only point I was trying to illustrate is that in a deep and liquid market like the US, investment mismatches are more easily available. The market here is a little more crowded, you must always be looking for global diversification and owning big businesses that are able to operate across a multitude of geographies. I do not know why there is this perception of South African businesses that they are not patriotic when they go abroad? Surely if you are looking for newer customers, you cannot be confined to 54 million souls? I encourage South African businesses to trade wherever they think there are opportunities.

If you think about it, if all the consumers in Sub Saharan Africa started using products that are manufactured on the continent, most especially here, that would be better for trade across Africa, not so? As a collective, we need to recognise that there is a world of opportunities out there, stopping and routing out Xenophobia. There is a reason why people want to live and do business here, it is better than their country. Great risks are taken by people who travel and move out of their comfort zones, there is no plan B. That is why you often find that countries that readily accept immigrants into their systems have a greater rate of productivity than the locals, as a result of only Plan A.

The long and the short of it all is that you should have a globally diversified portfolio with big companies that have better than average growth prospects. You must own high quality, almost always. As they say in the classics, invest in what you know. Rather than going beyond the tried and tested, there is a reason that large and sizeable companies remain enduring parts of the investable world, there is a reason for size and scale and more importantly longevity.

Company corner

At the start here Naspers have blown through 2000 Rand, as a result of TenCent having crested 170 Hong Kong Dollars for the first time. Perhaps it is time for a refresher in terms of the, what Naspers is worth question. Their results for the full year to end March were released in June of last year. If there is to be a trading update, there could be one at any time in-between now and then, looking back over the years and more especially at the interim phase, the trading statement was ten days before results. End of June says the investor relations calendar, 29 June to be precise.

Our trusty Naspers/Tencent calculator is as follows: Take the Tencent market cap in Hong Kong, which right now is 1.58 trillion HKD. Naspers owns 33.85 percent of TenCent, that translates to 534 billion Hong Kong Dollars. One Hong Kong Dollar at the current exchange rate is 1.56 Rand. So, quite simply, multiply 534 billion HKD by 1.56 and that equals 834.8 billion Rand. Naspers had a market capitalisation of 813 billion Rand at the open today, up 3.7 percent as I write this in early morning trade which equals 843 billion Rand. The difference between what the stake in Tencent is worth, relative to what the JSE buyers are willing to pay is roughly 8 billion Rand. Effectively, the South African asset management community is telling you that the people of Hong Kong, or the folks valuing Tencent on a 53 multiple are overpaying. With growth rates in the mid 30's, the PEG ratio is somewhere in the region of 1.43 times, which is starting to reach expensive levels.

I am reminded many times that a) the internet is still at early stages in China and there is plenty of room to grow rapidly, b) there is very little entertainment in China, that is why the Tencent platforms are so successful and c) the Chinese authorities like having control over the local companies that operate in that space, equally the companies there now will keep external competitors at bay. So whilst Tencent may be at the edge of what is "full" in terms of price, the rest of Naspers is effectively "free". This phenomenon of "getting the rest for free" with regards to the rest of the Naspers businesses has ALWAYS been around, somehow our wisdom amongst South African investors is arrogantly miles better than those folks closer to the action of the business who actually live in the region. Yes. Perhaps it is worthwhile to ask the investor relations person at Naspers this very question, and why she thinks it exists.

Remembering that last year the TV business at Naspers recorded revenues of 36.271 billion Rand and registered EBIDTA of 10.370 billion Rand. You could easily pay 150 billion Rand for that as a standalone business. And yet, I recall over a year ago Koos Bekker thought that the business was a "legacy" business. He is right, more and more content will be available online when the faster internet speeds become available in South Africa (sometime in 2030 - maybe, I am of course kidding), that is a threat to their very own business. Perhaps when the ecommerce businesses are fully fledged and making money (instead of losing A LOT), the TV business will be floated separately. Who knows, for now the cash cow is available for the heavy investments in the ecommerce businesses.

Things we are reading

This is clever. Via AEI. 33 Insanely Clever Innovations That Need To Be Everywhere Already. They include traffic lights with countdown lights, a folding bike helmet, tile attachments to your keys and wallets to make sure that you can find them, always. Encouraging innovation drives wealth creation.

Phew. This takes a giant sideswipe at the Hedge Fund industry, written by Morgan Housel: Two hedge fund managers walk into a bar. It turns out that the market has crushed hedge funds over ten years. And they were supposed to be "neutral", so much for paying all the fees.

This article has received a fair amount of attention over the last week, I expect this trend to continue - Is Your Job 'Routine'? If So, It's Probably Disappearing. The need for quality education is more now than ever and is a great story for a company like Curro or Advtech.

I found this infographic on twitter over the weekend. You could say that this is economics 101.

When using financial/ mathematical models stop working, the temptation with low interest rates is to double down on the original position - Doubling Down on Risk

Arguably the most important thing for start ups is access to capital, the easier it is to get capital, the innovation a country will have - SEC: Startups Can Now Raise $50 Million in 'Mini IPO'.

Home again, home again, jiggety-jog. Stocks are up. This is a record, I think. Interestingly we always measure ourselves in Rand terms, the currency that we transact in of course. You cannot go to the shops and buy bread in Dollars, this is not Zimbabwe. It is therefore interesting to note that the iShares MSCI South Africa Index ETF (share code EZA) is 8.78 percent higher in Dollar terms thus far, year-to-date. Over a year however, the ETF is up only 6 percent, meaning that the Dollar return has been quite poor, relative to the S&P 500, which has returned 15.76 percent. Over five years however, it becomes even more apparent that you should and must have offshore investments in a Dollar based environment, owning high cap quality companies. The S&P 500 is up 76 percent, whilst the EZA is up a mere 13.38 percent. Inside of the EZA there are 53 stocks, Naspers is the biggest (nearly 20 percent), with MTN around 9.6 percent. Over five years the Dollar is 65 percent stronger against the Rand, there is your difference. The Rand is nearly 40 percent weaker to the Dollar over the same time.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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Friday, 10 April 2015

I don't know, I do care.

"The point that I am trying to make is that nobody knows the future. Nobody knew that Apple was going to return 1924 percent over the last ten years. Equally nobody knew that Eastman Kodak (an iconic brand of yesteryear) would go to zero. The irony was that the highest price that Eastman Kodak ever reached was moments before the October 1987 stock market draw down, the single worst day percentage wise known to all of us."

To market, to market to buy a fat pig. I really enjoyed the opening line of the Crossing Wall Street weekly newsletter today, it is a Peter Lynch quote in which he quite simply says that more money is lost by investors preparing for corrections or trying to anticipate corrections, than has been lost in the corrections themselves. Lynch was at Fidelity Investments, the behemoth (that is not nice) which as at September last year had nearly 2 trillion Dollars under management, total customer assets at Fidelity was nearly 5 trillion Dollars. Lynch managed the Fidelity Magellan Fund, the best known actively managed mutual fund in the world, according to Wikipedia. Magellan of course was one of the earliest explorers, Portuguese, funded by the Spanish however.

From the time that Lynch managed the fund, assets went from 18 million Dollars to 14 billion Dollars. Such was the consistency of Peter Lynch that he attracted more and more assets. The fund averaged 29 percent per annum during his 13 year tenure at the helm. So Lynch deserves a place in investing folklore, he is credited with the saying ten bagger, the stock that goes up tenfold is a ten bagger. He left a nice job to manage his own families money, he had enough of doing it. In this amazing interview with Charlie Rose: Peter Lynch Journeys From Funds to Philanthropy, you get a sense of where he is now. Part of the reason why he quit so early was to spend more time with his family, his dad died at the age of 46, he didn't want to work all that time in order to not see his family. Good lesson there for all of us I guess. Pressure too, 1 in 100 Americans had money invested in that fund, Lynch felt responsible, he cared.

Back to what Lynch was trying to say however, the anxiety part in us is different, per individual. I speak to many entrepreneurs who are clients, some of them exceptionally cautious and others very positive about the future almost always. Worrying about the next draw down in the market and not investing any money whatsoever (being too scared to part with cash, staying liquid), as you are too worried about losing money is a far worse trait to have than buying businesses today and accepting that market draw downs are part of investing. Markets always go up and down as a function of the current mood, the global economy, the future prospects based on earnings estimates.

I suspect that it is a control thing. Pretty much like a fear of flying, where you have absolutely no control, you are in an enclosed environment with strangers, sitting on a seat with just a seat belt. You had no fear of driving to the airport, yet statistically you should have been petrified driving next to people who have far fewer skills than the people who built and fly the aircrafts. However, you sit in the drivers seat, there is an element of control, you can brake, accelerate, turn, change lanes and so on. The only thing that you have control over in investing is what you buy and when you buy it. You have very little control in big and medium cap stocks over the price. The price is what it is, right now. You can only have control over a companies destiny if you have a board seat and have accumulated enough stock in order to get there, in a way that Carl Icahn does. There are very few individuals who can do that.

So if you can control what you buy and when you buy it, that gives you an element of sitting in the drivers seat. The other thing worth noting is that as intimately as you can know a business, you will never know it better than insiders who are in control of the business. Do you think that Stephen Saad has control over the sales of Aspen products? Yes and no. Yes, he can make sure that he is in all the "right" territories, has the right distribution mechanisms. If everyone was healthy and had no need for the therapies, as brilliant as Stephen Saad is, he cannot control that at all. If suddenly everyone was healthy and well, the need for new therapies would not exist. The Discovery Vitality platform would have done their job finally. However, that is not the case.

The point that I am trying to make is that nobody knows the future. Nobody knew that Apple was going to return 1924 percent over the last ten years. Equally nobody knew that Eastman Kodak (an iconic brand of yesteryear) would go to zero. The irony was that the highest price that Eastman Kodak ever reached was moments before the October 1987 stock market draw down, the single worst day percentage wise known to all of us. Worse than any flash crash. By the mid nineties the stock nearly recovered to the 1987 highs, but then the digital era saw the company expunged from usefulness. Not true, the company still exists and employs over 7000 people, ready for the digital era. Stock holders however got wiped out in September 2013. The irony was that Kodak were the first inventor of the digital camera, around 40 years ago, the board was however worried that the product would cannibalise their existing business. Oh, the horrible and dreadful irony.

So ironically the one thing that you have control over, when you are going to buy the stock (of the company) and how much, has nothing to do ultimately with the investment itself. The stock is merely the quoted price of the company. What is far more important than the stock price is the business, what they do and what their prospects are. Quite clearly the price matters, if you are paying 30 times worth of current earnings then you had better be completely sure that the company produces the necessary earnings for that "expensive" multiple to unwind. If a company valued at 30 times earnings grows earnings by 15 percent per annum for three years and the share prices "goes nowhere", what is the Price to Earnings multiple unwind? Not quick enough, the unwind is to 19 times in three years. The PEG ratio was something made popular by Peter Lynch, Price to Earnings over the Growth Rate. A number closer to 1 represents that the market has got it right. If you put yourself in a box, I won't buy this, it is too expensive, I however like the business, is that not too constricting?

Hard and fast rules again give us an element of control, not too dissimilar in sports such as cricket and golf. There are multiple rules, half the reason that cricket and golf confuse many. Possibly too many rules. Investing can be confined by a set of rules. If that is the case, you often miss fantastic opportunities as a result of being too expensive. And too much anxiety is crazy too, keeping you from buying quality as a result of being too expensive today. I hear the same people who call a company too expensive "fantastic" and then profess to have a forever holding period. Huh? Keep calm, keep investing, keep buying quality, keep paying attention. Don't fret about the Fed, people talking corrections and levels. When you own a stock of a company, you own a claim on future profits. As a shareholder of common stock you have the right to dividends. Let us presume that the same company that is expensive, in growth mode then beds down their recent growth mode and suddenly starts paying big dividends. And then you can buy them for the yield. Yes, owning stocks is like having a family, there are many challenges there too.

Company corner

Why would Woolworths partner with Pharrell Williams? Sure, he wears great hats, he has similar sounding (too similar) songs to Marvin Gaye. He gave an interview with Seth Meyers two nights ago in which he (Williams) suggested that he was fired from his job at McDonald's for being lazy. True story, not just once, three times in total. Pharrell actually wrote the song "I'm Lovin' It", which was then used as a jingle by McDonald's. The song was sung (and co-written) by Justin Timberlake, back in 2003. You know the jingle part on the McDonald's adverts. Irony, getting fired by McDonald's three times and then having them using your song for their jingle. Oh, and did we say that Williams is pretty darn cool, he looks great for a 42 year old (yes) and has pretty good style, even as a fashion loser I can see that.

There was no SENS announcement. There was no media release on their investor relations website. There was however a pretty big release, Ian Moir the CEO was interviewed by CNBCAfrica yesterday and he said that the new target market in South Africa (younger urbanites) would not listen to a suit like him, they were more likely to listen to Pharrell. His daughter, Ian Moir said (who is 23) LOVES Pharrell, a journalist that he met around the release, LOVES Pharrell, what is not to like. Other than the obvious of course -> The 'Blurred Lines' Legal Battle Explained: What Comes Next.

Here it is on the Woolies website: Are U With Us? It is for clean oceans and rivers, it is for making a difference with regards to creating different and sustainable products. Many people are attracted to the idea of shopping at a place that is conscious of the environment, changing it for the better. Better farming methods. And even more importantly, funding education in South Africa which is another big push behind the initiative. Time will tell whether or not the collaboration will bear fruit, Pharrell is cool, will Woolworths shoppers associate with him as a brand ambassador for change though? I hope so, the change for everything, including sustainable farming methods occurs only when consumers adopt it whole heartedly.

Things we are reading

A view from an entrepreneur on how the digital age operates - The platform age is upon us..will you be a landlord or tenant?. Having someone focus on the platform (shopping mall) allows you to focus on building an app (shop), making it easier to launch new cool products.

Here are the numbers on how much water is used to bring us everyday food - If Californians want to really conserve water, they should cut down on coffee, rice, and beef. To save the planet does that mean we have to give up our morning coffee and that fillet steak for supper?

How times have changed, imagine if an advertisement like this was placed today

What should you expect from your equity investment? - Average Returns Are Exceedingly Rare

Home again, home again, jiggety-jog. The great one, all hail the great one in the words of the "12th man" is no longer, Richie Benaud passed away last evening at the age of 84. Richie Benaud was captain of Australian cricket for 6 years, possibly better known to all of us as an exceptionally insightful cricket commentator and writer. Of course he bowled Leg Spin and could bat well enough, he never lost a single series as a captain. His highest test score, 122, was made here in Johannesburg, at the "New" Wanderers stadium just up the road from us. The Old Wanderers was at present day Park Station. Check out the Cricinfo tribute: Richie Benaud dies. So long Richie, thanks for all the memories.

Markets are marginally higher at the open here, dollar strength has translated through to weakness in the Rand, which is giving us a marginal boost at the get go here. Chinese stocks continue to be on an absolute tear.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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Thursday, 9 April 2015

Gore, Discovery to the core

"The group CEO exercised 4,318,732 rights at 90 Rand, the total amount is a crazy 388,685,880 Rand. Read that again, 388 million Rand to maintain his holding in the company and to not be diluted. Obviously he does not have the money lying around, right? The less talked about Barry Swartzberg (the co-founder) had to shell out 198.9 million Rand to follow his 2,210,735 rights. Collectively Barry and Adrian are following their rights to the tune of 587.65 million Rands, over half a billion Rand."

To market, to market to buy a fat pig. A pretty broad based rally across the board, the Chinese markets have been on a tear lately. There was some oil and gas M&A afterglow, it is taking some time for people to digest the massive premium that Royal Dutch Shell are offering for BG Group, the biggest deal in the sector for a long, long time. There has not been a deal of this size and scale for quite some time, most of the stock mega-mergers, Time Warner/Historic TW being the biggest - 186.2 billion Dollars back in January of 2000 the best example of an overpriced merger of equals topping the table.

There are in fact very few deals in history at this sort of price, 70 billion Dollars and certainly the merger of Shell Transport and Trading together with Royal Dutch Shell (in 2004) of 80.1 billion Dollars is the biggest. Other than this one. I can't say that I remember that one too much, October 2004 was when we were starting to see the emergence of the Chinese economic miracle. There are many reasons why companies agree to sell themselves, there are many reasons why companies go on the hunt for acquisitions, one thing is for sure that both parties always agree on, and that is price. Why would the Royal Dutch Shell board and bankers agree that paying a 50 percent premium on the closing price Tuesday was a compelling deal?

If you read the FT article (subscription only, you can get your free bunch for the month) titled: Brazil is the big prize for Shell in BG deal, the heading tells you the first part of what you need to know (Brazil), the second part is that the combined company will become the largest oil and gas producer on the planet by 2018, trumping Exxon Mobil. If you needed reminding, from this table: List of largest corporate profits and losses, Exxon Mobil holds five of the top six quarterly corporate profit records of all time. Scroll down the table and you get to see that Exxon Mobil, as well as Royal Dutch Shell, appears many times.

The combined entity could be saddled with as much as 61 billion Dollars worth of debt, according to Jeffries analyst Jason Gammel, who is quoted in the FT article. There are several hurdles to overcome, shareholders of both entities must rubber stamp the deal, governments must be happy that the markets will be just as free and fair post the deal. The main unknown is the price of crude and natural gas, if those prices go up, then a combined entity would be a far more profitable entity, the world is currently awash with cheap crude. Better technologies have enabled the North American producers to get oil closer to home. The Saudis are pumping at record levels. The Russians too. The Iranians might be able to export oil like crazy, undercutting their neighbours in an attempt to get market share. Obviously the less profitable oil fields will fall by the way side, we still use 94 million odd barrels a day, until that changes, we are addicted to fossil fuels.

With this chart below, daily usage (per quarter) from the International Energy agency (IEA) comes the associated commentary that you should read: World Oil Demand.

The one paragraph about the demand side leaves you feeling the same way you did at the beginning, not too sure where the price will end up in the very medium to short term: "Demand may also have been supported by opportunistic buying and growing interest in storage plays. While that would have helped tighten product markets, such demand is less sustainable than that driven by underlying economic growth, and there are still few firm signs at this stage that lower prices are giving the economy a real boost. China, for one, remains in cooling mode. Then again, information about demand lags supply and tends to be sketchier, so it may take time for any pickup in demand to be fully captured in the data." Pfff .... your best guess is as good as my best guess, which seemingly is as good as the IEA's best guess. Royal Dutch Shell is making more than a little guess, it is a 70 billion Dollar guesstimate, that apparently has been 20 years a coming.

Company corner

An interesting couple of announcements from Discovery over the last couple of days, one relates to the directors and related parties with regards to following their rights. First, the quantum of Adrian Gore's share, looking to maintain his shareholding in the company. We were discussing this a little in the office yesterday. The group CEO exercised 4,318,732 rights at 90 Rand, the total amount is a crazy 388,685,880 Rand. Read that again, 388 million Rand to maintain his holding in the company and to not be diluted. Obviously he does not have the money lying around, right?

The less talked about Barry Swartzberg (the co-founder) had to shell out 198.9 million Rand to follow his 2,210,735 rights. Collectively Barry and Adrian are following their rights to the tune of 587.65 million Rands, over half a billion Rand. Both of them are huge shareholders in their personal capacities, according to the last annual report, I have done my best to circle and show the extent of their huge holdings. Via the Discovery annual report.

So after this rights issue, Barry Swartzberg has (presuming he has not sold in-between now and then, June 2014) 25,763,238 shares, worth 3.413 billion Rand at the closing price of 132.49 Rand a share. And Adrian Gore? Presuming the same, that he has the same amount of shares from back then, Gore has 50,329,224 shares worth 6.668 billion Rand at the closing price. Collectively between themselves, they are not a Dollar billionaire yet. That must be the next stop!

And then a more significant announcement from Discovery, introducing a US life insurance and investment business, John Hancock, which will essentially white label the Vitality product. Here is the official announcement: DISCOVERY AND JOHN HANCOCK ANNOUNCE STRATEGIC PARTNERSHIP. John Hancock is a really old US based investments business named after one of the US "founding fathers". Hancock has the longest serving President of the Continental Congress. Remember the Lincoln speech about four score and seven years? That refers to the Continental Congress, so Hancock has an important name in American history.

Quite simply, as a Vitality user and how the program encourages you to perform better and make sure that you continue to get healthier, make smarter choices and live longer. Drive better. And so on. According to the release the Vitality program is not new to the US, there are 700 thousand members across 50 US states.

There is quite a cute advert for the product, if you follow the following John Hancock Vitality page. Well made and well done, with visuals of sports, exercise, healthy living and so on. All the stuff that we know really well, we know that we have to be fit, eat better and not have as much stress. Work out more. I think that this is pretty big. It turns out that Americans, like almost everyone globally, are underinsured on the life side. The chaps over at John Hancock had Tal Gilbert (one of the top guys at Vitality who has been there since 2004) at the release. Tal is a Joburger, guess what, like Barry and Adrian went to Wits and is an actuary. Excellent.

Good work Discovery, finding partners in well established markets and shaking it up a little. The health and wellness revolution (which is why we like this business) and more focus on a lifestyle that leads to a longer life. We all want to live healthier and longer.

Things we are reading

Given the huge economic growth that China has had, they are in a position to start targeting pollution - China's Pollution Assault Boosting Solar, Electric Vehicles. Green power generation is still more expensive, which could place it in the luxury realm. As China gets richer, it can focus more on green power. As the world of innovation focuses more on clean energy it will also get cheaper.

This is not a new graphic, interesting to be reminded of it - The world's economic center is quickly moving toward China

With the Apple watch becoming available to the retail market tomorrow, this is the most comprehensive review that I have seen so far - Apple Watch Review: You'll Want One, but You Don't Need One. The general consensus is that no one really knows how well the watch is going to do. Great looking product though!

Uber is one of the best disruptors around, and Google own part of the company - Uber's popularity surges, as business travellers avoid taxis

Home again, home again, jiggety-jog. What we describe as winter is closing in on us. Jerseys all around here in Joburg, it has been a cool and rainy two days, unseasonal weather. Stocks at the get go here marginally higher, commodity stocks with the lower prices are getting crushed at the beginning. Naspers nearly hit 2000 Rand a share, time for a share split is what we are saying in the office here!

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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Wednesday, 8 April 2015

Lets go Dutch

"Even though they may be seeming to be paying a massive premium, the share price of BG Group is down 20 percent in the last five years, and since the highs of March 2012, it is down a whopping 40 percent since the middle of March 2012. Over the last year the stock is down nearly twenty percent, the share price has obviously done very little over that time."

To market, to market to buy a fat pig. It certainly felt quit on the "desk" yesterday, not too many calls. We were quiet, I am guessing that the overindulgence of the weekend got the better of most. Not letting anything get the better of them was a large bounce back in the commodity producers, having taken a beating (down 29 percent over the last year), a little Easter respite was served up. Collectively the commodity stocks, driven by a large gain in Sasol, were up 1.4 percent on the day. The big move northwards in the oil price, as a result of the Saudis raising prices (on higher demand) from some of their key Asian trading partners had everything to do with that. The oil price rose another 3 percent yesterday, I guess in part sinking stocks in a late Wall Street reversal.

Following Friday's disappointment on the jobs number there was a better than anticipated ISM services number released on Monday, more importantly the JOLTS report, a jobs opening report was at the highest level since 2007 data showed yesterday. There are now over 5 million job openings in the US, listed that is, there are comfortably over 8 million people unemployed there. It is not about the job only, it is the skill set required to "do" the job. This is apparently an indicator of sorts that the Fed looks at for full employment.

If you are looking for the full report, here goes: Job Openings and Labor Turnover Survey. There, now you know what JOLTS stands for. It looks to me, if you scroll down and check out the tables that everyone is hiring. And I guess that is a good sign. Fastest growing; food services and accommodation. If that doesn't tell you that "things" are better, people are eating out more and travelling, then I guess nothing will.

The strong Dollar has not been bad for everyone. FedEx CEO Fred Smith in his southern drawl outlined all the rights reasons for the company he founded (FedEx) to buy the Dutch business TNT Express, for 4.8 billion Dollars -> FedEx and TNT Express Agree on Recommended All-Cash Public Offer for All TNT Express Shares.

Those of you who do not know the story of Fred Smith, I shall let you know that he once wrote an economics paper in his time spent at Yale, it had all the ideas and building blocks for what was to become the first overnight delivery company in the world. He served in the military for three years, did two years in Vietnam and used his time in airplanes (he was a forward air controller, sitting in the planes, not flying them) to mastermind his idea of overnight delivery. Using military precision.

Wikipedia suggests that Smith was a real cowboy: "In the early days of FedEx, Smith had to go to great lengths to keep the company afloat. In one instance, he took the company's last $5,000 to Las Vegas and won $27,000 gambling on blackjack to cover the company's $24,000 fuel bill." In an interview with CNBC's Jim Cramer, Smith said that Cramer's observation was spot on about a stronger Dollar and a European market that was getting better, thanks to Central Bank intervention. The confidence of doing an all cash 4.8 billion Dollar deal. This would give FedEx the third largest presence in Europe, so from a competitions point of view, not too much standing in the way.

Another deal, far more sizeable and the biggest of its kind in a LONG time was the news broken by the WSJ that Royal Dutch Shell would be looking to acquire BG Group for around 50 billion Dollars, one quarter of their market capitalisation. We knew that there was likely to be deals across the oil and gas complex, this is sizeable however. I guess being in Europe with stricter competitions rules, it might turn out to be a long affair. Remembering that the very name of the company, now over 100 years old, tells you that the roots lie in both The Netherlands and the UK.

The Shell name coincidently comes from the companies (the Shell Transport and Trading company) first line of business in the UK, the import and selling of sea shells. To collectors, you know. It was the son of the founder (surname Samuel) that first imported lamp oil from the Caspian sea, the first ever tanker built specifically for that purpose can be attributed to Shell. Funny isn't it, how businesses change over time. Read the full WSJ article: Shell in Advanced Talks to Buy BG Group.

As this still evolves, the newsletter that is, we have just had news in that Royal Dutch Shell has announced that they are in advanced talks in a (you may have to go through the disclaimer process): Cash and Share Offer for BG Group of a whopping (nearly) 70 billion Dollars. Even though they may be seeming to be paying a massive premium, the share price of BG Group is down 20 percent in the last five years, and since the highs of March 2012, it is down a whopping 40 percent since the middle of March 2012. Over the last year the stock is down nearly twenty percent, the share price has obviously done very little over that time. It just represents the willingness to bite now, the timing is more right. I cannot see the BG Group shareholders saying no in a hurry, that is an 18 billion Pound premium to the close last evening, or 62 percent premium. That would be the highest price since late March 2012.

Greece. It is the story that actually CAN'T go away. Why? This is why, a picture tells you that the Greeks need to "get money" in order to pay others back, to meet their obligations. Check the Tweet from Grant Williams, it turns out that May 12 is a far bigger day, when the country needs to pay back the IMF a whopping 700 million Euros plus:

I am not too sure that Alexis Tsipras, the Greek leader heading off to Moscow to see Vladimir Putin is the best idea that I have ever heard. Perhaps it is only trying to extract a little more leverage, the problem is that the Russians have less now than when they were in a position to help the Cypriots. Apparently the big thing that the Russians could do for the Greeks is to buy their fruit. There is a Russian embargo on fruit from the EU. The Greeks export a large amount of strawberries to the Russians, as do they peaches. That would help in the next harvest I guess. And it would give the Russians much joy to thumb their noses at the Germans. Who has all the cards in all of this? I am guessing everyone has a pretty bad set of cards, who will have the best poker face is probably the one who gets what they want. Possibly still the Germans.

Things we are reading

Eeekkk! Is your job going to be made redundant by the machines? In this case it is the work of a New Zealand sheep farmer, who have replaced his border collie with a drone. Yes, really. They're Using Drones to Herd Sheep. Perhaps it is time to setup a drone repair centre, don't you think?

Hipsters are almost everywhere. Vinyl (Really? Over digital?), organic coffee and of course, craft beer. Yesterday was National Beer Day in the US. It was the day that prohibition ended, way back then. The associated graph confirms what you knew already, craft beer is exploding: Today April 7 is National Beer Day

Having bonds in your portfolio adds diversification and lowers volatility - A Historical Look at a 50/50 Portfolio. Due to the lower risk of bonds, your returns are also down. Still a fan of adding to stocks for as long as possible and if you are going to live till 90, investing in stocks is still appropriate past the traditional "retirement" age.

Glad to hear progress is being made on this front - Defeating Alzheimer's by 2025 could be within reach. The scary stat from the article, "Yet, deaths due to Alzheimer's disease have increased by 68% between 2000 and 2010"

Im sure that this operating system and the hardware operates slower than those in South Korea - See what it's like to use a computer in North Korea. Some beautiful pictures of North Korea that you can use as a wallpaper.

Given the high Gold price in the years following the financial crisis, companies spent large amounts of money on Capex. The result is record gold production and demand not keeping up with the increase in supply - Gold Bust Means Less Mine Spending.

Home again, home again, jiggety-jog. The IPL starts today. True story. Pretty darn amazing that we are licking the wounds (fresh ones) of the World Cup (four more years!) and we get this fast tournament. Guess what, the IPL is huge, big enough to get a serious mention in the FT, the advertising that is: Indian ecommerce start-ups pile into cricket sponsorship. Markets have started much better here, perhaps all the M&A activity.

Sasha Naryshkine, Byron Lotter and Michael Treherne

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Tuesday, 7 April 2015

No jobs, no worries

"You would have expected the equities market to come under pressure with a report of this nature, weaker jobs is not good, right? Yes. Wrong. That did not happen, equity markets closed higher on the session. Part of the reason was a surge in oil prices, the news filtering through that demand in Asia is looking better as the Saudis have been able to sell their product at slightly higher prices."

To market, to market to buy a fat pig. Thursday was a very long time ago. In-between now and then, we had a very unfavourable US jobs report, see here: Employment Situation Summary. The headline number was a pretty wide miss, over 100 thousand fewer jobs created than the best guesstimates. It is a very volatile number, that in all honesty has been very unpredictable. Out of a workforce of 156 million in the US, 100 thousand is about 0.064 percent. Not much, enough to move the needle. The sector to lose jobs was mining, in fact almost all the jobs created in mining last year in the US have been lost this year. Mining includes quarrying as well as the more important (in this case) oil and gas extraction. The FT suggests that this "jobs report" is the worst miss since August 2009. I believe them, personally I do not keep score, and most people I know do not remember last month vs. expectations. Oh, and there were downward revisions from the prior months, as much as 69 thousand less for Jan and Feb collectively.

We spoke a few reports back about the impact of not only direct jobs associated with the industry, the services and manufacturing jobs relating directly to the industry would also be impacted by lower commodity prices. More specifically, oil and gas prices that are lower. Believe it or not, the categories are each drilled into (no pun intended), if you look at the Employment and Unemployment table under Mining, Quarrying, and Oil and Gas Extraction, you will see that the unemployment rate has gone from 4.1 percent in December 2014 to 8 percent in March. To rub salt into the wounds of those hanging on to their jobs, the average weekly hours has dropped, with those in non supervisory roles seeing their wages lower too.

You would have expected the equities market to come under pressure with a report of this nature, weaker jobs is not good, right? Yes. Wrong. That did not happen, equity markets closed higher on the session. Part of the reason was a surge in oil prices, the news filtering through that demand in Asia is looking better as the Saudis have been able to sell their product at slightly higher prices. Shunting through higher prices means that the demand side is looking better. Energy, materials and utilities all comfortably outpaced the broader market, as a collective the broader market S&P 500 was two-thirds of a percent better on the day. The weaker employment report possibly mean a more measured rate of increases in interest rates, that is also equities positive. Perhaps another reason was that the Greeks said that they would meet all of their obligations, remembering that there is the small matter of paying the IMF 450 million Euros due by Thursday this week.

Of course the US was open for business yesterday, we were not. Closed. Admittedly Easter Monday is a holiday celebrated in many countries, strangely not Portugal in Europe. Closer to home, not in Angola or Mozambique, nor the DRC. Nor Mauritius, possibly as a result of many holidays in that country, 13 public holidays a year on that island state. My view on holidays is that they should not interfere with work time, you either are off, or you are on. In a country where we struggle with productivity and unemployment, the obvious choice for celebrations (for me) is the weekend. You can go even one step further, look at the strange and wonderful life of Jack Ma (the Alibaba founder), who is quoted as saying: "If You're Poor At 35, You Deserve It". That is pretty harsh, he suggests that you have no ambition if that (poor at 35) is the case. Of course not all people are enabled with the same drive as Jack Ma, his Wikipedia entry tells me that he failed his university entrance exam no less than three times! Tenacity and drive are deep in the core.

Locally recourses on Thursday were slam dunked, mostly those businesses involved in the business of iron ore mining. As it stand now, Telkom nearly has a bigger market cap than Kumba Iron ore. Such has been the divergence between the two respective share prices. Financials and industrials shares as a collective tried hard to drag the market, resources down over two and one quarter percent however saw to it that the local market ended the session marginally in the red, down one-tenth of a percent.

Resources are gaping higher, up nearly two percent at the get go this morning, in large part a weaker Dollar has translated to higher commodity prices and of course look at the Rand to the US Dollar, at 11.80 to the US Dollar. The strong Dollar trade is unwinding a little here, earnings this "season" are going to be key. JNJ reports this time next week, as does Intel and JP Morgan. That will possibly be our first insight into how strong the Dollar has been, realtime to US earnings and by extension what the S&P 500 valuations could be relative to forward expectations. Remember that whilst the index has a "price" and collective earnings to justify the level, what matters as buyers of companies is the stocks that you own. We will monitor and watch our companies closely.

Lastly, I see this all of the time, folks bemoaning the corrupt and politically connected and somehow it is (the argument) always insular. Meaning that it is confined to our borders. Of course this is not true, it is the nature of the chattering classes in their respective environments. That is why it is important that you read this WSJ article: How Brazil's 'Nine Horsemen' Cracked a Bribery Scandal. Unfortunately politics and business will always mix and mingle, those making the laws are powerful, those searching for ultimate profitability can easily find a way to politicians open doors. Perhaps the democracy model should be updated in some way, too much influence. We have technology, we should use more of that.

Company corner

We saw that a successful (lack of violence) election in Nigeria and a passing of the political baton to another political dispensation bring about a positive reaction for those wanting to own MTN shares. I am figuring that a second "peaceful" event (depending on who you are, which is always the case) between the world powers and Iran will lead to a similar type of reaction for MTN. See the FT story: Iran nuclear deal primes market for rising oil exports. Plus, this is also good news for MTN: Iranian Private Businesses Hope for Relief From Easing Sanctions. We shall see MTN during the course of the day, I suspect that they should see "more buyers than sellers" today. Stocks in Iran have had two big days of trade: Iran Nuclear Deal Sends Tehran Stocks Higher. Early in the trading session MTN is up just shy of two percent. The stock is up nearly ten percent in the last six trading sessions.

Ugghhhh. Sorry, it seems like I was out by a day. Discovery have announced the results of their rights issue, 99.2 percent subscribed for by existing shareholders, listen to this, an extra 67 million shares were applied for in the excess rights issue. Seeing as the difference was so small, there will only be 463 thousand excess shares to go around, heavily oversubscribed. Although, those close to the subscription process will tell you that there are people who "job" the system, knowing that they will not get all of the shares. Fancy that, 67 million excess shares applied for in a rights issue where there were only 55.5 million available. The shares will be allocated today, the cash will be debited from the accounts today, the shares will appear after the JSE overnight recon in peoples accounts tomorrow. Success! It is interesting to note that Discovery had such strong demand for their shares, obviously as a result of the significant discount.

Michael's Musings

On Wednesday Monsanto, the agriculture company, released their Second Quarter Financial Results , which were not great. The market was expecting worse than they delivered, the share price jumped 4% on the results.

Revenue for the quarter dropped $5.2 billion (est was for $5.59 billion) from $5.8 billion last year this time. The EPS also dropped to $2.90 a share from $3.15 a share, the guidance for the full year though was still in the range previously indicated. EPS for the full year is expected to be at the low end of the $5.75 to $6.00 a share range, which will still beat last years EPS of $5.22.

The reason for the poor results is of their biggest division (Corn) having sales down by 15%. There have been strong corn harvests in the US as of late which has resulting in a large inventory build up, so farmers are planting less corn this time round. One of the crops that is being planted more now is Soy Beans, which on a per hectare basis works out less profitable to Monsanto than corn.

GMO seeds and foods are controversial, with the more recent shot coming from the WHO. The report from the WHO says that "glyphosate" the active ingredient in one of Monsanto's herbicides is linked to cancer. Management say that the report hasn't impacted sales, they are fighting it and the report is at odds US and EU regulars stances on the product.

I dont see the pushback against GMO's going away anytime soon, I also don't see the need to feed an increasing global population going away either. CNBC Africa had a guest on this morning who said that 40% of Africa's children are not getting enough food on a daily basis; GMO will go along way to solving this problem. The yield on some African land is 30 times less than it is on land in the US and EU.

Given the expected 10% growth in EPS this year, the share is not cheap on a 23 P/E. I still see a great need for their products and they have built a solid "moat" around their business in the form of their brand with farmers and their annual spend on R&D.

Things we are reading

Via our mate Prof Mark J Perry comes some toilet humour. This is pretty weird, however there is some sort of connection between the end of communism and the beginning of the end in Venezuela: Venezuela Reaches the Final Stage of Socialism: No Toilet Paper.

One of the concerns with driverless cars is how they will handle being on the road with other driverless cars and how will they handle unexpected things happening - Crash-Testing Driverless Cars in a Robot City. The data from these tests will go along way in making better driverless cars and in the formation of the laws to govern them.

A crisis is not bad for everyone, in Russia owning a classified company is a good thing right now - This Guy's Russian Business Is Booming as the Economy Collapses

Twitters new app "Periscope" is making waves - Periscope's first update tackles boring feeds and notification overload

Home again, home again, jiggety-jog. I hope you are all rested over the weekend, the Lions snatched a comeback victory over the Bulls in the rain at Emirates Park. Amazing. The Easter Bunny managed to pull off the great heist again, how he/she does it is a mystery to me. White lies? The definition is that it is a lie told to avoid hurting someones feelings. I guess if you did not make them up in the first place, they would not exist. It is all about fun! Lastly, well done (very well done) to Paul, who smashed his PB at Two Oceans, managing a 4:39:59 for the 56km segment, which was harder over Ou Kaapse Weg this year, as a result of the damaging Cape fires. That is pretty darn fast and super well done.

Sasha Naryshkine, Byron Lotter and Michael Treherne

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Thursday, 2 April 2015

Coming through!

"I kid you not, a 2 percent difference in market capitalisation exists between Anglo American and Steinhoff at this point. Steinhoff as of last evening, have a market capitalisation of 243 billion Rand, Anglo American have a market cap of 254 billion Rand. And you will be more surprised to know that Anglo American have fallen out of the top ten companies by market cap in the South African market."

To market, to market to buy a fat pig. Resource stocks were slam dunked, mostly as a result of the falling iron ore price. Below 50 Dollars a ton. The worst level since May of 2009, that is a long time ago. From May the 8th, 2009 to present day, your return in Anglo American securities would be minus 3.82 percent. That is in Rand terms. In Pound Sterling that same return has been minus 31.5 percent, your Rands have been somewhat protected by a weakening currency. The yield in Pounds is around 5.6 percent, could that be right? A payment of 85 US cents last year (at around 12 Rand to the Dollar, that is 10.2, after tax that equals 8.67 Rand) translates to a post tax yield of 4.8 percent for Anglo American. Obviously that is dependent on commodity prices, Mr. Market is telling you that the company might struggle to meet that 85 US cent obligation this year.

I kid you not, a 2 percent difference in market capitalisation exists between Anglo American and Steinhoff at this point. Steinhoff as of last evening, have a market capitalisation of 243 billion Rand, Anglo American have a market cap of 254 billion Rand. And you will be more surprised to know that Anglo American have fallen out of the top ten companies by market cap in the South African market. They only represent 2 and a quarter percent of the entire market capitalisation, obviously not on a weighted basis where large parts of the market caps of SABMiller and BATS have foreign registers in London that are larger.

Lean in a little, you are going to find this even more surprising and this represents all the heavy lifting that Marcus Jooste has done at Steinhoff, in June of 2010, Steinhoff had a market cap of 25 billion Rand, much fewer shares in issue (1.4 billion then versus 3.184 billion shares now). Anglo, in December of 2010 had a market cap in Rand terms of 413 billion Rand (shares in issue have not changed that much), that has shrunk by 160 billion Rand as commodity prices have softened. The divergence of an old South African champion that is closely associated with the mining activity in this town of ours and a new champion of retail across the globe, in the form of Steinhoff has been nothing short of breathtaking. And if you had to ask me to stick my neck out as to who has the better prospects over the next half a decade, I would back Christo Wiese throwing in his lot with Steinhoff every single time.

As spectacular have been the vicious moves by Kumba Iron Ore and AngloGold Ashanti, southwards, in terms of moves to the bottom of the 40 biggest companies by market cap. Those companies find themselves in places 40 and 42 respectively, Redefine sandwiched between the two and Brait breathing down their necks. Again, if you had to stick a gun to my head I would rather choose Brait and Redefine over the iron ore and gold producer. I suspect that Mr. Market will continue to do the same too, the prospects just seem better. Paul did a show on Hot Stocks on the commodity producers, with a focus on iron ore and him and Wayne did not make an investment, even at these depressed prices. I am afraid that until something changes structurally, i.e. there is strong demand from either India, or a pickup in demand from the rest of the globe, the medium term looks like a hard battle. To let you know how "bad" it has been for producers, here is as long a graph I could get on the iron ore price from IndexMundi:

What becomes evident is that the price of iron ore, over 17 years up to 2002, "did nothing" for a long time. Demand was muted and it was unattractive to push volumes. The opposite changes. And now there is an enormous amount of volume being brought online and demand is softening from the Chinese. Yowsers. At the opposite end of the spectrum as far as poor performance was concerned on the day, was MTN, which was up over 6 percent, dragging the rest of the market higher. The favourable outcome in Nigeria, i.e. no violence with a political shift in power represents a new maturity with regards to African politics. I like it a lot.

Not a prank, quite simply put, as per the FT (subscription only, they have a free subscription option that lets you view a couple articles a month) article: Greece submits new list of reforms to eurozone. You can actually read the whole list of reforms on this document, which was "obtained" by the FT, titled: Greek Reforms. I read most of it. I was quite interested in the "VAT lottery", a system whereby if you insist on obtaining a receipt with the VAT amount from a retailer, you can enter that receipt into a lottery. i.e. By being a good citizen, you get a chance to win the lottery.

Another one of the points, and I think that spelling it out word for word, explains it all: "The initial goal for revenues from privatizations was 50 billion Euros between 2011 and 2016, with a 5 billion target for 2011, 10 billion for 2012 and 5 billion for 2013. In practice, proceeds from privatizations amounted to 1.6 billion in 2011, no revenues in 2012 and 1 billion in 2013. Seldom has a privatization program failed so spectacularly!" Wow. I guess practically speaking shifting government obligations onto the private sector means less government outlays.

There was also some cryptic explanation of how small business in Greece exists, a segment titled: Reducing undeclared work and reinforcing monitoring mechanisms: Undeclared work is prevalent in Greece, and it has risen alarmingly during the previous 4 years. The main reasons include the structural peculiarities of the Greek economy, dominated almost entirely by small and medium-sized businesses and an admittedly high degree of tolerance of shadow labor forms with fully undeclared labor at the extreme end of the spectrum. What does that sound like to you? Shadow labour forms? Man, I don't understand any of it, we cannot understand it, we don't live there. And guess what, early signs are that the new proposals have been rejected. Back to the drawing board, try harder.

Things we are reading

Ha, ha, ha. This is simply amazing, one of the best stories I have read in a long time. It starts badly when the guys iPhone gets stolen, he ends up travelling for nearly a whole day to find it and then is very surprised at some sort of culture that has developed between him and the chap who ended up with the stolen phone. Fun read: How I Became A Minor Celebrity In China (After My Stolen Phone Ended Up There). The second hand phone market in China is massive, the biggest in the world!

I know that you have always wanted to know, yet you have never quite found out where or who to ask, relax, here it is: 8 things worth knowing about eating sushi. I plan to do this too, to get to the Tsukiji fish market. The one in New York (new location Hunts Point) has annual sales of 1 billion Dollars and is second in size to the Tokyo one.

A big debate on the recovery has been where the jobs have been created - Duetsche Bank: No, This Is Not A Low-Wage Recovery. Having jobs growth in the higher paying jobs is good news for the economy, the data also highlights the need to upscale yourself.

This is not the first app to offer voice calls it is one of the biggest though which makes it far more useful - WhatsApp finally adds voice calls for all Android users, iOS coming soon. For companies like MTN and Vodacom we have already seen a shift in the number of voice calls and we will continue to see it. Data consumption is increasing at a faster rate than prices are falling, which means these companies can still see growth going forward.

Home again, home again, jiggety-jog. We are up one quarter of a percent today. Naspers got to 1900 ZAR a share. Turn down for what??

Sasha Naryshkine, Byron Lotter and Michael Treherne

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Wednesday, 1 April 2015

Goodluck Buhari

"When Buhari was involved in coups, most Nigerian folk were not born. I tried to get a balanced local look at the elections, trying to see the local media, they are mostly happy and apprehensive at the same time about change. Buhari comes with a strong mandate to fight corruption. Putting that into action and changing perceptions about Nigeria will be a huge job, I wish him well along the way."

To market, to market to buy a fat pig. First quarter out. Gone. G'bye. Nice knowing you. You're good, kid, but as long as I'm around, you're only second best. The you being referred to here is the Cincinnati kid, Steve McQueen acted that part. That was fifty years ago, that movie! Yowsers. Whereas April fool is the first day of April each and every year. Pranks day, don't get caught and end up being, in the immortal words of B. A. Baracus, don't be a "a sucker fool". The all share index, if you are keeping score, managed a gain of 4.85 percent for the first quarter. Not bad I guess, all things considered. In the US, the S&P 500 eked out a 0.44 percent gain for the quarter, last night there was a slump of 0.9 percent. The Dow Jones last evening was down over a percent, for the quarter it was down just over one quarter of a percent.

The standout for the quarter has undoubtably been the tech giants, the nerds of NASDAQ added 3.48 percent for the quarter. I favourited a tweet of Paul Kedrosky (not everyone's cup of tea) this morning: "The combined market cap of Dell, Microsoft, Intel & Cisco peaked at around 45% of Nasdaq 100 capitalization - & has since fallen to 14%." As some other fellow pointed out, in 2000 Nortel was 35 percent of the Toronto Stock Exchange. I remember when Dimension Data accounted for one third of overall trade during early 2000, that is on the JSE. The Dimension Data market cap of 16.381 billion Rand at the end of 1999 was really sizeable. Quickly, read the DD annual report from back then.

I think the point that Paul Kedrosky is trying to make is that valuations may seem stretched for the chattering classes, the growth of the newer technology businesses are outstripping the expectations of the past. Google trades on a forward multiple of less than 20 times, for the current year earnings, this is the first time that I have ever seen that. Further out that flattens even further to 16 and a half, that is the same as "old tech" companies like Microsoft. Microsoft had a tough quarter, down over twelve percent, Google managed to gain over four percent, perhaps the folks questioning the ability of the company to dominate search and the competition from Facebook is a concern. I suspect that Google will continue to attract innovative people, who want to change the world.

Nigerian elections are over, Goodluck Jonathan has conceded defeat to Muhammadu Buhari after it became apparent that he was way short. It was not the outcome that we had expected in this office, in fact in the predictions market we had suggested that it would go the other way. From the nearly 69 million registered voters, a little over 28 million cast their votes and sent Jonathan's PDP (People's Democratic Party (Nigeria)) packing. Better luck next time. The All Progressives Congress is only two years old, it was formed to take on the PDP and shuffle out what was seen as corrupt.

What interests me is that people can change their minds pretty quickly, plus they can vote for a candidate that was a former military dictator. Muhammadu Buhari is a bit of a journeyman, read his Wikipedia entry. He has won these elections on security concerns, promising to make Nigeria a safer place for its citizens. After four times of trying hard to get into power via the ballot box, he has finally won.

This indicates a certain maturity in Nigerian democracy, the fact that Goodluck Jonathan conceded. You can argue that the population is young, very young. If you believe the CIA Factbook and the Population structure of Nigeria. Less than 2 years ago, the estimates were that 63 percent of the Nigerian population was under the age of 24. Wow. And 43.8 percent of the 174.5 million strong population was under the age of 14. That is an exceptionally young population who want the same things as their peers globally. An education, opportunities, a better handset, One Direction tickets. I just added that last part in. The average total age of Nigeria is 17.9 years. Which means that when military rule ended in May 1999, nearly 16 years ago, the average Nigerian was 2 years old.

When Buhari was involved in coups, most Nigerian folk were not born. I tried to get a balanced local look at the elections, trying to see the local media, they are mostly happy and apprehensive at the same time about change. Buhari comes with a strong mandate to fight corruption. Putting that into action and changing perceptions about Nigeria will be a huge job, I wish him well along the way.

I am only selfishly interested for the purposes of the companies that we own in Nigeria. A peaceful transition and an economy that moves away from reliance on a specific resource. Human capital, innovation, energy and that entrepreneurial spirit that is associated with all things that are right about Nigeria. Let us hope that the old Buhari does not turn back to his old ways, ruling with an iron fist. I suspect that people can change. Read this, from the Nigerian The Guardian: We'll be magnanimous in victory, says Amaechi. At the start of trade this morning, MTN (after a pretty big fall off) is trading up nearly three and a half percent.

There is however another piece of news as to why MTN could be higher, and it is not a new story, it is of the company outsourcing their front end stores to a global private business called Brightstar Communications. Not a new story, resurfacing however.

Company corner snippets

Mediclinic released an announcement on Monday, titled Swiss refinancing, impact of Swiss interest rates, and UAE growth and refinancing. It is pretty simple. Mediclinic are taking advantage of a world of low yields to refinance some of their existing debt at lower rates, in a market where investors are looking for yield.

Low yields and searching for yield does not quite fit together, however fixed income investors in Switzerland have fewer and fewer options, if you read that the rate is 2 percent above Swiss Libor, you might be forgiven for thinking that is not favourable. However, when you read that Swiss Libor, as per the SNB website is negative 0.81 percent (three month), then it makes sense.

As per the last point: "(an) estimated total blended cost of the new package at a zero Libor rate is c. 1.73 % per annum excluding upfront costs." Cheap. Good work. Not so good work was when the SNB removed the Euro peg, Mediclinic have incurred a a non-cash flow interest charge of 25 million Swiss Francs, 20 million after tax.

They have then not only refinanced their UAE business, 85 basis points cheaper at 200 basis points. There is also an announcement that they are going to be building a 150 bed facility in Southern Dubai (which we are told is growing quickly), Mediclinic has reached an agreement to acquire land. Just a reminder, from the interim results there were 2 hospitals, 9 clinics and a total of 355 hospital beds, 27 clinic beds and a whopping 2293 employees in this Dubai business. As well as 538 doctors, both self employed as well as working for Mediclinic.

Whilst there is increasing competition in the region, there are also more citizen benefits (health benefits), their hospitals are doing well. The Mediclinic Al Hili is open now in the city of Al Ain (Abu Dhabi) to further service the needs of the locals. Citizens can get access to world class facilities without the need to travel far and wide. We now wait for the next Mediclinic update, ahead of their results on the 21st of May.

The very best place to find information about a listed business is their annual report. I try and read them as they hit the screens, to pick up simple things like, I don't know, Nick Holland of Goldfields earning in his personal capacity over 50 million Rand in the last two years. How have shareholders fared? In fairness, they (Goldfields) have increased production, cash costs have been fairly steady, shareholder returns have coincided with a general downturn in the bullion price. Meaning that unfortunately shareholders have not enjoyed the same personal returns. I guess that he, Nick Holland is "just doing his job" it is up to shareholders to decide how much he gets paid, not so?

Things we are reading

Boiling water is used in many of our energy generating systems, using this virus allows us to generate energy more efficiently - Discovery uses virus to boil water three times faster. Where technology is moving always blows me away.

Having a look at longer dated history helps put things into perspective. In this case, it highlights Buffetts sustained incredible returns. The other thing to note is how many decades the average return was under 6% - Buffett's Performance by Decade

The power of technology to help promote freedom - The $50 device that symbolizes a shift in North Korea. Going back as far as the printing press, which made it harder for authorities to control what people "thought". This device is doing the same thing in North Korea.

Home again, home again, jiggety-jog. Markets are lower here to begin with, most noticeably the gold shares. After being up around 30 percent at one stage during the quarter, the performance collectively of the gold counters is below the rest of the market. Sigh. Check it out later today, the ADP numbers will be released, those are a precursor to the jobs number Friday, completely untraceable on Easter Friday.

Sasha Naryshkine, Byron Lotter and Michael Treherne

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