Small Caps

Keith McLachlan

Keith McLachlan writes regularly on SmallCaps.co.za.

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27 February 2014 11:23

Don't fiddle with your small caps

Invest for the long haul.

CAPE TOWN – Over the last ten years, three of the top twenty local unit trusts have been small cap funds. The Nedgroup Investments Entrepreneur Fund, the Momentum Small/Mid Cap Fund and the Investec Emerging Companies Fund have all delivered annualised returns of over 20.5% over that time.

Three funds might not sound like a lot, but proportionally, its significant. Small cap funds make up a tiny portion of the local collective investment scheme universe – there are currently just nine of them in...

29 October 2013 13:15

When to sell your small cap investment

Assuming you're investing with cash you won't immediately need.

Most stock market research, articles and other publications revolve around one thing: what/when to buy. I am no exception to this, as most of this website revolves around what small caps are interesting and potentially worth investing.

Not enough, though, is written on when to sell an investment. Thus, the average investor has an endless list of stock picks and rules about when to buy these stock picks, but very few rules or strategies for realising his investment.

More pointedly, let me jot down some thoughts on the three reasons why you should sell a small cap investment. You should be investing with cash that you do not and will not immediately need, thus assuming this is true, I would go so far as to say that these are the only three reasons why you should consider selling a position in a small cap stock.

04 September 2013 12:10

Gold, platinum, construction or poultry?

Value investors hover, but which listed stocks in these sectors are worth buying?

In my opinion, the four local sectors that are currently the most depressed are gold mining, platinum mining, construction and poultry production. In just the last three years the Gold Mining Index has dropped 49%, the Platinum Mining Index has sunk 33%, Construction Index has slipped 19% and all the listed poultry stocks are struggling along with varying degrees of woe and carnage.

If the market caps of the entire JSE-listed gold sector, platinum sector, construction sector and the individual poultry stocks are all added up together, they are worth only as much as Sasol (SOL) or about R310bn.

So, naturally, all the value investors are hovering over the listed stocks in these sectors like vultures, slowly picking at the carcasses while muttering "long-term, long-term,...

16 April 2013 13:18

A glance at listed ICT stocks' risks and rewards

Included Gijima, EOH, Pinnacle, Mustek and Datatec, along with two ICT service groups.

Assuming that risk is defined as the 30 month-on-month price volatility of the stock price and that reward is the 12m implied return based on the 12m TP and Forward Dividend Yields. Figure 1 illustrates the JSE-listed ICT stock's risk/reward.

Firstly, Gijima (GIJ) is obviously the massive outlier in this investable ICT universe. The stock has huge risk attached to its turnaround and the coming dilution of its rights issue, but potentially also holds excellent upside. I see the stock's fair value (based on a Monte Carlo simulation) as c.10cps to 14cps. But, this is not at all a risk-free turnaround and Gijima has lost some major market share and taken some reputational body-blows over the last couple of years that will need to be mended. This is not always an easy task in a...

27 September 2012 14:52

Behind the growth of SA’s unsecured lending market

Since 2007 unsecured loans have grown by an average of 38% quarter-on-quarter.

JOHANNESBURG - This is not an article about Capitec or African Bank directly, nor Blue Financial Services or African Dawn. Rather, this is an article summarising a couple of points I have discovered researching the unsecured lending market in South Africa.

Since Q4:07 total unsecured loans in South Africa have grown by an average of c.38% quarter-on-quarter, with the average loan amount and duration expanding from c.R8 344 for 662 days at the start of this period to c.R16 230 for 796 days at the end of Q1:12.

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