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Simon’s weekly wrap: Retail trends, market recovery, and a preference share with a twist

MoneywebNOW also looked at US stocks for the patient, pursuing global fixed income, Hammerson’s rights issue, US healthcare Reits, and more.

For retailers that weren’t deemed essential services, the hard lockdown of 2020’s second quarter was hard – with revenue dropping to zero. Michael Mark, CEO of Truworths, shares some great insights into shopping patterns with us: consumers bought less fancy items, moved online and tended to favour regional malls over the super malls in larger cities. He also speaks about managing the supply chain and why Truworths paid a final dividend (for the year ended June) amid most other listed companies skipping theirs.

Back when markets were just recovering from the aggressive March selloff, the talk was all about what the shape of the recovery would be: would it really be a V-shaped recovery, or would it be W-shaped, with even L- and U-shaped options? Six months later Dave Mohr of Old Mutual Wealth says it has ended up as a K-shaped recovery, as the market split into two. The top half (mostly tech stocks) have soared, while the rest has remained under pressure, but there is still potential in the lower leg – albeit not without risks.

We also spoke to Anchor Capital’s Henry Biddlecombe who has been very bullish on the tech giants. But he’s also looking at some of those beaten-down US stocks as the economy opens up. Sure, the lockdown really hurt and the road back to normal profits may take some years as the recover takes on a K-shape, but these companies are starting to operate again, generating cash flow and ultimately profits. Yet many are still at extremely depressed prices and as such offer great investment opportunity for patient investors.

Northam Platinum has a preference share with a twist. The Zambezi preference share pays prime +3.5%, offering a very solid yield. But it doesn’t actually pay the dividend: rather it accrues into the price daily and will convert into either cash or Northam Platinum shares when it expires in 2025. Drikus Combrinck of Capicraft spoke to us about how it works and described his spreadsheet that helps him determine the potential return over the next five years.

Also this week:

Nick Kunze of Sanlam Private Wealth on Discovery’s update and Apple and Tesla’s stock splits. Northam Platinum’s Paul Dunne talks results and buying back its Zambezi pref share; and Satrix’s Kingsley Williams discusses the pursuit of global fixed income.

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On that Northam Pref : if the Div accumulated over time and you sell, is that proceed over current price then deemed to a capital gain? That would change the say 11% compound yield significantly.

Say from now it goes from 85 to 135 roughly, then the 50 gain becomes 41

Still, an interesting option in these low yield days.

I see the share is up 300% from the covid lows!

yes, it would be taxed as CGT as apposed to dividend.

End of comments.



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