SaurusDNA

Yeah, day before yesterday was last day for trading (LDT) for the dividend payment so there has been the usual post-dividend sell-off yesterday and today. Hopefully it'll start climbing from tomorrow again.

Yes, they only listed on 22 November. Still hard to find info.

Here's the official JSE index codes (although Google Finance uses different ones): All share is J203 and the Top40 is J200.

In my opinion, the Allan Gray Balanced fund is one of the best the market has to offer. Its performance has been nothing less than superb in that it has smashed the benchmark year after year after year: https://www.allangray.co.za/fund-pages/balanced-fund/

I'm actively trading them now, but I'm also thinking about buying their shares too, but I don't feel I have enough info on them yet. Maybe a Motus thread is the way to go. Here's their performance graph since their listing on 22 November 2018:

They're the Hyundai and Kia guys now, and include these dealerships. From the Rentals point of view, they run Tempest and Europcar. Here's their official website: https://www.motuscorp.co.za/

They used to be part of the Imperial group, but then Imperial split, and Hyundai, Kia, Renault, Mitsubishi is now called Motus.

While there is certainly merit to the argument that on average, in the long run, passive investments perform at least as well as, if not better, than actively managed investments, the funds in which Momentum has invested your money (ie. Allan Gray, Coronation, Investec etc) have had phenomenal performance since their inception, and they are certainly not just your average actively managed funds. These funds are among the best South Africa has to offer with returns beating the benchmark year after year. Also remember that offshore has its (important) cons as well as its merits. While offshore investments may serve as a Rand hedge, they simply cannot keep up with our inflation. Even with the annual average 4% drop in the Rand, the 2-4% growth typical of global growth, even when combined with Rand depreciation, does not usually beat South Africa's 6.5 - 8% inflation. South African markets do tend to perform a few percent higher than inflation though, and I'm pretty sure that if you look at your Momentum fund returns, you're probably close to 11% annual return over the past 10 years after the 2% costs have been deducted, even though the market has been flat. In every/any chosen period longer than 10 years (10-years, 15 years etc) South African investments have beaten the offshore average, even when compounded with Rand depreciation. I'm wary of moving too much money offshore. Consensus at the moment is that 30-40% of your money offshore presents the optimal risk to reward ratio. Also bear in mind that 30 -35% of your Momentum fund is already invested offshore. If it were me, I'd keep the bulk of the money with Momentum. Especially since you're 55, the actively managed approach, which switches between bonds, stocks and cash as the market fluctuates, decreases your risk significantly. The good thing about managed funds is that they limit the downside, while they may underperform passive investments slightly during strong bull markets. At 55, preserving your wealth is definitely more important than high-risk growth. So yes, I personally do believe that moving your Momentum investment to passive investments would be a mistake in your case. If it were me, I'd keep the R5.5M right where it is! (The extra R2M is only a quarter of your portfolio so it seems a reasonable amount to put in the higher risk passive funds as you have done.)

Yes - you should have them already.

Me too! I'm just waiting to see if they go up or down. I'm not keen on a long term investment in Multichoice (MCG) but it might be good for trading (either long or short) in the next few days as it may experience quite a bit of movement while the market decides. The CFDs have a reasonable gearing of roughly 6.5 times.

Yes, my Naspers shares are down R1141 since this morning and my new Multichoice shares are worth R1092, so they've pretty much balanced each other out exactly.

I agree. The returns on these have been worse than a simple savings account. I can't imagine the appeal or why anyone might consider buying these. At least with their Newfunds Traci 3 month ETF you know what you're going to get, and at almost zero risk. These have worse returns but with risk. I don't get it...

Well, I got my 10 free Multichoice shares today (due to the unbundling of Multichoice from Naspers). Nice when shares just appear in your account out of the blue!

That is a most interesting observation. I have posted up the graph of STXEMG vs the JSE All-share index below. The correlation is clear to see and the difference in growth between the two is 10%!

I'm trying to figure out why the Motus (MTH) share price keeps dropping. Their "fair value" is considered to be around R95 per share, their fundamentals are good, a forward P/E of around 7 and an expected dividend yield of 4.2%. They are the sole importers of Hyundai, Kia, Renault, Mitsubishi with massive growth potential. They're currently only at R78 per share. They started out very well but the last months has seen them lose almost 30% in just over a month. ? Well, they're at the support level now, so I'm seriously hoping they don't drop any further... Any thoughts on their short to medium term future?

I guess the annual limits of Tax free investment accounts will remain at R33000 for the third year in a row then... ?

And don't forget tax-bracket creep! This one is the silent unnoticed killers that they've been doing for the past few years. I don't know how they're going to manage the Eskom issue - if they bail out Eskom, we get the final ratings downgrade to junk by Moody's. If they don't, Eskom will be bankrupt by April. Things that I think will be strategically omitted from the speech (but really hope he does address): Tax free investment account annual and lifetime limit increases. How they're going to fund free education. How they're going to fund the e-tolls issue.

Coincidentally, Standard Bank actually published a research report on Discovery yesterday (19 February 2019). They give DSY a current SELL recommendation based on a spot valuation of R116 and a 12-month target price of R132.

This whole discussion is academic, of course. Every person's financial situation is different and what suits one person may not suit another. I'm not so sure that I agree with you with regards to the pensions and RAs being all RSA though. Most pensions and RA plans have 30% directly offshore, and the 70% that is left is usually market capped, so your Naspers etc. weigh heavily with quite a lot of indirect offshore exposure, bringing the actual offshore exposure closer 50%.

In light of the above, I have changed my target TFIA ETF ratios to be 60% local and 40% foreign indices and my new target TFIA portfolio looks as follows: LOCAL (60%): Local equities: CTOP50: 10% DIVTRX: 10% NFEMOM: 10% STXQUA: 10% Local property: PTXTEN: 20% FOREIGN (40%): Foreign equities: ASHGEQ: 7.5% GLODIV: 7.5% STXEMG: 7.5% SYG4IR: 7.5% Foreign property: GLPROP: 10%

For a while now I've been asking the question: "What percentage of my TFIA ETFs should be in 'foreign' indices?" Some people will immediately say "Put everything in foreign indices - the Rand is going to collapse or South Africa is going to be downgraded to junk" etc. And yet, the experts will typically tell you to put only 30% to 40% in foreign ETFs and the rest in local indices. So I've done a ton of study to find out why and the results surprised me - so much so that I have now changed the desired weightings of my TFIA ETF portfolio to allocate a greater percentage to local ETFs. Here's the thing. On the one hand, the Rand depreciates on average by 4% per year against the Dollar, and has pretty much done so since the time of Adam and Eve. Therefore, by buying ETFs of foreign indices, you are 'guaranteed' a 4% gain on your investment due to the weakening Rand. Now, on the other hand, let's look at foreign growth and interest on bonds, for example, where a 3% above-inflation is considered a good investment. Let's take England as an example. With its inflation close to 0%, a 3% return on an English investment would be considered "good." So if you had invested in an "England ETF, you would, by way of illustration, get your 0% inflation plus 3% return plus your 4% due to Rand depreciation, a total return of 7%. However, locally, it is South Africa's high inflation that makes it ideal for investment, which at first may seem counter-intuitive. Interest-bearing investments such as bonds and preference shares may also typically return inflation plus 3% - so with our 6% inflation, that gives a total return of 9%. And the JSE does much better than just inflation plus 3%! The other countries (outside of emerging markets) just don't have our inflation and therefore don't have the growth that the JSE index does. This is also why emerging markets are expected to give higher returns than developed markets in the long term. Secondly, putting more than say 40% in foreign indices means you are no longer diversified in the sense that if the Rands strengthens significantly, your portfolio collapses (and historically, it is highly unlikely to average a drop of more than 4% per year). On the other hand, the JSE index is not affected by the Rand in the same way, so whether the Rand drops or climbs, you're still guaranteed your above inflation growth on your local index ETFs. So betting too much on foreign indices is, in essence, going for a higher risk, but with lower returns, the exact opposite of what we should be doing. Of the academic studies I've read, most put the optimal risk-to-reward ratio for investing at 60% local and 40% foreign ETFs, and often support this with models. But now I finally understand why my previous 50% : 50% local : foreign split was considered high risk.

Here's an excellent series of reviews on each of the property ETFs if you want some bedtime reading: Property ETF Series Part 1: CoreShares Proptrax SAPY Property ETF Series Part 2: CoreShares Proptrax Ten Property ETF Series Part 3: CoreShares S&P Global Property Property ETF Series Part 4: Satrix Property Property ETF Series Part 5: STANLIB SA Property ETF Property ETF Series Part 6: Sygnia Itrix Global Property ETF Note though that the long-term historic yields are not really applicable at the moment since the current yields have more than doubled in recent times, making property ETFs extremely attractive at the moment.

That's a good list. I particularly like CML and SHP for 2019. For community picks - I'd like to add Dis-Chem (JSE:DCP) and Discovery (JSE:DSY) to the list.

Global property returns are always significantly less than local property returns (see table below). Since property ETFs are supposed to primarily produce income, I'd automatically remove GLPROP and SYGP from the list (these two I'd add if you specifically want diversification in the global section of your portfolio, but as an income earner main property ETF, the returns on these two aren't great compared to local property, even taking into account the average annual 4% Rand depreciation. ie. even with the 4% annual drop in the Rand taken into account, these indices consistently perform at roughly 3% lower than local property ETFs. I personally don't like PTXSPY and STPROP because these are uncapped and are heavily weighted in favour of three companies - they each have 50% of the total ETF in just Growthpoint, Redefine and Nepi Rockcastle. That being said, PTXSPY was the best performer of the six for the past year in terms of yield, but was the worst performer in terms of growth, due to the higher weighting of the big three. STXPRO and PTXTEN are both capped at 10% in any one company, which is a major plus in my opinion. The difference between STXPRO and PTXTEN is that PTXTEN is made up of the top 10 companies, each making up 10% of the ETF (equally weighted). On the other hand, STXPRO is made up of 15 companies at the moment, weighted by market capitalization, with a maximum of 10% in any one company. The difference in performance in earnings yield from PTXTEN is roughly 2% higher than from STXPRO. For the past year, the distribution yield from PTXTEN was 8.57%, whereas from STXPRO, it was 6.45%. This extra 2% makes a huge difference, and more than offsets the higher TER. The current income yields for the six you mentioned are as follows: PTXSPY: 9.00% PTXTEN: 8.57% STPROP: 8.45% STXPRO: 6.45% GLPROP: 2.76% SYGP: 1.99% The growth from the four is pretty similar (graph below), so I'd say you should choose using yields and risk as the criteria for your choice. In respect of yields, PTXSPY, PTXTEN and STPROP are pretty similar, with PTXSPY taking a slight lead. However, PTXTEN is less risky, being capped at 10% in any one company, whereas in the other two, you're the the mercy of the big three. For me, risk management is more important than the tiny extra percentage from PTXSPY, so my personal choice is PTXTEN. But in all fairness, all four of the local ETFs are pretty great and boils down to personal preference - performance vs appetite for risk.

My Reasons for my strategy: Local vs global: First, my thoughts on local vs global ETFs. For the last 20 odd-years, the Rand has averaged a depreciation against the Dollar of roughly -4% per year. The S&P500 has had roughly 6.8% growth, thus giving a total return of roughly 11% (including Rand effects) by investing offshore. The JSE, on the other hand, has performed at over 15% per annum for this period. Global returns are generally lower than local returns because inflation is lower globally than in RSA. Thus, even with the dropping Rand, local returns historically still trump global returns in the long run. That's why I'm happy with a 50%/50% split in global vs local ETFs. My ETFs - the good and the bad: CTOP50: The JSE has never been cheaper. It's P/E is good enough even to start being attractive to foreign investors. Also, I love that 10% cap in any one company. This ETF is a must. DIVTRX: If the bear market continues, high-dividend shares perform better. That's why I'm holding on to this one for now, but eventually (after the market starts to recover), I may sell this and buy CTOP50 with this money. PTXTEN: Different asset class - not correlated to the JSE. Property always does well in the long tern and is at a 52-week low. A steal at this price. STXQUA: I just love the companies in this ETF - such attractive fundamentals. I own this one simply because I believe in the companies that this ETF represents. ASHGEQ: Diversified global. Core ETF. GLODIV: A smart-beta ETF - its methodology may outperform the global all-share index in the long run, so a competitor for ASHGEQ. GLPROP: Global property. I'm not too sure about this one, as global property returns are not generally as good as local ones, even with the extra 4% per annum Rand depreciation. I may sell this one eventually. For now, though, with the uncertainty in the market, this is just to have a different asset class. STXEMG: Highest potential for growth over 25 years. Emerging markets fluctuate wildly but always outperform developed markets in the very long term. SYG4IR: I had to have some Tech shares, but I already have too much in the USA through my other ETFs, Thus, this gives my exposure to the newest and most exciting tech in Asia. If I didn't have this I would replace it with STXNDQ, but I just don't want too much USA at the moment. The USA has had it's longest bull market in history. How long can it continue? It might, but I prefer to be diversified. My shares - why I own/will continue to buy these ones: CML: Dividends of almost 10% per annum - that's better than cash even before growth! My favourite stock pick for 2019 at the moment. CPI: Continues to remain strong, even in the terrible 2018. DCP: Tough choice between either Dis-Chem or Clicks. But I didn't want two in the same sector, since the two are very well correlated. I just feel that since Dis-Chem is new and Clicks is already well established, Dis-Chem has more potential for growth between the two. DSY: Historically rock solid, and with Discovery Bank on the way, it looks even more attractive than its already dazzling history. L4L: Still holding on to the belief that this one will take off one day. A bit of a risk, but it may pay off. MRP: Had a bit of a dip, but recovering nicely. Cheap clothes of reasonable quality must do well in the long run. And with its competitors in the clothing department losing the plot (I'm thinking Woolworth and Edgars here), it just has to go up. SHP: The poor performance of this stock has been due to negative inflation of the food products on its shelf (the average prices of its shelf actually dropped in 2018), thus dropping its turnover (and profit). As food inflation is expected to rise in 2019 (also with drought predicted again) this should reverse the losses and lead to considerable gains. This share is also very cheap at the moment.