With so much noise in the market place
these days, it is hard to determine what is important and what is not. Every so
often we hear that the market is at or near the highs of days gone by, and that
Apple is the most valuable company of all time. Then, the very next day, after
the US markets come off by a mere half percent, suddenly you start reading
about how the world is going to end all over again and how Apple is overvalued
to the core.
So how does one keep track of what is
important and what is not? I guess the answer here would be to look at the
secular trend and to decide for yourself. From what I have seen, the market is
in an expansion phase - or a bull phase if you will. It rallies up, and then
either consolidates or corrects a little, and then continues to rally.
Being of the belief that we are currently
in a bull market, I will have to argue that what appears to be a coming correction
on the US markets (and a pullback on the South African market) should be used
to buy into good fundamental shares that offer long term value and growth
prospects. It can be seen as this; you know what fruit you want to eat (it
might even be apples), but you also know that currently this particular fruit
is very expensive. So instead of not eating your chosen fruit or paying too
much for such a fruit, you are waiting for other people to demand less of this fruit
so that you can buy the fruit of your hearts desire and a much lower price.
Fruit of course, is an arbitrary example. So
let’s look at some stocks.
I have mentioned Coronation Fund Managers
Ltd (CML) before and will do so again. Coronation is a good solid company that
we at Rock Capital Management believe will offer good long term value and
continued growth. As mentioned before, R29.00 a share seems to be an attractive
entry point.
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| Coronation Fund Managers Ltd |
Then, let’s have a brief look at MTN Group
Ltd (MTN). With its subscriber base up 6.9%, revenue up by 17.5% and headline earnings
per share (HEPS) up 14.3% it certainly does look good in terms of
sustainability and long term value.
We believe that this value is worth buying into,
however – as with all investments - patience is a key factor. It is our view
that the value that MTN offers is maximised at R150.00 per share, thus we will
patiently wait for a correction and start accumulating when it reaches this
level.
Further, it must be noted that at a 72%
payout ratio, MTN will be paying a dividend of R3.21 on Monday the 3rd
of September 2012. In order to earn this dividend, you will need to own the
share at the close of business on Friday the 24th of August 2012.
On the technical side on the coin, there is
further support for the above view. Bellow is a weekly chart of MTN. You will
notice that there is a long term triangle formation that it has recently broken
out of. The target this formation break is rather high, so I will not quote it
here, but the chart certainly does pain a rather bullish picture.
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| MTN Group Ltd |
I will stress again, patience is key in the
world of investing. There is no shame in waiting to get into the right share,
at the right time, at the right price.
Sources: SENS
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