ARTICLES

Massmart

Almost nine months ago we suggested that you take an interest in two shares – Massmart and Blue Label. We suggested that they would benefit from any sort of recovery in the South African economy. At the time, investors were running scared because of the fall-out from the pandemic and the resulting lockdowns. We quoted that famous saying by Warren Buffett – “Be fearful when others are greedy, and greedy when other are fearful”. Since then, both shares have performed well, but Massmart has shot the lights out. In September 2020, Massmart was in a terrible state.

Walmart had bought Massmart for R17bn ($1,54bn) in 2010 and had watched as the value of its investment fell to just R4,2bn by August 2020 following the lockdowns. They brought in Mitchell Slape, a Walmart executive and turnaround artist, to rescue the situation. Slape has made some sweeping changes including the sale of Dion Wired (23 stores), and the prospective sales of Cambridge Foods, Rhino Stores, The Fruitspot and Massfresh meat processing.

But in September 2020, what was most interesting about Mitchell Slape was that he personally bought 300 000 Massmart shares at an average price of R27.29, paying out R8,187m out of his own pocket. We drew your attention to this in this article published on 5^th September 2020. We argued that Slape had by then had time to evaluate Massmart and was in an excellent position to make this investment. Consider the chart:

This chart shows the final collapse of Massmart down to its low of less than R20 a share in August 2020 and the subsequent recovery. Slape’s purchase of 300 000 shares was done at the perfect moment, just as the share broke above its longer-term downward trendline (not shown). Our article was written on the weekend of 5^th/6^th September 2020 when the Massmart price on the JSE was 3150c. Since then, the share has risen to R61 – which is a gain of 93,6% in under 9 months.

Notably, Blue Label has also performed reasonably well, rising from 320c to 436c, or 36,25% over the same time period:

As a private investor you should always look on national and international calamities (such as the pandemic) as a potential opportunity to buy shares when they are cheap. Investors always over-react, both on the upside and the downside, giving you an opportunity to profit.

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PDSNET ARTICLES - MAY 2021

Massmart

Almost nine months ago we suggested that you take an interest in two shares – Massmart and Blue Label. We suggested that they would benefit from any sort of recovery in the South African economy. At the time, investors were running scared because of the fall-out from the pandemic and the resulting lockdowns. We quoted that famous saying by Warren Buffett –

Correction

Since the V-bottom of COVID-19 in March last year, the S&P500 index has risen an amazing 86,6% without any major correction. There have been 7 “mini-corrections” of varying sizes, including the current one (which is not yet over), but in each case the market has quickly bounced back and resumed its inexorable upward trend. Consider the chart:

Rand Hedges

One of the complicating factors for a South African investor is the volatility of the rand. Many of our leading shares derive a large percentage, or even all, their income from their interests overseas – which means that their earnings are directly impacted by the strength or weakness of the rand. So, it becomes essential that you formulate a view on the