;

Calgro-M3

11 October 2021 By PDSNET

Calgro used to be the darling of the institutional investors. Every fund manager in South Africa was buying the share and it rose dramatically from as little at 50c in February 2011 to an intraday high of 2275c on 11th August 2015. At this point it had a market capitalisation of R2,8bn and was trading on a price:earnings (P:E) ratio of 20,5. Not bad for a nascent property developer. Consider the chart:

Calgro-M3 (CGR): September 2014 - 8 October 2021. Chart by ShareFriend Pro

From the high point in August 2015, Calgro’s share price made what technical analysts call a “triple top” with tops on 12/8/2015, 21/12/2015 and finally 13th May 2016 – all at 2350c. It could not seem to penetrate that level despite all the great publicity it was getting at the time. For technical analysts, a triple top is a very bearish sign. It normally comes before a major downward trend.

In our view, a triple top is caused by one or more major shareholders off-loading their shares because of some bad news. The bad news is not known to the investing public but the major shareholders are privy to it because they are very close to the company. Each time the share reaches that level they take the opportunity to off-load causing the share to fall back, but it rises again because all the news, in the financial media, is very positive. However it cannot penetrate that high and falls back again. The third time this happens, investors give up and begin to abandon the share – resulting in a protracted downward trend. A very similar pattern (a triple top) occurred in Steinhoff shares between March and August 2016 – and as we now know, the share has subsequently fallen from around R90 to a low of just 70c in September 2020.

For the next five years after the triple top, Calgro shares fell steadily in a long downward trend which came to an end on 17th February 2021 at a price of just 170c. Our advice to our customers through this time was to wait for a clear upside breakout through that trendline. That breakout finally came on 24th August 2021 at a price of 272c. Since then, the share has moved up to 340c – a gain of 25% in about six weeks.

This company has been through a tough 4 years but is now beginning to function effectively again. They have 4654 residences under construction compared to half that number a year ago and their memorial park business saw turnover up 65.2%, albeit off a low base. They have managed to reduce their debt significantly and bought back 4,6% of their issued share capital.

With their latest trading statement for the six months to 31st August 2021, Calgro is expecting to return to profit with headline earnings per share (HEPS) of over 40c – but as a private investor you could have bought the share ahead of this news at 272c, when it broke up through its long-term downward trendline. We believe that its new upward trend has only just begun.


DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.



Share this article:

PDSNET ARTICLES

New Record High

As we predicted, the S&P500 reached a new all-time record high on Thursday 21st October 2021 at 4549.78. This officially means that the correction that it was going through is over. That correction took the index down to a closing low of 4300.46 (on 4th October 2021) – which is a 5,2% decline from the cycle high of 4536.95

Hulamin - Insider Trading

In our opinion on Hulamin, last updated on 3rd September 2021, we noted “What is noteworthy about this share is that it has a net asset value (NAV) which is more than 3 times its current share price making it a possible takeover target”.

On Thursday last week the company issued a bland “cautionary” notice

The Confidential Report - October 2021

America

The S&P500 is in a correction which began after 2nd September 2021 when it made an all-time record high of 4537. Since then, it has fallen by as much as 249 points to an intra-day low of 4288 on Friday (1/10/21). This correction has taken 20 trading days and amounted to 5,4% at its worst. There are a variety

Context

The context within which a chart is viewed is vital to your understanding of it. In this article we will attempt to show the broader context within which we view the market action which took place last Friday.

INTRADAY

Let us focus our attention on the S&P500 index, which is a weighted average of the

Human Behaviour

Investing in shares is about predicting the future. When buying a share the buyer is saying that he expects its price to rise, while the seller, by his sale, clearly has the expectation that it will fall. Of course, only one of them can be right and whomever is right will take money away from whomever is wrong. And the outcome depends entirely on the accuracy of their predictions

Windfall!

THE RAND

The current account surplus on the Balance of Payments in the second quarter came in at R343bn – considerably higher than the first quarter’s substantial surplus of R261bn. Obviously, this massive and on-going influx of cash is largely due to the worldwide boom in commodities which is benefiting South Africa despite the

Our Club Portfolio

Last year, on the 14th December 2020  we wrote an article about our Investment Club software and our in-house company portfolio which we run on that software. As we said in that article, running this portfolio has proved to be a highly motivating exercise for our staff. The diagram below shows where we were on 11th December 2020

The Confidential Report - September 2021

America

The suggestion by the Federal Reserve Bank (Fed) that it may begin to reduce its monthly asset buying program from $120bn per month before the end of 2021 sent markets into a new mini-correction. The process of reducing this type of quantitative easing (Q/E) has become known as “tapering” and the Fed’s consideration

US Inflation

The S&P500 has continued to make new record highs one after another. It recently recorded its 200th straight trading day without a correction of 5% or more. This is not a record, but it shows that the upward trend is becoming more exponential. A few months ago, we drew your attention to the fact that since the low point of COVID-19 in March

Italtile

Following the impact of COVID-19 and the recent civil unrest, the hunt is on for high quality listed shares which have the potential to rise as the South African economy recovers. Obviously, service companies, which do not require significant working capital (i.e., stock levels or debtors’ books), tend to be more highly rated