24 May 2021 By PDSNET

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 5th 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:

Massmart: November 2019 -  21 May 2021. Chart by ShareFriend Pro.

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 5th/6th 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:

Blue Label: August 2020 - 21 May 2021. Chart by ShareFriend Pro.

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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Fundamental Context

The assessment of shares is divided into fundamental analysis and technical analysis. The fundamentalist is trying to answer this question, “How good will this company be as a payer of dividends in the future ?” This requires an in-depth study of everything about the company starting with its most recent financials.

Market Action

In general, we encourage investors to take a medium to long-term view of the market and not to get involved in “trading” or intra-day buying and selling, especially in highly geared derivative instruments.

However, watching the intra-day progress of the S&P500 index and other indicators

Market Update

The S&P500 has virtually completed its seventh “mini-correction” on Friday the 4th of June 2021, since the V-bottom of the pandemic in March 2020. It exceeded its previous all-time high closing level of 4232.6, reaching an intra-day high of 4233.45. That it would probably go to a new record high was indicated by its record intra-day high

The Confidential Report - June 2021


In the previous Confidential Report on 5th May 2021, when the S&P500 index was at 4167, we suggested that it was probably due for a correction. Over the last month we have watched as a correction unfolded in that index. However, it turned out to be only a mini-correction of just 4% - and as we pointed out in our article, 


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

The Confidential Report - May 2021

The US economy grew at an annualized rate of 6,4% in the first quarter of 2021 – which was much faster than expected. Gross Domestic Product (GDP) was $19,1 trillion – which can be compared to the $19,3 trillion of the December quarter of 2019 - before the pandemic took hold. This shows that the economy is now virtually back to pre-COVID-19 levels. The

Top of the Market Signs

In last week’s article, 12-Year Bull Trend, we pointed out that the bull trend was rising exponentially and ultimately that could only end with an exponential collapse. We said that the exact timing of that collapse was very difficult to assess.

You may also recall our article of 23rd January

12 Year Bull Trend

On 6th March 2009, just over 12 years ago, the S&P500 index made an intra-day cycle low at 666.79. It was the end of a 17-month bear trend which had seen the S&P fall by 57,4%. The world was in the teeth of the sub-prime crisis and negativity abounded. Investors were terrified.  The response to the crisis was massive and world-wide.