It says here in the paper that only 45.1% of Joburg’s residents are satisfied with the city council and that this number is down around 5%, since it was last sampled a year ago. Well, if they were to poll the folk who have had to tackle the Bompas Road, Jan Smuts Avenue intersection where the traffic lights have been out for two days they would get a percentage way lower than that.
It would be considerably lower than the 25.4% total return that the All Share index delivered in 2004. This was so much better than anyone had predicted. But when it come to statistics it is difficult enough to get even the historical numbers right. Just ask Stats SA about their manufacturing data.
Of course at share and sector level the results were widely scattered. This can be summarised by the fact that resources were down around 5% for the year while the financials and industrials were up almost 50%. This last number is pretty heroic stuff and one might think that this kind of surge must have stretched valuations somewhat. However, average year on year earnings growth in the financial and industrial sectors index is at an eyepopping 30%. This means that although these shares have re-rated very significantly since the 2003 lows, they are currently not yet hugely over valued. In my view one could continue to hold them while as always keeping a very wary eye on Wall Street.
The problem comes in trying to find any pockets of undervaluation for the new cash that always seems to appear at the start of a year. Some of that cash is coming from the tasty and chunky dividends that are flowing from the market. Companies are still reducing dividend cover and returning cash to shareholders as they too seem baffled by the problem of what to do with it.
I have wondered before why it is taking the boys from Barclays so long to make up their mind about whether to buy ABSA or not. But then, sitting at the cricket yesterday the answer came to me in a flash. There will not be any progress on this deal until the English cricket touring side leave. The ABSA corporate suite at Wanderers was full of slightly red gentlemen, conducting serious due diligence studies through the bottom of a beer glass. Compared to wading about in the rain-filled streets of their soggy isle there’s really no contest!
Which is why this first edition of Tidemarks for 2005 is early today. I am off to Wanderers myself in a few minutes. I trust that you enjoyed a safe and happy festive season and that the New Year will be healthy and prosperous.
James Greener
14th January 2005
