Ben Temkin
3 October 2008
column
Johannesburg — THE news on Wednesday of the huge fine imposed on Sasol by the European Commission more than soured Jean's and my day. It is an unpleasant feeling to know that some managers in the group were involved in a cartel.
Tiger Brands was one of the first investments we made for the Private Investor portfolio. When we learnt that some of its managers had been involved in fixing the price of bread, we did not immediately sell the shares. It later became clear, however, that the company's economic crime was not an isolated one. It also seemed that senior executives -- by not acting against the illicit practices -- had tacitly approved them.
Our loss of confidence in Tiger Brands' management, rather than the exposure of the economic crimes, was the main reason for selling the shares. The exodus of CEO Nick Dennis and several other senior managers left a void. Their successors could be better or worse managers but we did not want to ride along while we found out.
Our past experience told Jean and I that a change in a company's leadership was often a poor investment fundamental.
I don't need to reiterate the history of the paraffin wax cartel to confirm that Sasol's senior management inherited the damage and did their best to limit it. We will stick to CE Pat Davies and his team and hold our Sasol shares.
Of course, Sasol's earnings growth will be affected by the amount of the fine, or -- what seems to be a faint hope -- a smaller amount. I suspect that the market has already more than discounted the effect of this in the share price.
In due course I plan to return to my review of Sanlam. However, before I do this, as I also received yesterday the monthly broker's statement on the Private Investor portfolio, it is timely to report on the portfolio's progress.
Last month, the portfolio received two dividends, a handsome one of R278,80 from Grindrod and a less handsome one of R74,73 from Anglo American. After administration charges and interest, the portfolio now holds cash of R2148,10. This cash amount is still far below the ideal critical mass for reinvestment.
The portfolio's index at the end of the month was 90,86, a paper loss of 9,14% since we seeded the portfolio with R100000 of our own money on August 21 last year.
Against most of the standard investment benchmarks, this is fair performance, but, as you know, we don't use benchmarks -- we assess the portfolio on the intrinsic investment fundamentals of the constituent counters.
We accept, though, that overall market sentiment apart, the share price weakness of one or more the counters may be telling us there is an investment fundamental about which we know little or nothing.
It is disappointing that only three counters, Murray & Roberts, NewGold and Sasol, have shown paper gains. The remainder have paper losses varying from Hudaco's 2,13% to Bell's 49,5%.
On the investment fundamentals I know about, all the investments with paper losses to date look under-priced. Try as I want to I cannot, however, be either a disinterested or entirely objective commentator on shares I own.
Be the first to Write a Comment!
Copyright © 2008 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
