Johannesburg — JUST before 2pm on Wednesday, thunder was ominously rumbling. Anxious not to endanger my electronic lifeline, I disconnected the PC from the main and unplugged the ADSL line. Just after 2pm, while my communications system was in limbo, Murray and Roberts Holdings (M&R), the first counter bought by the Private Investor portfolio, published its disappointing trading update for the half-year ended December.

Fortunately, Thor, the Norwegian mythological god of thunder, allowed me to sleep easily. In the dawn sunshine I reinvigorated the electronic lifeline and read that M&R expected half-year bottom-line diluted headline earnings per share to be between 15% and 20% lower than in the comparable previous period.

The Greeks' mythological gods warned of the danger of hubris, overbearing pride. The age-old proverb is that fall follows pride. I wondered whether I had been too proud of M&R's historic earnings performance and had been overoptimistic on its prospects.

There are, as far as I know, no mythological gods of the stock market, but Mars, the god of war, probably presides. Cassandra is all too obviously the market's prophetess. She warns, but we don't heed.

Yes, at least on the short term, I was overoptimistic on M&R's growth in bottom-line earnings per share. In August 2007, the Private Investor portfolio paid a gross share price of R71,04 for its holding in M&R.

At the portfolio's price, the historic price-earnings ratio was 22 and the earnings yield was 4,5%. These ratings were justified on medium- to long-term average annual growth in bottom-line earnings per share of about 30%. The investment fundamentals at the time confirmed that the challenging target was achievable.

The market was much more optimistic and took the price- earnings ratio briefly to more than 30. With bottom-line earnings growth of 69% in the last financial year, 2008, the portfolio's historic price-earnings ratio was down to 12,9 and the market's ratio was 19.

Mars then was roused from slumber and the global economy collapsed. Even so, in 2009, M&R's bottom-line earnings per share rose by 23% and, over some two years, the investment returned better than the portfolio's target return. Historically, the price-earnings ratio on the portfolio's investment at R71,04 had moved down to 10,52 and its earnings yield was 9,5%.

When in August I reviewed M&R, following the publication of the 2008 results, I felt its investment fundamentals were sound enough to suggest that 30% growth in bottom-line earnings per share was achievable. There must have been some hubris in this suggestion. However, if I was right, M&R's shares were on a forward price- earnings ratio and an earnings yield of 12,3%.

M&R's share price was then R48 and the historic price- earnings ratio was 5,5 and 18,2%, well below the portfolio's guesstimated forward ratings. Cassandra nudged me in my ribs and I conceded that the market was probably rating the share price on the basis that M&R's bottom-line earnings would barely improve over 2010.

Since then the share has traded at over R60 before falling back to around R51. Is Cassandra prophesying a long-term earnings decline? M&R's massive order book, proven management and improved international prospects suggest otherwise.

Unfortunately, the Gautrain project could be a big blip. Overall, I'm unconvinced on Cassandra's nudge.