In this month’s episode Alec Hogg takes us through the movements in the portfolio’s holdings, intrinsic risks in markets at the moment, and the impact of the dollar strength on the portfolio. All while answering pertinent community questions about the portfolio’s performance and local and global investment environments in general.
While some of the changes have already worked out well. One, Telkom, not so, after MTN pulled out of a possible takeover. It could have been worse as ahead of the restructure, I was tempted to add Murray & Roberts after its share price had fallen by half despite an upbeat outlook. Even after falling further – now a third of August’s price – M&R is not for us.
I’m indebted to community member Neels Viljoen’s pointer to Benjamin Graham’s classic definition of an investable stock: “one which, on thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”
Neels, who has plenty of experience in the sector, reckons it is impossible for investors to make anything other than an educated guess whether projects in M&R’s massive order book will make or lose money. A fact the stock market was reminded of last Monday when M&R disclosed serious problems on its mega projects in Texas and Western Australia.
Given such uncertainty, Neels writes, “it is thus impossible to calculate the intrinsic value with any degree of certainty. Luck plays a bigger role.” Ergo M&R shares are speculative, not investable. A timely reminder for all of us.
Alec Hogg
