Volatility and speculation drive market behaviour – Piet Viljoen
Piet Viljoen discusses market volatility driven by speculation, the Bankso scandal linked to human nature's desire for quick money, and Karooooo's success on NASDAQ amid South Africa's investment landscape challenges.
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By BizNews reporter
In a recent interview on BizNews Briefing, Merchant West portfolio manager Piet Viljoen spoke to host Alec Hogg about the volatility in today's stock market, particularly focusing on the sudden 20% drop in the valuation of some tech companies. Viljoen attributes this sharp fluctuation to speculative trading and short-term investment strategies, warning that such swings are not reflective of the companies' underlying fundamentals.
Viljoen explained that companies like ASML and other AI-related tech firms have not experienced real changes in their intrinsic value, but their stock prices have become increasingly volatile due to speculative pressures. "Market prices do, but values don't change by 20% overnight," Viljoen stated, suggesting that the excessive speculation driving market fluctuations is out of sync with the actual performance of these businesses.
When asked about the current climate for investors, Viljoen stressed the importance of caution and thorough research. "You have to be careful… do your work, and get conviction in your work," he advised. He underscored the fact that while some tech companies may be overvalued, others may justify their price, but the key lies in meticulous evaluation.
Viljoen also touched on politics briefly, sidestepping an in-depth analysis but noting the overall noise surrounding the U.S. elections. Referring to the political betting markets and their pricing in of a Trump victory, Viljoen quipped, "If 340 million people… the best [they] can come up with is Trump and Kamala Harris, then, you know, it's not something I want to be thinking about too much."
Bankso Scandal: Speculation and Human Nature
The interview also covered the ongoing financial controversy surrounding Bankso, a company linked to deepfake adverts featuring prominent figures like Elon Musk and Johann Rupert. The company has been accused of financial misappropriation, leading the Financial Sector Conduct Authority (FSCA) to provisionally withdraw its license. Further action by the Financial Intelligence Centre includes freezing seven of the company's bank accounts.
Despite vehement denials from Bankso about any wrongdoing, Viljoen was skeptical. He linked the debacle to human nature, suggesting that people are often drawn to schemes that promise easy money. "It just repeats itself time and time again. You can put these guys in jail, but someone new will come up and promise easy money," Viljoen remarked.
He further emphasized the dangers of short-termism in investing, stating that markets often reflect human nature rather than fundamentals. Quoting Warren Buffett, Viljoen explained that while markets may function like a voting machine in the short term, driven by popular sentiment, they act as a weighing machine over time, focusing on the true value of businesses. This insight, he noted, is crucial for long-term success in investing.
Karooooo's NASDAQ Success and the Broader Market Landscape
Turning to South African companies, Viljoen discussed Karooooo, the parent company of CarTrack, which is listed on NASDAQ. Karooooo has seen significant success, with its shares rising 54% year-to-date. According to Viljoen, this surge is partly due to Karooooo's expansion into international markets, which has allowed the company to access more liquidity and investor interest.
Viljoen praised Karooooo CEO Zach Calisto, calling him a "true entrepreneur" and commending his ability to build a robust business. The decision to list on NASDAQ, Viljoen noted, was wise, given the lack of local investment in South Africa. "Most South Africans have taken their money offshore… there is very little money flowing into South African companies on the JSE," Viljoen explained, adding that moving to international markets has been crucial for many South African firms seeking growth and liquidity.
In conclusion, Viljoen's interview painted a picture of markets driven by human emotions, where caution and thorough analysis are necessary to navigate both local and international investment opportunities. His insights into the speculative nature of current market volatility, combined with his analysis of companies like Bankso and Karooooo, offered a deep dive into the challenges and opportunities facing modern investors.
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