Five billion reasons why it makes sense to buy yourself some Steinhoff shares

A cornerstone of smart investing is to do your homework and once you've found a company you like, apply patience. That requires tempering your enthusiasm by waiting until some external event temporarily drops the price into the "bargain" bracket.

We've got an example right now in the form of Steinhoff, the Johannesburg-born furniture multinational. By rights, the company's share price on the JSE should be surging after the successful spinoff of its African business (listed 20 Sept at R20.50; price now R24.50) and the recent fall in the rand, an obvious booster for the hard currency business. Instead, in the past month Steinhoff shares have lost 10%.

Reason for the reverse is negative publicity from a court action in Amsterdam. The case was brought by a former joint venture partner who has proven adept at getting journalists to believe his story. The case was heard on September 21. Judgement is expected by end November.

Steinhoff issued a statement after the hearing to say it remains confident of winning the case. Yesterday the company went one better by disclosing that it has bought back a hefty R5bn worth of its own shares. The insiders couldn't resist taking advantage of the emotion-driven price slump. Neither should you.