Risk is good (#455)

Simon Shares

• We now have updates from listed retailers as to the damage caused by last weeks rioting. Chantal Marx ran the data and says we saw almost 1,700 stores looted or closed due to the rioting and this is about 8% of the retailers' local footprint and some 5% of global footprint. This is a significant number, but considering many are open for trade again, with many opening last weekend already. The impact on earnings is likely to be very modest, if at all.
• PwC expects last weeks riots to take about 0.4% off local GDP for 2021. They already had a low expectation of under 3%, but that drop of 0.4% does illustrate how listed retailers may be okay, the real pain is in the unlisted and especially the small one-off store.
• Local CPI dropped a little in June to 4.9% (5.2% in May).
• The population of South Africa was estimated to be 60.14million at mid-year 2021, an increase of about 604,281 (1.01%) since mid-year 2020.
• Stellar production updates from Anglo American (JSE code: AGL) and BHP* (JSE code: BHP). They are both firing on all cylinders, even if there have been some issues (iron ore rail line for example). But they're largely debt-free, no massive projects or M&A activity and Greg Katzenellenbogen says the worlds top miners will make almost US$120billion profit this year, double from last year. So massive dividends?
• Sygnia did not steal your dividend.

* I hold ungeared positions.

Upcoming events;

• 22 July ~ JSE Power Hour: Power of savings
• 19 August ~ JSE Power Hour: BEE shares and the JSE

Risk is good

I got an email from a listener asking about risk free investments on the JSE. Thing is, there is no risk free on the JSE - and that's a good thing.

Without risk there would be no reward.

When I am looking for investments, I always look for the good things about the business. Margins, growth, product and the like.

But I also dig into the risks, competition, input inflation and the like.

The thing is, I like to see risk, I just want risk that I think the company can manage and ultimately maybe even turn into a benefit. For example, new product is absolutely a risk. But what if they disrupt themselves and create a new product that hits sales of their existing product, but creates an entire new category.

Apple did this with the iPhone, killing off the iPod.

When researching into long-term 'til death do us part' investments

I create a short list of the three main features I like in a stock. But I also create a list of the three main risks and I keep a close eye on both lists.