Sept. 10, 2020
Day 167 of lockdown.
Jeez peeps are buying SA Inc
Top movers in Top40 and MidCap pic.twitter.com/6zgQO5DmHS
— Simon Brown (@SimonPB) September 9, 2020
We're seeing lots of really bad results now that companies results include the second quarter. But the market is expecting this and in many instances not even selling the stock down much if at all as the bad results roll in.
The flip side is that when we see some decent results the market loves that news and sends the stock soaring higher.
This is because right now our expectation is for bad results so good is a pleasant surprise. I have often spoken about the fact that results or other announcements are often not about the actual numbers, rather it is about the expectations relative to those numbers.
What we are seeing is in part a two-part market. Remembering back in hard lockdown when the question was if the rebound would be V-shaped? Or perhaps W, U with some even suggesting L shaped. Well, Old Mutual says actually it is K shaped.
This makes sense. In the US the upper leg of the K is big tech socks with the rest being the lower leg of the K.
Locally miners are the upper leg and financials the lower leg.
So now we can put this together, K shaped recover and the market-loving positive surprises. Hunt out those top quality companies in the lower leg as they're cheap and if they're quality they'll not only recover but will do so quickly and with great profits. This is where we'll find stocks that still have great upside potential.
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