JSE Direct with Simon Brown

It's all lies (#430)

Jan. 20, 2021

Simon Shares

  • Trading updates from Truworths (JSE code: TRU) and Foschini (JSE code: TFG) both saw sales decrease for the period ending both saw sales down. But not down as much as expected and hence the stocks went wild. Truworths was up some 25% in two days. More than anything this is because expectations were dire. That said I'm not convinced, the lockdown was increased post the period end and as mentioned, sales and HEPS are expected to be down. We'll get more retail updates and over the following two weeks, with Pick n Pay the exception - they don't issues sales trading updates.
  • On Pick n Pay (JSE code: PIK), they announced that after eight-years CEO Richard Brasher will be stepping down after a solid turn around in the company.
  • Local CPI came in at 3.1% for December leaving 2020 at 3.3%, the lowest since 2004 (1.4%) and 1969 (3.0%). The MPC will announce he repo rate Thursday, no change expected and with growth under pressure (load shedding, new lockdowns and late vaccine) I don't any increases in 2021

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It's all lies

All of it. Politicians, corporates, marketers. The whole lot. So we need to be extra cautious whenever we hear anything an ask the questions. Ask why they say that? Ask the likelihood of it being provable and how the lie benefits them? Ask what's missing, and why is it missing?

Let's be clear, Trump has emboldened liars like nobody before him. But this is not new. Politicians lie all the time, most promising things that they're unable or worse, unwilling, to actually deliver on. But we've entered a new level whereby when lies are challenged they are deflected not with truth but more lies or the truth is called 'fake news'.

For investors, we also have a bunch of lying happening.

My favourite trick is that before I read a set of results I head to the previous one or two sets and maybe even an annual report and read their forward-looking statement and review of the period. This quickly gives you a sense of which CEOs are honest and which are just fluffing it until their next bonus.

Accounts are themselves not directly lies, but they're also not 100% truth. There are assumptions made at many turns in a set of results.

  • Some like Steinhoff we now know were all lies and I avoided that because of the complexity and that's an important point.
  • Tongaat was a hard one to spot, but the red flag (in hindsight but useful for the future) is when the company gets to 'value' assets.
  • African Bank we could spot because earnings were increasing but dividends were not. So no cash was being made from the higher earnings.

Common amongst all three? Very strong CEO who ruled with an iron fist.


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