Sasol: Spectacular Recovery

Exactly one week ago, on Monday the 24th of August, Sasol ended the session at R375.25, its lowest level since January, amid a rout in global markets and a slump in oil prices. However, since then, Sasol has been one of the top performers on the JSE, as equity and commodity markets recovered. Over the past two sessions, Sasol has added 5.25% and 7.41%, respectively, as it rose to trade at R431.79 per share. This was mainly due a 16.25% increase in the Brent crude price over the same period. Looking the forward, Sasol will continue to be somewhat correlated to the Brent crude price and thus, vulnerable to any declines.
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Discovery: Upbeat update

Yesterday, Discovery closed 0.82% lower after releasing a trading statement for the year ended 30 June. In the update, the integrated financial services organization advised shareholders that it expects basic earnings per share to increase by between 60%-70% and come in at between 893.3 cents and 949.8 cents, from a restated amount of 558.7 cents. However, normalised headline earnings per share are only expected to increase by 10%-20% to between 654.3 cents and 713.8 cents. This is mainly due to the increase of shares in issue after the rights issue earlier this year. Currently, the share sits as one of our Top 10 stocks to own. It trades on a PE of 15.56, a DY of 1.26% and has returned to 31.4% in the last 12 months.
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Asia: Bouncing!

Asian markets were a sea of green this morning, as positive sentiment flooded across the globe. The Hang Seng index outperformed its peers, as it gained 2.6% to trade above the 21,600 points level. Meanwhile, the Shanghai Composite added 1.55% to trade just below the critical 3,000 point mark. In Japan, the Nikkei added 1.89% amid a broad-based rally, with export-orientated stocks attracting large buy orders. Lastly, the ASX rose 1.43%, with the index supported by a pick-up in buying across a majority of sectors.
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EOH Holdings: Oversold or still too expensive?

EOH Holdings, the largest ICT service provider in South Africa, has endured a sticky spell of late. Despite gaining 4.57% during yesterday’s session, the stock has lost 12.5% over the last week alone. Excluding yesterday’s gains, EOH fell from an intra-day high of R173.49 on the 19th of August, to a low of R136.00 on Monday, a massive 21.6% decline in less than three trading days. This was in part attributed to a general decline in the ICT sector, but also coincides with the release of its trading statement. With the share currently sitting at a PE ratio of 29.54, it seems that the market was less than enthused that the company was only expecting earnings and headline earnings per share to increase between 20%-30%. If the PE does begin to unwind, investors might find more opportunity in a up-and-coming challenger Adapt IT (ADI), which is trading on a far more reasonable 20x multiple.
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The Gold Index: Safe Haven

The J150, or the Gold Index, has been one of the few indices which have come through this most recent global sell-off in outstanding form. Over the past two weeks, the JSE All Share index has declined from 52,221 points to 47,631 points, resulting in a negative return of 8.8%. During the same period, the Gold Index has risen a massive 37.7% to 1,078 points, from 783 points two weeks ago. This was largely due to a whopping 48.2% increase in AngloGold Ashanti and a 40.6% return in Gold Fields over the same period. The index has been flying on a combination of positive sentiment, a weakening rand and a rebound in the spot gold price.

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The Rand: Emerging Market Slaughter

On Friday, Wall Street suffered its steepest 1-day decline in nearly 4 years on fears of a China-led global economic slowdown. The sell-off was broad, with all 10 major sectors ending in the red. Among others, the energy index fell 2.6% as U.S. crude oil dipped below $40 a barrel, while the consumer staples index fell 2.6% to move into the red for the year. Apple was among the biggest drags on the S&P and NASDAQ, down 4.6%, as it led the technology sector to close 4.2% lower. For the week, the Dow Jones and S&P 500 fell 5.8% each, while the NASDAQ tumbled 6.8%. Lastly, the CBOE Volatility index climbed to its highest point since 2011 and notched its biggest-ever weekly percentage gain.

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Oil: A Slippery Slope

Oil prices ended sharply lower on Wednesday, following an unexpectedly large increase in U.S. stockpiles. As a result, Brent crude lost 3.7% to trade at $46.97 per barrel, while U.S. crude fell more than 4%. Brent continued to edge lower this morning, down $0.07 to trade at $46.90 per barrel. In contrast, spot gold raced to its highest level in five weeks, following the release of the FOMC minutes last night, which showed a September hike in U.S. interest rates may be unlikely. This morning, spot gold was flat at $1,134/oz, after touching a high of $1,135.20/oz.

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Wall-Mart Stores: Choppy Results

The US’s largest retailer by sales, Wal-Mart, released its results for the quarter yesterday and saw revenues increase to $120.2bn, from $120.13bn a year ago. It was the decrease in earnings and outlook, however, which sent the share tumbling 3.38%. For the period, the company posted earnings of $1.08 per share, down from $1.21 a share, as an increase in staff costs weighed on profits. These results were mixed compared to analysts’ expectations of earnings of $1.12 a share on $119.72bn in revenue. Lastly, it also lowered its full-year outlook to a range of $4.40-$4.70 a share, from $4.70-$5.05, lower than expectations of $4.77 per share.

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Estee Lauder results: A mixed bag

On Monday, Estee Lauder, one of the world’s leading manufacturers of skin care and make-up products, fell 6.8% after it reported lower-than-expected quarterly revenue. For the period, revenue came in at $2.52bn, a 7% increase, but slightly lower than estimates of $2.56bn. This was in part due to the stronger dollar, which has resulted in a decrease in export volumes. Furthermore, the company saw a 4% increase in earnings to $0.40 per share, much higher than estimates of $0.34. This improvement, as well as those of previous quarters, have been driven mostly by product innovation and cost saving measures.

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JC Penney: Above low expectations

J.C. Penney, the struggling U.S. clothing retailer, announced its 2nd quarter results on Friday, with its results coming in slightly higher than expectations. Revenue for the period rose 2.7% to 2.88bn, slightly higher than estimates, boosted by men’s clothing and fine jewellery. For the period, the group lost $138mn, or 45 cents per share, compared to expectations of a loss of 50 cents per share. This marks a slight improvement from its loss of 56 cent per share from a year earlier, which signals that the turn-around plan by new CEO, Marvin Ellison, is finding traction. After the results, the share surged 5.6%, but has still fallen a massive 81% since February 2012.

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