Both AltX and Satrix are investment vehicles aimed at encouraging the participation of the retail investor as an alternative to unit trusts, but their appropriateness as retirement vehicles requires an understanding of the pros and cons of each.
Like the main board, AltX declined precipitously following the international financial crisis in 2008-09. But unlike the main board (which Satrix tracks) it did not bounce back even a little bit during the recovery. In fact, AltX has just dropped below 1 000 for the first time, a far cry from the 5 000 level it reached in late 2007. On a three-year outlook, AltX is 70% lower than the all-share index. AltX is above all about small cap stocks, and whether on AltX or main board, these have not performed well during the recovery because there is so much value to be had elsewhere – and also because they tend to be unresearched. AltX is prone to that weakness that appears to affect all small cap boards: wild booms and busts.
Pros and Cons of AltX
AltX attracts little interest because investors tend to follow momentum, and that’s currently with the large cap and resources stocks – which you can access via Satrix. The biggest drawback of AltX according to Shawn Stockigt, manager of several Stanlib funds including its Small Cap and Value funds, is that unlike Satrix, AltX does not represent any common theme.
He therefore never looks at AltX as an entity – he looks rather at small caps, construction companies or value shares, irrespective of where they are to be found. “It’s a diverse index, with only three or four larger companies heavily weighting it. Companies also move in and out of the board, making AltX irrelevant as an investment ‘theme’,” he says.
Explaining AltX and Satrix
Unlike Satrix, AltX is not an investment product – but a trading platform on which the investor buys individual shares. AltX aims to attract small and medium sized companies, and is also tailored more to the private investor than the institution, though institutions still account for 30% – 40% of market cap – giving some reassurance to private investors.
Satrix is a range of exchange-traded funds, the most popular being Satrix 40, which gives investors the performance of the FTSE/JSE’s top 40 index. It enables investors to invest in a single security that provides a diversified portfolio of the top 40 companies, measured by their market capitalisation, on the JSE. It provides both the price performance of this index as well as paying out quarterly all the dividends received from the JSE’s top 40 companies.
But are these retirement vehicles?
Stalwart investment managers such as Armein Tyer, MD of Sanlam Investment Management and Citadel wealth planner Johan Strydom both recommend the JSE’s Satrix series for the private investor, whether for retirement or savings purposes.
EFTs, such as those offered by Satrix, offer strong competition to unit trusts: to keep costs down they tend to be ‘tracker’ funds that in their underlying basket of shares mirror those used by the JSE to calculate the average growth of various sectors. By emulating the average of the sector, they achieve growth that is better than most actively managed funds – in the short-term. While the performance of Satrix tracks that of its index, a look at AltX’s performance shows a massive spike, whereafter it “fell off a cliff, and hasn’t recovered since,” says Stockigt.
For retirement purposes, he says “you’d have to say ‘don’t go there’, but by delving a little deeper into individual companies there is certainly value to be found.” However, it takes a great deal of personal research. While there are good companies on the AltX, there are equally good or better companies elsewhere, also at favourable valuations, and you can get a diversified portfolio of such value stocks through Satrix. So much value is to be found elsewhere, not only on the JSE’s main board, but more
particularly in offshore investments.
However, small cap stocks do appeal to the contrarian investor, and identifying the right stock can be rewarding. Stockigt points out that if you’d bought Spur a year ago, you would have increased your capital fivefold, with the dividend alone being more than the initial investment. He bought Spur for R2,15, received a dividend of R3,38 and the share was valued in June 2010 at R10,20. He recommends anyone take a certain proportion of their retirement portfolio not likely to be needed any time soon, and dedicate that portion to more high risk punts. These opportunities exist – and there are others – but it begs the question of whether this is a retirement strategy. It is certainly high risk – not the sort of investment you can buy and forget about.
The key weakness of small caps is liquidity, and Stockigt lists this as the most important consideration when buying. Yes, there are bargains to be had – but you have to question whether you can sell the stocks when you wish to. Many AltX companies whose share price is languishing are also ripe for buyouts (M&A). These are good companies with great potential and are being ignored. Once the M&A market itself picks up, they may be ignored no longer. For Satrix (or passive) investors looking to invest in an AltX index fund, no such index exists.
Stockigt emphases that index funds generally adopt a theme, whereas the AltX is far too diverse a group to be a ‘theme’. The same applies when making comparisons to either a Satrix index fund or answering the question of whether the AltX would make a suitable investment towards retirement. Investing in AltX is the same as investing in any single stock. Furthermore, the torrid time the AltX has had in recent years would tend to exclude AltX shares from any but the most high-risk portfolio.
Understand Your Investment Options
“Researching AltX companies is no different from researching any company listed on the JSE,” says Shawn Stockigt, manager of Stanlib Funds. More than that, he again recommends investors look at companies (or their products) they have some knowledge of. Two important gauges of a company are corporate governance and liquidity.
“We look for low price:earnings ratios and high dividend yields and if they appear to offer value, we interrogate further. We also look at companies that have fallen particularly hard as to whether there are valid reasons for the fall. We look for the ‘unloved’ companies. For instance, I’d be looking at the construction space right now, because the market may be over-discounting the bad news.” Value fund managers study the JSE daily prices for companies that stand out and then find reasons for the difference.
(Infographic) The 10 Things You Should Cover In Every Investment Pitch
If you want to wow potential investors, you need to cover your bases.
If you’ve ever watched Entrepreneur’s original series, Elevator Pitch, then you’ve probably seen smart founders make dumb mistakes while pitching their ideas to potential investors. They might flub an answer or get tongue-tied, or they might just be a little boring. Other times, you might notice that something seemed off about a pitch, but you can’t quite put your finger on why.
Investors are gambling every time they put money into a new project or idea. Your job when pitching is to prove to them that you’re worth the risk. That means you’ll need to not only show them the possible upside of what they have to gain, but also be clear about what they could possibly expect to lose and their odds. In other words, you need to give them a holistic view of what you do, not just the one good idea.
You might have pitched an investor yourself and thought you crushed it, only to hear that the investor isn’t interested. If that’s the case, there’s a chance the pitch was missing one of 10 essential elements.
This infographic by Buffalo 7 breaks down 10 slides you should have in your next investment pitch deck. If you’re not presenting formally, though, you can still keep track of these aspects in your head and make sure you cover each one. They include:
- The vision, where you concisely explain your idea.
- The problem. Why is your vision necessary or helpful?
- The opportunity. What is the market size, and how can you position yourself to earn a share of it?
This is just the start, though. Check out the infographic below to see the rest of the slides you need when pitching investors.
This article was originally posted here on Entrepreneur.com.
‘Shark Tank’ Investors Reveal Top 5 Tips To Make Your Business Famous
Is your business worthy of fame? If so, pay attention to what the Sharks have to say …
Shark Tank enters its tenth season as popular as ever. Over the past decade, millions of people have watched fascinated as entrepreneurs pitched their business ideas and startups in the hopes of winning an investment and support from self-made millionaires and billionaires.
The multi-Emmy® Award-winning reality-based show has had a tremendous impact on the business world and has been a major influence on the increased popularity of becoming an entrepreneur. Over the years, the show has evolved into one of the world’s top platforms to launch a business and recently reached an astonishing $100 million in deals offered in the Tank.
I was recently invited to attend a private event hosted on the set of Shark Tank to celebrate their 10th season and met with all the Sharks and most of the guest Sharks for the current season. This year’s guest list includes luminaries:
- Charles Barkley, Hall of Fame NBA star and TV analyst
- Alex Rodriguez, legendary baseball player and businessman
- Rohan Oza, an iconic brand builder and marketing expert
- Sara Blakely, founder and owner of SPANX brand
- Matt Higgins, the co-founder and CEO of RSE Ventures and vice chairman of the Miami Dolphins
- Bethenny Frankel, TV celebrity, author, and founder of Skinnygirl brand
- Jamie Siminoff, the CEO of RING, who rejected an investment offer in season 5, but went on to sell his company to Amazon for a whopping $1 billion.
My better half was also invited, and we arrived promptly on time at Studio 24 inside of Sony Pictures Studios in Culver City, CA. We were greeted by the cordial staff who informed us that the Sharks were still filming the last takes of the day. After several minutes, we were invited to chat with the Sharks on the main floor where nervous entrepreneurs excitedly pitch their companies to the investors under the bright lights of the studio set.
I was curious to know what excited the Sharks the most about their tenth season and what they believed to be the best advice for an entrepreneur to help make their business famous.
1. Create an ingenious product
When asked, Lori Greiner said, “It’s a mix, right? Of smart marketing and ingenious product. For example, Scrub Daddy was a technology. So, taking that one sponge, which was revolutionary, changed the whole sponge arena. We now have, to date, 20 different SKUs, and we have 30,000 new retail locations and 170 million in sales. That’s what takes it from one idea to a global brand.”
Of course, skillfully promoting your product on a platform like QVC is another excellent way to make your business famous. The day after the Scrub Daddy episode aired, Greiner helped CEO Aaron Krause sell their entire inventory of 42,000 sponges in less than seven minutes on QVC.
2. Leverage social media marketing
During my chat with Bethenny Frankel, she stressed, “Social networking is so important. Also being a little bit disruptive now … and you have to be creative. You have to be creative. The President was the most disruptive candidate that there’s probably ever been in history. He got people’s attention, and young entrepreneurs need to get people’s attention in some way. So be a little disruptive.”
Matt Higgins responded, “I’d say that you have to understand social and digital marketing. You can’t survive unless you understand Instagram, Snapchat or all the tools out there. You have to be contemporary.”
Barbara Corcoran claimed, “Every one of us successful entrepreneurs, for the last two years, were phenomenal at social media. It’s true. No exceptions.”
No smart entrepreneur will deny the power of social media when it comes to making your company famous. With more than 2 billion people worldwide using some form of social media, any business can put their business in front of a large audience, especially if they can create content that goes viral.
3. Build a community
Daymond John stressed the value of building a community. “You’ve got to build a community,” stated John. “Nobody needs to buy anything new in this world. They only buy it because there’s some form of community and/or need that you are supplying for them.”
John speaks from experience. He built a successful clothing empire by creating a vast community of his own via his clothing brand FUBU. John wisely invested in celebrity endorsements, making him an early pioneer of modern influencer marketing.
If you lack the resources to build your own community from scratch, you can leverage the power of others. Partnering with influencers who have cultivated their own communities allows you to introduce your product or service to larger audiences. In fact, some consider Shark Tank to be the world’s largest business influencer platform.
4. Devise a publicity hook to win earned media coverage
Barbara Corcoran also said, “I’d say you need a publicity hook. Some hook, angle or gimmick that grabs the attention unfairly from your competitors.”
Remember, Shark Tank is a unique combination of reality television, business acumen, and entertainment. Doing something unique, different, or disruptive can get you significant media attention and abundant free publicity… especially if you’re able to leverage that publicity and captivate the show’s producers, who decide your fate as to whether you’ll appear on the show.
Regardless if you want to appear on Shark Tank or not, being featured in the media is a way to differentiate your business from the competition and reach a broader audience. Be creative and willing to take educated risks when it comes to getting noticed by the media. You should always be actively building relationships with media representatives and ask for their insights when formulating your plan.
5. Know your strengths and stay focused
When I asked for billionaire Mark Cuban’s insights, he thoughtfully replied, “Knowing your unique advantages, play to that, and your strengths. And focus. You know, what happens is very often people start with an idea, get a little bit of traction, then it gets hard. And when it gets hard, they start looking for other things to do as opposed to playing to their strengths. Because businesses aren’t supposed to be easy. You know, if they were easy everybody would already be rich, and we’d all be sitting on a beach somewhere. And so, when it gets tough, you gotta dig in and work hard. I’d say the final thing I’d add is that sales cures all. There’s never been a business that succeeded without sales. So, if you focus on selling … if you’re able to sell … and that’s something that is one of your core competencies, then you’ll be okay.”
These are wise words from one of the world’s few billionaires.
This article was originally posted here on Entrepreneur.com.
The Best Way To Get Your Teenager To Start Investing Right Now
Jeff Rose advises a young fan on where to start his investment journey.
In this video, Entrepreneur Network partner Jeff Rose talks about receiving a letter from a young investor, who is looking for advice on how to begin investing.
Rose talks about the act of actually doing the investing versus worrying about reading books or asking others about the process. Taking action gets the most results, since you are able to make mistakes and start the learning process. Taking action also leads to more experience, which is to say if you begin investing as a teen, you will be much more savvy about investing as a twenty-something.
In answering this young investor’s concern about investment direction – the fan hopes to balance short-term gain and long-term gain, as well as to establish some padding for a future business – Rose turns him in one specific direction: A Roth IRA. When he was younger, Rose didn’t even know what a stock was until far into his college years; during this time, he discovered the Roth IRA and learned of its compounding power, as well as the accessibility of an initial investment.
As another route, Rose also mentions starting a business. This path, Rose explains, will help you achieve the most return on investment.
Click on the video to hear more tips for a younger investor.
This article was originally posted here on Entrepreneur.com.
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