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New Year May Ring in Sector Switches

Where are the investment profits going to come from in 2013? It probably won’t be much different to 2012 – trends don’t change just because we ring in a new year.

Eamonn Ryan

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Is the global economy one jot different to what it was this time last year? The three issues confronting the world in 2013 – just as in 2012 – are: the US economy, the Eurozone crisis and slowing growth in China.

South Africa, like other emerging economies that have seen sharply lower growth this year, remains hostage to the global environment, which has seen planet-wide growth slip for each of the past three years: 2010 (5%); 2011 (3,8%); 2012 (3,1%); and 2013 (projected 3,4%).

Most of these problems affect governments, and investment analysts are quick to point out that companies are doing better and in some cases are rated higher than their governments.

Subtle economic shifts have taken place during 2012 which means that – bar a Eurozone recession and looming US fiscal cliff – we’re heading for more peaceful waters than a year ago. In the US, consumers are doing better but the economy is running a deficit that is bigger than Greece’s. Though it’s not a focus at the moment, the US will have to go through a phase of austerity like that of Greece and other European countries.

Future growth levels for China are expected to be in the region of 7% – 8% rather than 11% – 12%. Brazil and India have also demonstrated rapidly cooling economies.

Paul Hansen, STANLIB Retail director, anticipates that two major trends of the past 18 months may be due for a switch. The first is falling global interest rates which can’t really fall any further; and the second is the weak resources sector on the back of falling commodity prices throughout 2012, which has probably now bottomed.

Low interest rates

Interest rates have been low for several years in developed economies but over the past 18 months key emerging markets such as China and Brazil also cut their rates. Last year, the bond market (still on a 30-year bull run) and listed properties were the beneficiaries of low interest rates but there’s no guarantee this will continue into 2013.

Hansen believes the low interest rate trend will “continue for a while” but doesn’t expect much more from either the overheating bond market or listed property, although over the shorter term because of a recent 9% correction, STANLIB is expecting a 13% return from South African listed property in the next 12 months.

“STANLIB still likes offshore listed property, partly because of rental growth and partly because of the good yields of 4% on shares,” he says.

However, investors should be wary of buying anything interest-rate or retail related: real retail sales growth is slowing. In September 2012 it slowed to 4,3% year-on-year, from 6,7% in August, the third
consecutive quarter of slowing growth since a 7,7% year-on-year peak in the final three months of 2011.

Pieter Koekemoer, head of personal investments at Coronation Fund Managers, lists the themes of the past year.

“The winning asset classes of the past year were listed property, and financial and industrial stocks. Property was the beneficiary of a very benign monetary policy, as well as the unexpected 50bps cut in the middle of the year, and the fact that property carries the promise of a growing yield, thanks to rental escalations.”

The losers were resources and commodity stocks. “Overall, the JSE ALSI increased about 25% over the last 12 months, while the financial and industrial indices leapt 40%, and the resources index was essentially flat,” says Koekemoer. Compared to the 2008 peak for most resources stocks, they are down on average 50% since then, with some as much as 70% – 80% down.

South African retailers have benefited most from the fall in commodity shares since the 2008 recession. Growth has been fuelled by foreign buyers, and since September 2008 the listed retail index has almost tripled in value. Resources on the other hand have fallen 9,6% as lower commodity prices have in some cases severely dented earnings.

Resources rebound

Mr Price trades on a price:earnings ratio above 30. Shoprite and Woolworths are approaching that level, while Truworths and Foschini are trading in the mid to high teens.

Therefore, something to watch out for may be retail weakness and a resources index rebound, and here Hansen sees some chance for investors to make money in 2013, “particularly if the Chinese economy picks up.” Growth rates in China may still shrink but there are signs that the bottom has been reached.

Hansen adds: “Offshore markets are likely to continue their bull trend, boosted by Asian markets, which performed particularly badly in 2012, but which I expect to recover in 2013, especially the Chinese stock market.”

Koekemoer endorses this view, saying Coronation, in common with many fund managers, is at its maximum 25% offshore allowance. “Low interest rates are supporting equity prices and this is likely to remain the case at least until 2015.

In our own portfolio, we have no bonds, are underweight listed property and also underweight domestic equities. Sectors of the economy are under pressure, and the consumer boom has been primarily driven by credit extension. This means it’s hard to justify some of the current domestic p:e ratios.”

Last year’s winning shares

Tom de Lange, chief investment officer at Emperor Asset Managers, says: “Using a momentum approach, on our buying list last year were the following shares (returns for 2012 in brackets): EOH holdings (74%), Metair (59%), Woolworths (48%), BATS (46%), Coronation (22%), Life Healthcare (37%), Shoprite (37%), Mr Price (23%), AVI (34%), Tiger Brands (31%), Vodacom (19%), Cashbuild (23%), Foschini (18%), SAB Miller (19%) and Exxaro (23%). With gearing of 150%, we returned close to 40% for our clients, not too bad if you consider the JSE All Share Index returned around 14% (which incidentally is quite a normal return).

We missed out on Bell (58%), Capital & Counties (52%) and Old Mutual (32%). So where to put your money for 2013? De Lange lists this year’s potential winners as coming from three hot sectors: Consumers, Services and Food and Health.

The lagging sectors remain Platinum, Resources and Industrials. “Using the same momentum approach, on our buying list for 2013 would be: Metair, Pinnacle, Woolworths, Life Healthcare, Mr Price, Aspen, RMI Holdings, Famous Brands, Invicta, Assore, Old Mutual, AVI, Omnia, Imperial, Litha Healthcare, Cashbuild, Shoprite, Coronation, EOH, Naspers, Clicks and RMB Holdings.

There are a number of retail stocks in there, but remember the interest rate cycle won’t change any time soon, so it remains appealing under the momentum style of investing.

“Slightly further down the list but still worth considering would be PSG, Resilient, SAB Miller, Richemont, WBHO, FirstRand and City Lodge. If you have the appetite for smaller counters with higher volatility, you may also consider Ellies, Curro, Taste, Brait, Metrofile and Afrimat.

“Happy investing,” concludes De Lange.

2013 stock picks

The stock pick for 2013 by Asheen Rabilal, equity analyst at Sanlam Investment Management (SIM), is EMIRA. “Even though this stock has not been well liked in the market, SIM believes that EMIRA’s significant de-rating allows it to offer investors better potential upside than the stronger performing, and better known, larger cap property stocks.”

Invicta is selected by Olof Bergh, investment analyst at Sanlam Private Investments (SPI). “This importation and distribution business has hit SPI’s radar screen recently as it’s a high quality company, delivering consistently high returns at low levels of volatility and high levels of growth, relative to the overall market.”

Tom de Lange, chief investment officer at Emperor Asset Managers, picks the platinum sector as one to watch for 2013, though it’s already recovered 20% – 25% from its lows.

“Even though you can probably pick up resource and platinum shares now at attractive prices, it doesn’t mean that your portfolio is going to outperform the market. So for those investors who do have an appetite for these shares, buy them on the dips, exercise patience and remain underweight until they show decent momentum,” says De Lange.

His picks for the platinum sector are: Implats, Northam, Aquarius and Eastplats. For resources: Billiton, Kumba, Exxaro, Sasol and Assore.

De Lange adds: “Investors can find as many things to worry over now as this time last year. Last year, the three hot sectors were Consumers, Telecoms & IT and Food and Health. The lagging sectors were Resources, Industrials and Platinum. Property, Services and Financials were in nowhere territory.”

Before becoming a financial writer and freelance journalist in 1997, Eamonn Ryan was a legal adviser, company secretary and alternate director at listed company Cashbuild Limited from 1988 to 1997. Since becoming a financial writer, he has focused on the business and financial sectors, as well as personal finance, writing for Finweek, The Star Business Report, Sunday Times Business Times, Business Day, Mail & Guardian, Entrepreneur, Corporate Research Foundation (which brings out a series of books each year ranking SA’s best employers and best managers), as well as a host of once-off and annual publications such as ‘Enterprising Women’ and ‘Portfolio of Black Business’. He also writes media releases, inhouse magazines and sustainability or annual financial reports for various South African corporates and financial services groups, including the Ernst & Young annual M&A book.

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Investing

(Infographic) The 10 Things You Should Cover In Every Investment Pitch

If you want to wow potential investors, you need to cover your bases.

Matthew McCreary

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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:

  1. The vision, where you concisely explain your idea.
  2. The problem. Why is your vision necessary or helpful?
  3. The opportunity. What is the market size, and how can you position yourself to earn a share of it?

Related: How To Pitch Your Business, Product Or Idea To Industry Experts

This is just the start, though. Check out the infographic below to see the rest of the slides you need when pitching investors.

1541174287_investment-pitch-infographic

This article was originally posted here on Entrepreneur.com.

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‘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 …

Eric 'ERock' Christopher

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Shark Tank

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.

Related: 6 Great Tips For A Successful Shark Tank Pitch

2. Leverage social media marketing

barbara-corcoran

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.

Related: Shark Tank Funded Start-up Native Decor’s Founder on Investment, Mentorship And Dreaming Big

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.

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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.

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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.

Related: Making International Investing Simple And Transparent – CybiWealth Digital Platform

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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