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<p>INVESTORS IN SHARES in South Africa must now have even stronger nerves than usual. What to do: buy, sell or hold on? For quite a few months analysts and other experts have been making convincing - yet contradictory - recommendations. Finweek's technical analyst warned last week the JSE all-share index could drop to 25 000. The respected Allan Gray has exchanged its investments in mining giants such as BHP Billiton and Anglo American for less cyclical shares like British American Tobacco and SABMiller. Other asset managers have made their general shareholding lighter. </p>
<p>But they're swimming against the tide. For the past year buyers worldwide of South African shares have been pushing the indices relentlessly upward. If you look at individual shares there are few that don't appear to be expensive. According to the traditional benchmark of the price:earnings multiple, Impala Platinum, for example - with its p:e of more than 60 - is extremely expensive. Several others often seen as value shares - such as Shoprite and Spar - are hovering around 20. </p>
<p>The returns are also much lower than investors are accustomed to. Anglo is still not distributing anything. Richemont's dividend yield is less than 0,5% and special dividends have long been a thing of the past. Nevertheless, several analysts recommend that all those shares - and many others - should now be bought. </p>
<p>Much of the blame for the uncertainty, vagueness and even confusion is due to the financial crisis and the subsequent worldwide recession. Besides the almost impossible task of trying to determine where the economy is heading, it's even difficult - on the basis of the recent past - to determine the current state of the economy and, more specifically, the markets. </p>
<p>The traditional yardsticks of how cheap or expensive a share is are in many cases badly distorted by sharp falls in companies' earnings due to the recession. How many of such falls were temporary and how quickly can the companies recover? </p>
<p>Apart from that, company results in SA can be distorted by transactions involving black economic empowerment, and companies - and therefore also the people who invest or want to invest in them - must bear in mind chronic infrastructure issues, such as Eskom's (in)ability to ensure a supply of power, and political factors, like threats to nationalise mines and farms. </p>
<p>Investing in shares has never been for the faint-hearted. Today, even those with strong constitutions must be more careful, more patient and better informed than before.
<p>But they're swimming against the tide. For the past year buyers worldwide of South African shares have been pushing the indices relentlessly upward. If you look at individual shares there are few that don't appear to be expensive. According to the traditional benchmark of the price:earnings multiple, Impala Platinum, for example - with its p:e of more than 60 - is extremely expensive. Several others often seen as value shares - such as Shoprite and Spar - are hovering around 20. </p>
<p>The returns are also much lower than investors are accustomed to. Anglo is still not distributing anything. Richemont's dividend yield is less than 0,5% and special dividends have long been a thing of the past. Nevertheless, several analysts recommend that all those shares - and many others - should now be bought. </p>
<p>Much of the blame for the uncertainty, vagueness and even confusion is due to the financial crisis and the subsequent worldwide recession. Besides the almost impossible task of trying to determine where the economy is heading, it's even difficult - on the basis of the recent past - to determine the current state of the economy and, more specifically, the markets. </p>
<p>The traditional yardsticks of how cheap or expensive a share is are in many cases badly distorted by sharp falls in companies' earnings due to the recession. How many of such falls were temporary and how quickly can the companies recover? </p>
<p>Apart from that, company results in SA can be distorted by transactions involving black economic empowerment, and companies - and therefore also the people who invest or want to invest in them - must bear in mind chronic infrastructure issues, such as Eskom's (in)ability to ensure a supply of power, and political factors, like threats to nationalise mines and farms. </p>
<p>Investing in shares has never been for the faint-hearted. Today, even those with strong constitutions must be more careful, more patient and better informed than before.
