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Port Elizabeth - Another week, another record.
It became way too easy to predict and make money: buy shares on Monday, wait a few days for the market to run to a new high and go and spend your profit.
The only hard part is to ignore the fact that most shares are already standing on quite demanding price/earnings ratios, while prospects for continued strong profit growth is not that good.
The PE ratio on the JSE Top-40 index reached nearly18 times on Friday when the market hit a new high (the largest 40 companies on the JSE amount to more than 70% of the market capitalisation, which is a suitable proxy).
Some of the ratings of large index shares are downright frightening, for example, Anglo American [JSE:AGL] is on a PE ration of 28.1, SABMiller [JSE:SAB] on nearly 30 times, Richemont [JSE:RCH] on 22.7 and Naspers [JSE:NPN] is on a heady PE ratio of 56.3.
While we all know that results from platinum mines will be a big disaster in the current financial year, platinum shares are still on high historic PE ratios: Anglo American Platinum [JSE:AMS] is on a PE of 91 times. Impala Platinum [JSE:IMP] is on a lower 34.8 ratio - ironically because it is still earning income from its previously troublesome investment in platinum mines in Zimbabwe.
Most industrial and financial shares are also on demanding ratings, be it lower than the extreme examples mentioned above.
Discovery [JSE:DSY] is on 20 times earnings and the share prices of Bidvest [JSE:BVT], Barloworld [JSE:BAW] and Remgro [JSE:REM] are all on PE ratios of above 17.
Nevertheless, investment managers and brokers are not seen to predict a correction. But maybe investors should be considering lightening their holdings in some of these very expensive shares and start looking at some of the good companies on lower ratings.
The week ahead:
The market seems set for another good week as recent economic data and company news was mostly positive.
Figures from the Reserve Bank showed that credit extension - the backbone of modern economies - recovered during March.
Economic news from the US and Europe was also mostly positive.
Coronation Fund Managers [JSE:CML] announced last week that headline earnings per share could increase by as much as 80% in the six months to March compared with the same period last year.
This is in itself a sign of the strong market as an increasing proportion of Coronation's management fees are based on the performance of the funds under management.
Massmart [JSE:MSM] said that sales in the first quarter of the year were somewhat higher than expected, setting the tone for other retailers and creating investor expectations.
Several mining companies will either publish quarterly results or give investors a quick trading update this week. Among these are Harmony Gold Mining [JSE:HAR], ArcelorMittal [JSE:ACL] and Gold Fields [JSE:GFI].
Several companies will follow with trading updates in the next few weeks for the reporting period to end-March.
It became way too easy to predict and make money: buy shares on Monday, wait a few days for the market to run to a new high and go and spend your profit.
The only hard part is to ignore the fact that most shares are already standing on quite demanding price/earnings ratios, while prospects for continued strong profit growth is not that good.
The PE ratio on the JSE Top-40 index reached nearly18 times on Friday when the market hit a new high (the largest 40 companies on the JSE amount to more than 70% of the market capitalisation, which is a suitable proxy).
Some of the ratings of large index shares are downright frightening, for example, Anglo American [JSE:AGL] is on a PE ration of 28.1, SABMiller [JSE:SAB] on nearly 30 times, Richemont [JSE:RCH] on 22.7 and Naspers [JSE:NPN] is on a heady PE ratio of 56.3.
While we all know that results from platinum mines will be a big disaster in the current financial year, platinum shares are still on high historic PE ratios: Anglo American Platinum [JSE:AMS] is on a PE of 91 times. Impala Platinum [JSE:IMP] is on a lower 34.8 ratio - ironically because it is still earning income from its previously troublesome investment in platinum mines in Zimbabwe.
Most industrial and financial shares are also on demanding ratings, be it lower than the extreme examples mentioned above.
Discovery [JSE:DSY] is on 20 times earnings and the share prices of Bidvest [JSE:BVT], Barloworld [JSE:BAW] and Remgro [JSE:REM] are all on PE ratios of above 17.
Nevertheless, investment managers and brokers are not seen to predict a correction. But maybe investors should be considering lightening their holdings in some of these very expensive shares and start looking at some of the good companies on lower ratings.
The week ahead:
The market seems set for another good week as recent economic data and company news was mostly positive.
Figures from the Reserve Bank showed that credit extension - the backbone of modern economies - recovered during March.
Economic news from the US and Europe was also mostly positive.
Coronation Fund Managers [JSE:CML] announced last week that headline earnings per share could increase by as much as 80% in the six months to March compared with the same period last year.
This is in itself a sign of the strong market as an increasing proportion of Coronation's management fees are based on the performance of the funds under management.
Massmart [JSE:MSM] said that sales in the first quarter of the year were somewhat higher than expected, setting the tone for other retailers and creating investor expectations.
Several mining companies will either publish quarterly results or give investors a quick trading update this week. Among these are Harmony Gold Mining [JSE:HAR], ArcelorMittal [JSE:ACL] and Gold Fields [JSE:GFI].
Several companies will follow with trading updates in the next few weeks for the reporting period to end-March.
