DIY Portfolio Management Support Club
Staff: Charles Hattingh, Colette Spear (daughter) and Jade Spear (granddaughter)
Honorary Life Members: Anneke Andrews, Ric Andrews, Chris Vietri, LC van der Merwe , Pieter Els, Rynhardt van Rooyen, Christiaan Lamprecht
Tel: 011 476-3626; Fax: 011 476-3627; Email: or (not and) ; Web: www.mafiabuzz.co.za
Buzz 087
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Financial Advisor Managing a Portfolio
A retiree asked me to evaluate a portfolio being managed by a registered financial advisor. We took the opening value five years ago and entered the contributions and withdrawals made to end June 2017. During this period the market earned 11.5% p.a. His portfolio earned a paltry 2.5% p.a. He made an opportunity loss of over R700 000 on a R1.4m portfolio over this period. Thank goodness he has a pension from his previous employer. There is a massive need to teach DIY Portfolio Management skills to the young.
Dishonest People
Many years ago an acquaintance (A) was asked by his client (C) to deposit a dollar cheque into his (S’s) bank account and pay the proceeds to him (C) as he said that he needed the cash urgently. The amount was material. The dollar cheque bounced and C absconded with A’s money.
Last year an auditing firm paid me a substantial sum in error. The accountant asked me to refund the money. Having learnt from the above experience I telephoned the partner of the firm to confirm the error and the banking details for the refund, waited five days to ensure that the cash was safely in my account and then paid the money back.
Last month I paid R9 500 in error for a kitchen refurbishment. I asked the owner of the firm for a refund, which he promised to pay me the next day. I am still waiting. What do I do? Get my cousins from Benoni to break his arms, destroy his business by publishing his details or walk away from the situation?
Honest People
I took my watch to Cresta Jewellers for a new battery. When I returned to collect it they said it did not need one but did need to be cleaned, which they did. They refused to take any payment.
One evening before a workshop I discovered that Jade had not sent me the participant list for the next day’s workshop. When I telephoned her she discovered that she had forgotten to hit the send button. No cover-up, merely the truth.
During a workshop we were trying to determine who won the share selection game. Jacques van der Walt had the highest portfolio. As we started clapping he said: “Sorry, I duplicated CPI” which disqualified him. He could have basked in the glory but chose to be truthful.
My faith in humanity is partially restored.
Two New Stupid Idea Traps
Twice during this month I have heard the argument “I made a stupid decision so must now recoup the loss I made.” Sorry mate: a loss is a loss is a loss. All you can do is learn from the experience and make better decisions next time.
Investors hold onto dogs in the hope that they will “recover the loss they made”. You must have a forward looking view. Will you do better by holding the share going forward or selling the share and investing in a better prospect?
I saw the writing on the wall for a share. I suggested to the investor it was time to dump it. He procrastinated. The share tanked. His comment was: “It is not serious as I am still making a profit on it.”
Feedback on Buzz 86 – Naspers
Please note that I did not suggest that you sell Naspers. As long as the majority of investors believe in the Sum of the Parts methodology, the share will continue to rise as Tencent soars. I say if Tencent’s price goes up and Naspers does not pass this benefit through to its shareholders, it makes no sense that Naspers should go up in tandem. I am in the minority.
I had some positive feedback from some very bright people saying “your logic is spot on”. I also had feedback saying that my thinking was naïve. But no one commented on the R8bn paid to outside shareholders out of capital. People get away with this sort of thing in SA as no one seems to care. So why should I?
Mistakes Made by our Hedgehog Family
The original purpose of Hedgehog was for us to learn from the errors of others so I asked our Hedgehog cousins to share some of their mistakes with us. Well it appears as if 99% of them do not make mistakes or they do not believe in the concept of paying it forward.
Veloce said that he decided to sell Spur because of negative commentary about the company and tried to push for a slightly higher price. Had he not been greedy he could have realised between 3250 and 3300 for his shares. Instead the price slid 18% before he could sell. The lesson he learnt was not to try to save the pennies but to execute the transaction with discipline. Thank you so much for sharing this with us Veloce.
Positive Attitude saw my commentary on Brait, wanted to sell the share but then started thinking that maybe he can recover his loss by waiting for the price to recover, which it did not at the time. The lesson he learnt from this was to cut his losses in situations like this. (See the Stupid Idea Trap above.) Thank you Positive Attitude for taking the trouble to share this with us.
A Special Thanks to Anton Louw
Anton has been an absolute gem taking the MeB strategy idea and running with it. He has developed some superb tactics for applying this strategy which I am using in the workshops and correspondence programme. Thank you so much Anton – we will all benefit from your efforts.
Thought for the Month
If you would not buy a falling knife (a share that is slip sliding away) why would you not sell one you own?
Kind regards,
Charles Hattingh,
July 2017
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