ANNUAL REPORT 2012

[nala]

Extract from Chairman's report "If you bought R100 000 worth of PSG shares in November 1995 and: - reinvested all the dividends that you received in PSG and - held onto Capitec shares that you received in terms of its unbundling in 2003 and re-invested the dividends received from those shares into Capitec then your R100 000 would be worth approximately R136 million today. This translates into a total return index (TRI) OF 55%. How was this calculated and the figure arrived at. Is it at all possible?

[Harathke]

When CEO's start becoming retrospective about how awesome they are...it really is not a good thing.

[THRESHOLD]

You derive the required rate to discount the current value back to the invested value (weighted for time eg. dividends introduced at intervals along the way.) This rate is usually a "per annum" rate compounded annually. I am sure they have triple-checked the figure they have given.

[THRESHOLD]

There are some handy formulae - so you don't have to tear your hait out "re-inventing the wheel" as it were. Have a look at Wiki or Investopedia.

[kwagga]

In 1995 the average houseprice was R 172 000. So, if you invested 72% of that (R100k) in a 50c penny share you would have been a multi millionare. Ok, let's do the same today. 72% of the average houseprice today is R720 000 give or take a thousand of two. Now, invest that amount in one penny share and wait 17 years. It's really worthless information they're providing us with, because who has that amount of money to invest in 1 penny share to start off with (except the founders (owners), and then off course in 17 years time everyone will make the same calculation and start having wet dreams starting with if only I.......

[kwagga]

In 1995 the average houseprice was R 172 000. So, if you invested 72% of that (R100k) in a 50c penny share you would have been a multi millionare. Ok, let's do the same today. 72% of the average houseprice today is R720 000 give or take a thousand of two. Now, invest that amount in one penny share and wait 17 years. It's really worthless information they're providing us with, because who has that amount of money to invest in 1 penny share to start off with (except the founders (owners), and then off course in 17 years time everyone will make the same calculation and start having wet dreams starting with if only I.......

[THRESHOLD]

Don't forget the cost of holding that house - rates & taxes, insurance, maintenance & repairs, life assurance for the bank... an dthen the acquisition costs:- bond origination, registration fees, transfer fees, legal fees. And many of those costs rear their heads again when you try to sell. I wonder if there is any return at all on the median house.

[THRESHOLD]

BUT you could have put in R10 000 and had R14 million odd. Or R1000 and had R1,4 million odd. This reminds me o fyesterday's discussion about investing in microcaps as potential 10-baggers.

[THRESHOLD]

R100000 in Pinnacle Micro with the palrty dividends reinvested would be worth R54 million now too. There are others too. One needs to take a spread.

[partridge]

Harathke is right - besides you have to deflate both sides of the equation- as to what I ( joe investor) would realistically have put in in 1995...R100k? I think not. Its all yesterday's stuff - and I am not buying yesterday. The question is :what excites you today about the share? ? All I know is that when I look at Curro for example I see more and more capital needed.

[SimonPB]

they selling time machines I assume ??

[kwagga]

Ja, Thresho.d. I think your approach to pennies is spot on. Then again you have the funds to support this strategy. You have to diversify. Placing hope on one or two pennies will end with just that – hope and lots of frustration.

[superstar]

The conclusion we can make out of this would then be, there is always an opportunity to make big profits or big losses on small caps. What the honourable CEO is saying is not really breaking news and how you look for those opportunities is up to you

[THRESHOLD]

Capitec - based on all measures - was worth a punt. Just R10 000. It was cheap back then. Those same people are buying it now though. Sinking millions into it. "RISK PERCEPTION." Amazing...? It required a bit of patience.

[THRESHOLD]

AND - It was 2002. Not 1995. These returns were generated in 10 years.

[kwagga]

I noticed Capitec the first time when it traded at R14 back in 2005. I didn't pay too much attention to it because my perception of companies focused on microloans were never a possitive one. My lesson learned from this is to not be too critical of companies and their prospects, because you simply don't know how things like future technology, leglisation etc. will affect them. Timing plays a huge part in the future prospects of companies, and a lot of times the growth of companies even surprise those intimately involved with the day to day operations of these companies. It's almost impossible for an outsider to get these ten baggers right with any type of consistency. Look at Vodacom. They catered for 50 000 subscribers in the first operational year. They got 5X that in the first year. No one suspected that figures.

[THRESHOLD]

Well VODACOM was hiding in TELKOM but - MTN was considered a "no-brainer" investment in its early days.

[THRESHOLD]

As for micro-caps- you don't need to be consistent. Just do your homework and you will benefit from the leverage inherent in their share prices. Only buy the ones you like. Buy what you can comfortably afford. Some will fail - most will do fine (if you have done your research properly) and the couple that work - well...

[#19]

How much of your portfolio(%) would you put in each small cap investment?

[THRESHOLD]

Don't even talk percentages. Talk about a total percentage allocation to small caps and then the percentage to each share in that sub-portfolio.