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What is then behind the poor performance ?

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DG1
Contributor
what could be the reason for the poor performance ?
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14 REPLIES 14
SimonPB
Valued Contributor
interest arte increases hurt prop stcosk as they carry a bunch of debt. So the recent inflation data suggesting maybe another increae causes worries. Check what happened after the mpc raised the first tinme last year, some 30% shed.
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GdM
Frequent Contributor
What stocks benefit from interest rate increases?
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SimonPB
Valued Contributor
defensive stocks such as RCH (in my view).
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GdM
Frequent Contributor
Surely RCH is anything but a defensive stock - luxury brands include Dunhill, Cartier, Mont Blanc....? or is that part of Remgro?
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SimonPB
Valued Contributor
luxury brands are part of RCH, and people buying this stuff are so rich that not much hurts them? And then of course cigarettes. Tot hsi end SAB also applies, but maybe to a lessor degree, not having a drink is maybe easieer then not having a cigarette ?
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GdM
Frequent Contributor
Hey - perhaps I switch from Glen Carlou to Witzenburg when times are tough, but I guess they all come from KWV! What about stocks like Tiger Brands, Metro Cash and Carry, basic foodstuffs - people have to eat, and demand inelastic? May not realise collosal gains, but capital protection during an impending recession. (No John - I'm not getting bearish on you - just hypothetical).
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SimonPB
Valued Contributor
ya, but maybe even more basic, PIK?
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GdM
Frequent Contributor
Hhmmmm.... quite right. Perhaps that private equity bid for Shoprite wasn't such a bad idea after all! Tx.
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john_1
Super Contributor
Agree with Simon, Food cash retailers, always good to keep eye on them as it is a good berometre of the mood of the market, remember most money is pension funds money that cant go to cash so they go defensive, I was suprised to se PIK take a pounding yesterday.
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SimonPB
Valued Contributor
gdm, never under estiamte the private equity deals, and those that don't work - muct be telling us something. Especially remembering that the company remaisn with less debt and the priavet guys generally take a 5 year view.
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john_1
Super Contributor
I like were you going with this. explain further please.
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JohnnyCash
Super Contributor
WTF!!!!!!!!!!!!!!!!!!!!!!!!!!!
Here I am getting my @rse whipped with GRY and not only does it close on its high for the day, but its high is 3,5% UP for the day!!! What I would have given to get 690 today instead of 650! Oh and whoever decided to do it did it with close to 500,000 shares!!!!!!!!!!!!!!!
No stoplosses or systems or anything can protect you!!!!!
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SimonPB
Valued Contributor
well lets look at teh edcon. stock was at 3000c then the deal was announced and eventually priced at 4600c. Now if the deal had failed ECO would most likely have slipped back as the easy money was over. BUT these private equity people are smart and have done their homework, and if they were prepared to pay 4600c, then it had to represent value over at least 5 years. now sure they could/would squeeze out some extra profits, but they also increase debt that to a degree off sets the extra squeeze. So failed private equity deals are always worth a second stare.
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GdM
Frequent Contributor
Agreed, although it may result in shareholder enrichment, it does not always maintain the best interests of all stakeholders. More often than not, PE deals strip out the non-performing/ non-core assets and consequently streamline the workforce. Where the shareholders gain, I don't know whether it's always a positive sum game.... overall.
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