Basics of buying shares: Lesson 4

In lesson 3 I looked at the share choices shared by more than one Fund Manager. This lesson I look at some of the shares in the top 10 but not shared by more than 1 Fund manager. Just to re-cap why I go about selecting shares using this process:

• The top 10 pics of reputable fund managers give fundamental validity to the selected shares
• I can start building a WATCH LIST. It gives you a target, nothing more.
• The watch list will focus your attention towards any news about the company, building a cumulative knowledge database about the shares.

I recently listened to an interview with Warren Buffett and his 2 lieutenants. They read average 500 pages per week relating to news on companies on their watch list. I usually read the Business Day newspaper cover to cover, scanning for the names of the companies on my watch list. One of the things that I wait for is news of company directors share dealings in their own company which they have to make public, and more importantly the news of the shares that reputable fund managers buy.

For example, yesterday Coronation increased their stake in Tygerbrands. Tygerbrands has fallen from R300 to R243 in a very short period but offer a good Divi and fair P/E. They will battle with the rising interest rate cycle but it is a solid company. I have been buying the share for a while and 5 years from now it will trade at a higher price, plus it will continue paying me the dividend. With Coronation also buying more at this level provide a lot of confidence.

Some of the other shares in the fund managers top 10 as mentioned in the beginning are:

• Steinhoff, Capitec, Exxaro, Remgro, Impala, Adcorp, Clover, Omnia, Glencore, Aspen, Reinet, Mondi, Nedbank, Intu

You will see that a lot of them have performed very well over the last year and are expensive to buy now. I have chosen 5 of these shares and performed the same analysis as I did the first time:

	Price	F P/E	D/Y	1 yr	30day
Steinhoff	52	13	1.56%	98%	12%
Capitec	183	11	3.33%	-2%	-3%
Exxaro	146	10	2.65%	-14%	-3%
Remgro	184	14	1.87%	9%	0%
Impala	115	23	0.52%	-13%	-1%
	52 High	52 Low	Median	Fall
Steinhoff	52	23	37	-28%
Capitec	222	179	201	10%
Exxaro	179	137	158	8%
Remgro	211	171	191	4%
Impala	139	86	113	-2%

Looking at this list I will buy Capitec now and wait for a small drop in Exxaro and Remgro before I buy them. Capitec is trading at 10% below its median price, offer a 3.33% dividend and is negative on a 1jr and 30 day price.

There are many ways to skin a cat but this process will get you involved in looking and listening at certain shares. Never rush into buying a share. Watch it for a while until you are comfortable and then commit for the longer term. Even if the price falls the day after you have bought it, just forget about it. I usually buy 1/2 the amount of the share I identified as offering value immediately and then if it falls a bit more, I will buy the other 1/2.