Local small caps; value or value trap? (#586)

JSE Direct with Simon Brown

Introduction:

• Simon Brown kicks off the episode discussing the current state of the Rand, noting its stability leading up to the elections despite fluctuations.
• Speculation around ANC's momentum in the polls and potential coalition scenarios.
• The impact of the dollar's weakness on the Rand's performance.

Structured Products:

• Simon delves into the concept of structured products, which offer capital guarantees and enhanced returns through strategic investment mechanisms like options and bonds.
• Announcement of an upcoming Power Hour with Standard Bank focusing on structured products.
• Brief overview of actively managed certificates, also at next weeks Standard Bank Power Hour.

FNB's New ETNs:

• FNB's introduction of new Exchange Traded Notes (ETNs), including a variety of indices and US-listed stocks.
• Explanation of Compo and Quanto variations, tailored to currency impacts.
• Highlights of recently launched ETNs, such as Nvidia, Booking Holdings, Eli Lilly, and Palo Alto Networks.

Amazon.co.za's Arrival:

• Simon provides insights into Amazon.co.za's debut in South Africa, discussing initial observations and comparisons with local competitors.
• Discussion on the potential impact of Amazon's entry on brick-and-mortar retailers and existing online platforms.

Exploring Small Caps:

• Simon poses the question of whether local small caps on the JSE offer value or pose as value traps.
• Definition and implications of value traps in investments, emphasising the importance of dividends and price appreciation.
• Insights from John Biccard of Investec on potential post-election performance in small caps.
• Examination of various small cap stocks, analysing dividend yields, price-to-book ratios, and earnings potential.
• Simon's perspective on the opportunities and challenges presented by small cap investments, urging caution and strategic analysis.

* I hold ungeared positions.

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