Arthur Buchner: Nedcor Securities

MONEYWEB, Alec Hogg, 13 April 2005

The single-stock futures challenge for the Aids orphans.

MONEYWEB:  Tonight, looking at our single-stock futures challenge, we have Arthur Buchner from Nedcor Securities. We heard last week from Brian [MacMillan] that he had gone long on Sanlam. I think he’s made money for the Aids orphans on that. Would you know whether or not they have closed out that position?

ARTHUR BUCHNER:  Well, we were hectically busy today, Alec, so derivative structures I think were partly responsible for what happened on the market today. I actually didn’t get through to the JSE to ask what the final totals were, but I know there was R50,000-odd last week, and we have actually had a very good week, starting on Monday. Hopefully they got out of the Sanlams on the bounce, because they did come back yesterday and today, but their in-price was around today’s level. So if they got out, which is what we are emphasising with our futures – short term in, short term out, low cost of trading, then they would have done very well. But all I can say is, from our perspective, we had a R9,000 trade. The trades are still open, we haven’t closed them.

MONEYWEB:  Which stock is this one?

ARTHUR BUCHNER:  On Tuesday we bought MLAs, the old Iscor, at R56.65 …

MONEYWEB:  Pshew – they had a good run today, again, against the market.

ARTHUR BUCHNER:  Well, I did say we should be in and out. They did rally up to about R60, and we thought it’s a 5.5, 6 PE-odd stock, good earnings, good dividend yield, that’s been hit down on the Kumba iron-ore yields, so we thought it was a really good bottom … [indistinct]. And then yesterday it came back, and in fact today it traded as low as R56.20, I think. So instead of selling out at R59 two days ago, and taking our profit, we just decided to double up again today. So we doubled up again today.

MONEYWEB:  It closed at R58.

ARTHUR BUCHNER:  It closed at R58. We haven’t sold them. We still believe it offers another R2 to R3. We think it’s been oversold. What normally happens is something that the punters out there have experienced – I’ll refer to it as foreign, because the local guys tend to be very conservative when they buy and sell. If they want to buy, they buy very slowly – and if they want to sell, they sell very slowly. Don’t try to impact on the market. However, if a foreign order comes into the market, they want to sell, they want to sell now. And invariably you see these big swings in the market, something like Sasol going to R163 the other day. I can tell you that must have been a foreign buying order, because of the aggressive nature of the purchasing. And exactly the same thing in the selling. And I think MLAs we just sold too hard, and I do think it must be a foreign seller, because of the aggressiveness of it. And as soon as they pull out, they bounce back to fair value. And that’s why we’ve taken that. We’ve also bought some FirstRand, R12.95 – so we are 10c out of the money on that transaction. Same thing. Came back from R14.25, it bounced and hit its head against R13.50, but back to R13.05. The last time it was at R12.60 was about two months ago. We think it offers value here. And we were in Argents, but we have now cut that position.

MONEYWEB:  Argent? Can you now buy a single-stock future in Argent?

ARTHUR BUCHNER:  You can buy a single-stock future on anything. Anything that is listed on the JSE, if it has enough liquidity, because there’s a liquidity constraint on it, and it trades in a certain percentage of its market capitalisation per year, the JSE would look at listing it. It does cost them money to list it, so therefore they need to have transactions that are going to happen in that stock. But in the Top 200 stocks on the JSE, I don’t think there’s one that wouldn’t be listed.

MONEYWEB:  Arthur Buchner is from Nedcor Securities, and making money for the Aids orphans.

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