Arthur Buchner: Nedcor

MONEYWEB, Alec Hogg, 09 March 2005

Update on the single-stock futures fund-raising effort for the Aids orphans.

BELINDA ANDERSON: We welcome Arthur Buchner from Nedcor Securities in the studio with us for the single-stock securities feature.  This competition is all about making as much money as possible for Noah, for the Aids orphans. We did hear from Allan Thomson from the JSE last night that at this stage the collective amount that all four banks have made was just shy of R59,000 rand. Arthur, that’s looking really good.

ARTHUR BUCHNER: Well, considering that we stated with R30,000 as an initial investment to use as margin, all the banks, we actually broke the R59,000 today. If you understand how single-stock futures get marked to market on a daily basis, what you have is you have income playing in every single day at the close of the market. So when Allan was chatting, it was just shy of the R59,000, and we continued – and with trades coming in today it might even be above the R60,000.

BELINDA ANDERSON: How much of that have you made?

ARTHUR BUCHNER: We’re sitting on R14,000 of the R59,000. It’s been divided up – R19,000, 13, 16 and 14.

BELINDA ANDERSON: It’s a fairly even spread.

ARTHUR BUCHNER: It’s a very even spread. Actually, one of the funny things that have come out of it, and it’s something that listeners may like to take into account, we always said that futures are quite risky. We sit in our barber shop and we have a hair cut, and the guy says, “I’ve got a tip, let’s go out and buy it”. And guys actually go out and they buy the stock, and the next thing they know, they’re burning. And what we found is that the four different banks are trading in two or three stocks. So they haven’t gone out and tried to punt the market and tried to buy every single stock that’s around – they’ve become masters of a certain amount. So, for example, we have one of the banks which enjoys Sanlam, they’ve done two or three trades in Sanlam, of which all three trades have been profitable. Others have chosen the resource sector. And then we have one of the banks choosing the industrial sector. And another thing which is also fascinating is the fact that only one profit has been made on the short side. If you know futures, it was developed in the early 1800s or late 1800s as a hedge instrument, and so were the financial markets as a hedge instrument. Yet the bull market that we are seeing in South Africa is showing that straight through by the traders playing everything off a long base.

BELINDA ANDERSON: So in other words, everyone is bullish?

ARTHUR BUCHNER: It seems that everyone is bullish because, if everyone was bearish, and we’re in a bear market, you would have found that everyone plays it off a short base. Everyone is feeling comfortable. I would rather buy it first. If there’s a shock in the States, it doesn’t matter, the value is in the stock. So therefore it should bounce back. And that’s what we are seeing definitely coming through.

BELINDA ANDERSON: The other thing about single-stock futures is it sounds like you can determine your level of list, your gearing.

ARTHUR BUCHNER: That’s another fascinating part by everyone. We have one of the banks which trades actually quite aggressively, and has bought for example 30,000 Sanlams, and has held onto those Sanlams, whereas another one of the banks has effectively traded in 1,000 Anglos. Now your exposures on those two different transactions are very, very different. You can go and bet the whole house, or you can bet little bits. And what we’ve found is that the one bank has traded in five stocks, whereas the other bank is traded only in the one – but in a big way. So it’s really up to what your risk appetite is.

BELINDA ANDERSON: And yourself. Which ones have you been trading in?

ARTHUR BUCHNER: We’ve been in FirstRand, we’ve been long on FirstRand, which we cut last week. And we’ve actually traded Argent Industrial. We have a bullish house for you on Argent Industrial, and we bought it at around R10.30. We sold it out at R11 – and it’s now pulled back to theR10.60 level, and we picked that up again today at R10.70.

BELINDA ANDERSON: Without wanting to jinx things, because obviously this is not realised profit until it’s realised, judging from how well you’ve been doing so far, how much do you think we can feasibly hope to make for the Aids orphans?

ARTHUR BUCHNER: Well, the competition has been going four weeks, and the competition is running for 13 weeks. If we can do three times what we’ve got at the moment, I think we can come in at around R150,000 conservatively. But to really shoot the lights out would be around the R200,000 level. The other thing is that, remember, that a lot of these profits have been realised. So there are only two open positions at the moment, which are effectively looking quite good. I quite like one of the banks who are long of Sanlam – I think that’s a good punt at the moment. I think they are going to move up. And so hopefully we can out perform and I think R150,000 is quite attainable.

BELINDA ANDERSON: That would be very welcome indeed. That was Arthur Buchner from Nedcor Securities, talking to us about single-stock futures.

Posted in Market commentary

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