I spent a fair amount of time over the weekend looking at ETF options in my tax-free savings account (TFSA). I sold out of Sygnia 4th Industrial Revolution because I think that so-called "growth" stocks might have a disappointing finish to 2021. The beauty of a TFSA is that exposures can be rotated without suffering tax leakage along the way.
If you want to understand my thought process behind this, make sure you read Ghost Mail tomorrow morning. I'll be giving many insights into the way I use ETFs in my portfolio and what my overall exposures are. It's free and you can
sign up here.
The reason I mention this is because the Naspers-Prosus share exchange offer has become unconditional. Pa rt of the stated rationale for this convoluted deal is that the management team wanted to reduce Naspers' weight in the local index. Having reviewed the universe of local ETFs, that weighting was a problem, although there are bigger issues in the Naspers-Prosus structure to consider.
The biggest offenders are the SWIX ETFs, which weight companies based on the proportion of shares held on the South African register. In the Satrix SWIF Top 40 ETF for example, Naspers was 25% of the fund at the end of June! That's hardly a diversification product, which isn't a bad thing provided you have fully understood what you are buying.
A detailed SENS announcement was released on Friday showing the impact on each index of the Naspers-Prosus deal. The basic summary is that the weighting of Naspers will decrease and the weighting of Prosus will increase. Keep an eye on ETF fact sheets and announcements in coming weeks to see how this has impacted y our overall exposure.
It's been a rough few months for the company, as the valuation of underlying business Tencent has fallen sharply under the threat of increased regulation in China. Combined with shareholder activism around the proposed deal (which has failed), the company has had its fair share of headlines. If this deal doesn't improve the discount to NAV, the management team will come under enormous pressure.
The lead story this morning is Massmart, which has released an earnings update that paints a grim picture. I made a lot of money out of Massmart as it recovered from pandemic lows, but I'm glad that I've sold out.
Other articles include updates on Aveng (a penny stock superhero) and Thungela, which is printing money and trading on an incredibly low EBITDA multiple.
There's a new Magic Markets episode available as well. We did something different for this show, by each choo sing two interesting US-listed stocks to discuss. I went with Corsair and Callaway, while my co-host Mohammed Nalla went with McKesson and Moderna. It's a great way to learn about high-level assessments of companies.
As usual on a Monday, Chris Gilmour gives insight into global affairs and the big-ticket items in the next week.
Good luck for a new week!
The Finance Ghost
