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- 💷 Is Purple Caution a Buying Signal?
💷 Is Purple Caution a Buying Signal?
Plus: Uptober, AI showdowns, construction surges & how to maximise your purchasing power in property.
FinMeUp
October 09, 2024
After a decent fuel price cut last week (on the back of consecutive cuts since June), Transport Minister Gwede Mantashe said they’re in discussions to lower it even further – dropping that his ultimate goal is for fuel in SA to be around the R14 mark.
This, of course, tracks with last week’s speculation of how SA can capitalise on a stronger Rand.
But this week, we take a look back at the Purple Group – which we added to our Top 11 picks for the year, to see how investor hesitation is keeping it undervalued, and perhaps ripe for the picking…
Shining some light on 🔦
Purple Group: Is market caution a buying signal?
Uptober, AI showdowns & construction surges.
Stock update: Higgo’s Top 11 stock picks for 2024.
Earnings calendar: Who’s reporting on revenue, when.
How to maximise your purchasing power in property.
THE SPOTLIGHT
Is Purple Group Caution A Buying Signal?
In September, you’ll remember we added EasyEquities parent Purple Group (JSE) to our Top 10 stock picks for the year – technically turning it into a Top 11.
Since then, we’ve seen moderate positive performance — up almost 30% for us! — but recent market sentiment has some investors holding back. So, what’s causing this cautious approach, and does it impact our outlook?
Hesitant Investors: An Opportunity?
Recent analysis shows Purple Group’s price-to-sales (P/S) ratio of 4x is just slightly above the industry median of 3.3x, which suggests that the market sees it as performing in line with the broader capital markets industry in South Africa.
Despite the company’s solid revenue growth – up 13% in the last year and 60% over the past three years – some shareholders seem to fear the stock has reached its performance limits.
Especially since it was under pressure recently due to a large seller who offloaded several million shares for around 80 cents. Now that the seller has exited, the stock has climbed from 70 cents to 90 cents.
This mix of caution and anticipation for good results means some investors are selling at lower prices, but we’re still very optimistic about Purple Group’s long-term potential. As a reminder, here’s why:
Crypto exposure: Bitcoin prices are up 3x from last year, and EasyEquities’ crypto trading volume boosts potential fee revenue for Purple Group.
Subscription model success: The R25 subscription model is adding recurring revenue, stabilizing cash flow.
Record inflows: EasyEquities has seen record inflows, nearing R60bn in assets, and its institutional revenue is growing.
New products expected: With an estimated EPS of 4 cents and a P/E ratio of around 19, Purple Group has a strong valuation considering its growth potential.
A Low Buy Opportunity
While Purple Group operates in a cyclical industry that may be affected by bear markets, two factors provide more stability: its subscription model and institutional revenue, which are both consistent and “sticky.”
This reduces volatility in its performance, even in challenging market conditions.
So, while investor caution is understandable given the economic landscape, we see this as an opportunity to potentially pick up stock at lower prices – and that’s why it stays in our Top 11 for the year.
Should You Invest in Purple Group Right Now?
Purple Group shows strong potential, with growing revenue, new product launches, and increasing assets under management. However, as a small-cap stock, it comes with risks – greater volatility and less liquidity compared to larger companies.
In fact, it all comes down to your risk appetite. Is this level of risk right for you?
We can help you find out in minutes – with Finimals.
Note: This is not financial advice, merely observations. For personalised financial advice, you can book to speak to a financial advisor here (powered by a registered FSP: No. 51310).
HAVE YOUR SAY
As fuel prices drop, where will you allocate your savings? |
STOCKS AND ALL
🏗️ Calgro Jump: Calgro M3 shares surged over 14% following a trading update projecting a 23% to 33% increase in headline earnings per share (Heps) for the six months ended August 2024. The property developer continues to show strong growth, building on 27% profit growth from FY 2024.
🤖 AMD AI Anticipation: AMD's stock is up over 15% year-to-date, with analysts expecting further gains as the company prepares to unveil new AI products at its "Advancing AI" event on 10 October 2024. With 13 "buy" ratings and expectations of new partnerships, AMD could gain ground in the AI space, challenging industry leader Nvidia.
₿ Uptober: Bitcoin surged past $63,000 after U.S. jobs data exceeded expectations, adding 254,000 new jobs. While prices cooled over the weekend, the original cryptocurrency erased earlier losses and is set for what many traders call "Uptober," a historically strong month for Bitcoin.
🦾 AI Showdown: Wondering whether to invest in Palantir or Snowflake? Palantir's accelerating revenue growth and profitability make it the clear AI stock winner as Snowflake struggles with slower revenue growth and significant losses. However, Palantir’s high valuation raises caution for investors, while Snowflake’s lower price-to-sales ratio might offer better long-term value.
☀️ Sunny Outlook: First Solar retains its “buy” rating despite BofA lowering the price target to $321 due to industry delays. With a fully booked backlog through 2026 and U.S. pricing stability, First Solar’s long-term position remains strong.
HIGGO’S TOP 11
Name | Growth YTD | Price |
|---|---|---|
44% | ZAC 72.00 | |
18.21% | $172.80 | |
34.35% | $63,126.50 | |
34.60% | $52.40 | |
18.68% | ZAC 1,258.00 | |
4.69% | $2,442.54 | |
6.40% | ZAC 1,330.00 | |
27.84% | $2,014.23 | |
83.51% | $51.75 | |
30.76% | ZAC 98.00 | |
-4.67% | ZAC 715.00 | |
11.36% | GBX 849.00 | |
PORTFOLIO YTD: | 37.20% |
UPCOMING EARNINGS REPORTS
These companies are expected to deliver earnings reports in the next few weeks:
9 October 2024 11 October 2024 | 14 October 2024 16 October 2024 |
WEALTH HACKER’S KIT
How to Maximise Your Property Purchasing Power
Want to build your wealth in property?
It’s a solid plan; property is known to be an excellent vehicle for solid, stable wealth protection and moderate growth.
But understanding and growing your purchasing power is the key to success in property investing in SA.
What is Purchasing Power in Property?
Your purchasing power is the maximum loan amount a bank will offer you to invest in property.
Each property you buy reduces this, but income-generating properties can help boost it back up.
Essentially, the more you earn, and the more you reinvest in rental properties, the more property loans you can get. This leverage is a powerful tool to build your wealth over time.
How Do Banks Calculate It?
Banks typically use the 30% rule: they won’t loan you more than what amounts to 30% of your gross income.
For instance, if you earn R60,000 a month, you might qualify for a loan of R1.8 million. But factors like your expenses and other financial commitments also come into play, so, cutting unnecessary expenses can help increase your purchasing power.
Ways to Improve Your Purchasing Power
Want to increase your purchasing power? Focus on raising your income or selling underperforming properties to free up room for new, better investments.
Plus, banks count around 80% of rental income as part of your affordability, so rental properties can significantly boost your purchasing power.
Pro Tip: Don’t rush into buying a primary residence. It reduces your purchasing power without generating income, limiting your ability to invest in rental properties.
By managing your purchasing power wisely, you’ll be in a stronger position to capitalise on opportunities and grow your property portfolio faster.
Should You Invest in Property?
Property investment offers long-term growth and income through rentals or value appreciation. And, unlike stocks or bonds, which can fluctuate with the market, property provides the stability of a tangible asset.
Ultimately, knowing whether it’s the right investment for you depends on your personal financial goals. Are you seeking long-term wealth growth, passive income, or a quick return?
Unsure?
THE PEOPLE HAVE SPOKEN
How do you feel about the potential of the ZAR hitting R16 or R15?
🟨⬜️⬜️⬜️⬜️⬜️ 🚀 Excited about more buying power (14%)
🟩🟩🟩🟩🟩🟩 📊 Planning to invest more internationally while the ZAR is strong (46%)
🟨⬜️⬜️⬜️⬜️⬜️ 😟 Worried about the impact on my foreign income (14%)
🟨⬜️⬜️⬜️⬜️⬜️ 💼 Considering shifting more funds into local opportunities (8%)
🟨🟨⬜️⬜️⬜️⬜️ 🤔 Haven’t thought about it yet (18%)
“I'll continue with "dollar-cost-averaging", investing monthly in solid international ETFs with a good track record. Keeping my eye on the long term.”
A solid plan, Mari! ☝️
“Positive move in the exchange rate means better buying power of the US dollar.”
Yes, you can get more for spending Rand in dollar markets, Shaun. 💸
“More buying power in consumers' hands means more businesses can open which leads to more people working, which leads to less crime (can go both ways) and that could lead to a stronger rand which will start the process all over. I know there are a lot of other factors involved, but that’s the basics.”
And more business, in general, is always good for the country, hey Xxnadu! 📊
“This honeymoon of the GNU won't last forever so strike the iron while it's hot.”
Good insight, Jan. We hoping it’s a while still, but yeah it looks like SARB wants to move strategically and fast to capitalise on that momentum. 🚀
PS: We had our board meeting yesterday, and we are excited to share with you what’s coming up over the next few weeks — see you next week.
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