Big news: We’re updating Higgo’s Top 10 to a Top 11.

Why? Well, there’s an opportunity that we find quite attractive – EasyEquities’ parent The Purple Group looks set to make some big waves in the next few months, and the price and fundamentals look pretty good.

Here’s what you need to know…

Shining some light on 🔦 

• The Purple Group opportunity & likely interest rate cuts.

• Coronation’s Bytes buy, Shoprite’s big moves & Scottish Mortgage buybacks. 

• Stock update: Higgo’s Top 11 stock picks for 2024

• Earnings calendar: Who’s reporting on revenue, when

• How inflation affects you – and how to beat it.

2 Hot September Investment Topics to Watch

September is already an exciting month as anticipation builds for potential lowered interest rates, both in SA and from the US. But Higgo recently spotted an opportunity to upgrade The Purple Group to a punt in his personal portfolio.

Here’s why…

1. Things are Looking Good for Purple Group

The Purple Group, the JSE-listed parent of SA investment platform EasyEquities currently trades around 75c with a market cap slightly exceeding R1 billion. But there’s reason to believe they will grow significantly over the next few months.

So much so that Higgo is adding it to his Top 10 stocks (guess that makes it the “Top 11” now) for 2024.

The reason: Well you’ll remember that we wrote an initial buy stock pick Purple in 2020 at 33c per share, and 2020 and 2021 were really good years for them. But then interest rates, hype and poor economic performance hit the stock market in ‘22 and ‘23 and they took a big knock – you might remember that Higgo mentioned in a YouTube video that he sold his Purple in 2022 after it had a massive pump.

But a lot has happened since then. From strategic acquisitions to growth in assets, institutional revenue, more stock market activity, potential interest rate cuts in September and the long tail of their subscription model, there are plenty of reasons we’re upgrading Purple to a punt…

Some Reasons We Expect Purple to Perform Well

• The average Bitcoin price is almost 3x higher than last year, meaning EasyEquities’ fees on just their current Easy 10 crypto product assets should be 3 times higher (let alone that people would have bought and traded more crypto, too).

• Despite the backlash of EasyEquities switching to a R25 subscription model a while back, it doesn’t seem that usage dropped; in fact, it had the opposite effect – so if they converted only 100k of their circa 1M active users to the R25 sub, that’s a lot of additional revenue that will come in now.

• Their CMO recently posted on X that EasyEquities is now “near R60bn in assets” and that they’ve seen record inflows month-to-month from about February this year.

• Their institutional revenue is growing – which is sticky revenue.

• And they are expected to launch some new products soon.

• On a valuation basis, if you assume (guestimate) an EPS of around 4 cents, it currently puts them on a PE of around 19, which is not too shabby.

All in all, the hype plus the positive revenue increases make us believe they’re a good buy at 75-odd cents — there seems to be some downward pressure on the price at the 80c mark (been holding steady for a few months), but that will likely change when they announce earnings; usually around August, so could be any day now.

Disclaimer: This stock pick should not be taken as financial advice. This is what Higgo is doing in his personal portfolio. Purple is a small cap, and with small caps comes risk. Always do your own due diligence.

2. Interest Rate Cuts Might be VERY Likely

Cleveland inflation tracking has proven to be phenomenally accurate in the past – not always 100% but generally very close to the actuals. 

And if you look at the drop in both the US and South African inflation, it’s looking extremely likely that we’ll see interest rate cuts as early as September.

We’re not sure when or by how much. But cuts will be good for consumers – anyone who has debt can expect some pricing relief – which is good for investors and ecosystems, as rate cuts mean people have more disposable income which injects liquidity and can boost investment performance.

We’re particularly optimistic about South Africa currently, but we’d be a little more cautious around US stocks, as they look to be a bit overpriced. More to follow on this topic.

Note: This is not financial advice; it is merely observations. For personalised financial advice, you can book to speak to a financial advisor here (powered by a registered FSP: No. 51310).

PS: Want to know your personal profile?

Our community has been engaging with Finimals, see yours here…

STOCKS AND ALL

💼 Bytes Buy: Coronation Fund Managers has increased its stake in Bytes Technology Group PLC to 8.01% of voting rights, now holding over 19 million shares as of August 30 2024, signalling huge confidence.

🛒 Shoprite's Big Moves: Shoprite has agreed to sell its furniture business, including OK Furniture and House & Home, to Pepkor for an estimated R3.2 billion. This comes as Shoprite reports a 12% increase in group revenue to R246.1 billion, while focusing on its core grocery operations.

📉 Northam Nosedive: Northam Platinum shares plunged 9.28% on the JSE after reporting an 82% drop in full-year earnings. Despite raising production by 10.3% and extending its credit facility to R11.3 billion, the company struggles with low platinum prices, leading to weaker profits.

🎲 Sibanye Struggles: Sibanye-Stillwater reported a 100% decline in earnings for H1 2024, driven by low PGM prices and a R7.5 billion impairment at its US Stillwater mine. The company is assessing further restructuring as the future of Stillwater remains uncertain.

💸 Ether ETF Drive: It’s a slow burn as Ethereum ETFs saw just one day of positive inflows in the second half of August, with net outflows totalling $2.5 billion after Grayscale's ETF conversion. BlackRock’s Ether ETF remains the largest, holding over $1 billion in assets.

🔄 Scottish Mortgage Buyback Surge: Scottish Mortgage (SMT) has spent over £684.1 million on share buybacks in the first half of 2024, surpassing its five-year average as it pushes past the halfway mark of its £1 billion buyback program.

UPCOMING EARNINGS REPORTS

These companies are expected to deliver earnings reports in the next few weeks:

11 September 2024

• Pan African Resources

13 September 2024

• Sibanye-Stillwater

WEALTH HACKER’S KIT

How Inflation Affects You & Your Wealth

Rising prices at the checkout counter stretch your money to its limit. But understanding how to protect yourself from inflation can help you stay ahead in your wealth-building journey.

What is Inflation?

In simple terms, inflation is the increase in the cost of goods and services, which causes a loss of purchasing power. Imagine this: if R100 buys you a basket of groceries today, it might only buy half of that in a year due to inflation. That’s the rising price of groceries (inflation) eroding your money's value.

If your income or assets aren’t keeping pace with inflation, you’re effectively getting poorer.

Knowing Your Inflation

Let’s say Person X rides an e-bike to work and is a vegan, while Person Y drives a big bakkie and eats meat daily. If the price of fuel goes up 18% and meat by 15%, Person Y will feel the impact more than Person X, because they use those products.

Each person’s inflation rate will vary depending on their lifestyle and spending habits. So you can track your own personal inflation risk based on what you buy and use every month.

How Does Inflation Affect Your Wealth?

The key takeaway is this: if your savings or investments aren't growing faster than inflation, you’re losing wealth. For example, if your bank is giving you 5% interest while inflation sits at 7.5%, you're effectively losing 2.5% of your purchasing power. 

To truly grow wealth, you need to focus on building real returns – where your money grows by more than inflation.

How to Protect Yourself

The best way to guard against inflation is to invest in assets that keep up or outperform inflation. 

Real estate, for example, often rises with inflation, and rental prices can be adjusted accordingly, making property a solid hedge. But stocks and shares also work: Over time, shares in companies that increase their earnings tend to outperform inflation. 

Many ETFs are designed to track broad markets or specific sectors, spreading risk while providing solid, inflation-beating returns.

Look for investments that offer inflation-beating returns and grow your wealth in real terms.

THE PEOPLE HAVE SPOKEN

We asked what you see for the future of banking in Africa, and all eyes are on the likes of Capitec…

🟩🟩🟩🟩🟩🟩 🌍 Capitec continues its growth, setting the pace for innovation. (40%)

🟨⬜️⬜️⬜️⬜️⬜️ 🏛️ SA’s Big Four banks maintain their dominance in SA through stability. (10%)

🟨🟨🟨🟨⬜️⬜️ 🛠️ New players emerge on the continent, challenging the old guard in unexpected ways. (30%)

🟨🟨🟨⬜️⬜️⬜️ 📉 A mixed bag: growth in some areas, challenges in others. (20%)

What you said…

Great observation, Freddie! We also benefit from watching the likes of Tyme Bank on the rise, with a different approach and at a different growth stage. It’s exciting to watch. 💸 

That’s it for today. See you next week Wednesday!