Productivity in Mining

Since mining companies do not control commodity prices, they forecast demand to drive decisions on production and capital investment. As no communication occurs between the various players globally, mining companies fall prey to the strongest form of game theory; they all do the same things at the same time while hoping for differentiated results. Further […]

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The Anatomy of a Good Thing

In January this year, cyclical companies assumed market leadership from high quality companies.  Yet our portfolio kept up admirably with this regime until June.  Since then, resource equities have put on a spectacular show of pace.  As these companies do not lend themselves to quality, we do not hold them bar BHP Billiton.  Naturally, we […]

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Disruption in the Print Media Industry

At First Avenue, we focus extensively on the ability of a company to build, and invest in, a sustainable economic moat that drives value creation. However, disruptive business models are often the ‘curveball’ that can destroy existing value. We therefore pay close attention to these forces in our investment analysis. It is particularly fascinating to […]

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When it is Bad to have Good Choices

Let’s take it from the top. The top of the cycle, that is.  As the market corrects, anticipating a roll-over in the economy, investors behave in a way you would expect any rational, thinking person to do: either they abandon the equity market – if they haven’t already – or they seek out companies that […]

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What Drives Gold

The value of gold is the price of gold You will have noticed the stand out performance of South African gold equities since the start of the year and perhaps wondered why they are doing well this time. Gold equities are in fact (poor) derivatives of the metal itself, and so it is useful to […]

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Mining in SA: A Tragedy of the Commons

SUSTAINABILITY OF THE SA MINING INDUSTRY The investment case in South African resource equities, as in all other equities, should be premised on sustainability.  In other words, if factors responsible for economic value creation in mining are not renewable, then mining companies cannot sustain the valuations investors place on them, regardless of the level of […]

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A Mobile Telecoms Perspective Part 2

ICASA TAKES STRONG STANCE AGAINST HIGH TARIFFS. In our previous note, we explained how the structure of the local mobile telecoms industry has led to inefficient outcomes for consumers.  An effective duopoly of MTN and Vodacom has resulted in pricing and tariffs that are amongst the highest in the world.  We showed high mobile termination […]

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SA Mobile Telecoms – A Price War?

Over the past year, Cell C and 8ta have disrupted the SA mobile market by introducing aggressively priced data and voice offerings. These come against a backdrop of an implicit duopoly in the local industry that is protected by a strong ‘network effect’. Initially supported by high termination rates, high voice prices are now justified […]

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Trouble Brewing in the Unsecured Lending Market

In our view, the massive growth in unsecured lending over the past couple years has been driven by a ‘gold rush’ mentality on the part of credit suppliers. With the economy at large growing slowly, but cost pressures biting the banks’ bottom line year after year, lenders are desperately seek high margin revenue growth from […]

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Our Take on Platinum Part II

Since our last communication, we have observed the labor troubles that have gripped the platinum group metals (“platinum”) industry and the world’s attention morph into a broader political issue. In our view, these events, in fact, represent a grand failing of South Africa’s industrial policy. Much of the political commentary on the tragic events in […]

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