It has to be the cruellest irony that, after 35 years of investment writing, probably my best short-term gain was made on advice — given largely in jest — by a tennis connection. Even crueller is the tiny sum I playfully invested. It is something which irks me when, at the time of writing, the magnificent dogecoin has soared over 150% in the past few weeks.
In fact, my crypto portfolio, only recently “assembled”, has lurched up about 30%. As a long-suffering value investor, I am not accustomed to such glorious slings of outrageous fortune. Naturally, my instinct is to take profit, the word “bubble” flashing every time I check my crypto portfolio. My tennis connection reassures me “it’s only the beginning” — which, of course, triggers a foreboding sense of déjà vu.
The last time I was reassured that it’s only the beginning it was, ironically, my ebullient tennis partner Ray, who, after bursting into the club champs quarterfinals, was certain we would have our names on the honour board that year. The next day we were unceremoniously dumped by a pair of youngsters, who had zero sympathy for their slightly hungover opposition.
In any event, I have been advised to look at other cryptos, specifically sui and ton, that might score if crypto’s trumpeting rally is sustained.
Frankly, I just don’t have the research capacity to delve into complicated asset classes — not when I do the hard yards checking the local Virgin Active activity to establish the veracity of Brait’s recent rally.
Anyway, bitcoin, the undisputed king of the sprawling crypto empire, has more than doubled since dipping under $40,000 on January 22. In the past week or so, the re-emergence of the Trumpinator in the US has whipped up some really frothy sentiment in the crypto market.
The way I understand it, a Trump administration could be a game-changer for crypto and digital currencies. There is talk that bitcoin, in particular, could become a strategic asset class as a potential bulwark against inflation.
Broader participation in the crypto markets, especially if aided by government support, would obviously boost prices further, especially if big savings institutions were to divert chunks of their client money to this alternative asset class. There is even talk that Trump could consider making bitcoin a strategic reserve asset. Now that does sound like wishful thinking.
If I’ve learnt one thing over the years — aside from never kick a fresh dog turd on a sweltering day — it’s not to set too much store by the promises and pledges of politicians. Besides, I don’t think I’m cut out to be a crypto “hodler”; it might be instructive — and, frankly, my saving grace — to be ploughing now through David McWilliams’s excellent tome Money — a story of humanity. What more could one ask for in the middle of all this crypto hype than an acerbic and slightly cynical long-term perspective on money?
The way I understand it, a Trump administration could be a game-changer for crypto and digital currencies
One of McWilliams’s observations that really tickled me was that about the South Sea Bubble of 1720 — an unchecked episode of euphoria if there ever was one. Aside from the infamous South Sea Company, there were a number of other “bubble” companies, including one that purported to produce square cannonballs. Such a prospectus would have made entertaining reading. I totally get the advantages of storing such explosives in what might have been an incendiary blockchain, but the aerodynamics of a square missile …
Moving to matters more familiar, I was rather excited to get the annual financial statements for unlisted public company Capevin Holdings*. The good news, for us dividend tipplers, was not in the financial statements, but in the notice of the AGM. This confirmed that a dividend of about 100c a share would be paid no later than December 31. So, by the end of this year, those who held onto their Capevin shares after the Heineken/Distell deal would have received back 200c a share in dividends on what was an effective “buy in” price of R15 a share. A well-fortified yield is certainly cheering.
But what I was trying to glean from the annual financial statements was why liquor giant Campari was prepared to pay, some months ago, a stiff premium to acquire a significant minority stake of 14.6% in Capevin.
For those who need reminding, Campari paid up just shy of £70m (then R1.63bn), which is equivalent to a price of more than R50 per Capevin share. Remgro’s just-released annual report puts a value of R5.283bn on Capevin, which equates to about R24.45 a share. That’s half the price Campari was willing to pay for a stake — which, for the record, it acquired, from third parties.
If we use Campari’s price of admission, Capevin carries an inferred value of about R11bn. So, which valuation is realistic — the one set by a conservative investment company or the one a drinks industry doyen with a nose for a deal gives? Capevin’s results, disappointingly, don’t carry much colour, or evidence, for that matter, to support a R50-plus a share valuation.
It would have been interesting to see the market’s verdict if Capevin had been listed. It’s probably best to keep the eye steady on the long-term horizon with the aim of capitalising on the group developing its portfolio of top-notch single malts, and hopefully bringing many casks to market when Chinese demand comes flowing back strongly.
* The writer owns shares in Capevin
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