7 RULES ON IDENTIFYING INVESTMENT OPPORTUNITIES

BY CULLEN ROCHE · http://pragcap.com/

Investors need to have rules.  Without structure and order you are destined to fail.  I always say you should invest or trade like a robot – without emotion and always adherent to your rules.  I’ve attached some excellent rules on identifying investment opportunities by the always insightful Howard Marks at Oaktree Capital Management.  For more details from myself on investing rules please see here and here:

·         No group or sector in the investment world enjoys as its birthright the promise of consistent high returns. There is no asset class that will do well simply because of what it is.  An example of this is real estate.  People said, “You should buy real estate because it’s a hedge against inflation,” and “You should buy real estate because they’re not making any more.”  But done at the wrong time, real estate investing didn’t work.

·         What matters most is not what you invest in, but when and at what price.There is no such thing as a good or bad investment idea per se.  For example, the selection of good companies is certainly not enough to assure good results — see Xerox, Avon, Merck and the rest of the “nifty fifty” in 1974.

Any investment can be good or bad depending on when it’s made and what price is paid.  It’s been said that “any bond can be triple-A at a price. “There is no security that is so good that it can’t be overpriced, or so bad that it can’t be underpriced.

·         The discipline which is most important in investing is not accounting or economics, but psychology. The key is who likes the investment now and who doesn’t.  Future prices changes will be determined by whether it comes to be liked by more people or fewer people in the future.Investing is a popularity contest, and  the most dangerous thing is to buy something at the peak of its popularity.  At that point, all favorable facts and opinions are already factored into its price, and no new buyers are left to emerge.

The safest and most potentially profitable thing is to buy something when no one likes it.  Given time its popularity, and thus its price, can only go one way: up.Watch which asset classes they’re holding conferences for and how many people are attending.  Sold-out conferences are a danger sign.  You want to participate in auctions where there are only one or two buyers, not hundreds or thousands.You want to buy things either before they’ve been discovered or after there’s been a shake-out.

·         The bottom line is that it is best to act as a contrarian. An investment that “everyone” knows to be undervalued is an oxymoron.  If everyone knows it’s undervalued, why haven’t they bought it and driven up its price?  And if they have bought, how can the price still be low?

Yogi Berra said, “nobody goes to that restaurant; it’s too popular.”  The equally oxy-moronic investment version is “Everybody likes that security because it’s so cheap.”

·         Book the bet that no one else will. If everyone likes the favorite in a football game and wants to bet on it, the point spread will grow so wide that the team — as good as it is — is unlikely to be able to cover the spread.  Take the other side of the bet — on the underdog. Likewise, if everyone is too scared of junk bonds to buy them, it will become possible for you to buy them at a yield spread which not only overcompensates for the actual credit risk, but sets the stage for their being the best performing fixed income sector in the world.  That was the case in late 1990. The bottom line is that one must try to be on the other side of the question from everyone else.  If everyone likes it, sell; if no one likes it, buy.

·         As Warren Buffet said, “the less care with which others conduct their affairs, the more care with which you should  conduct yours.”  When others are afraid, you needn’t be; when others are unafraid, you’d better be. It is usually said that the market runs on fear and greed.  I feel at any given point in time it runs on fear UorU greed.As 1991 began, everyone was petrified of high yield bonds.  Only the very best bonds could be issued, and thus buyers at  that time didn’t have to do any credit analysis — the market did it for them.  Its collective fear caused high standards to be imposed.  But when investors are unafraid, they’ll buy anything.  Thus the intelligent investor’s workload is much increased.

·         Gresham’s Law says “bad money drives out good.”  When paper money appeared, gold disappeared.  It works in investing too:  bad investors drive out good. When undemanding investors appear,  they’ll buy anything. Underwriting standards fall, and it gets hard for  demanding investors to find opportunities offering the return and risk balance they require, so they’re forced to the sidelines.Demanding investors must be willing to be inactive at times.

Franchising opportunity for young inspiring Entrepreneurs

Fast Food and Restaurants Franchises

Fish and Chip Franchise

1. Description

The Fish & Chip Co brings old England’s national food of batter-fried fish paired with huge fries to our shores to satisfy South African appetites. They successfully have been operating since 2009.

The Fish & Chip Co.

Established:	2009
Initial Franchise Fee:	R100 000 excl Vat
Set-up Costs:	R482 456 excl Vat
Management Fees:	R550 per week
Marketing Fees:	R550 per week
FASA Member:	No
Contact:	Milos Mazalek +27 (0)11 608 1060 www.fishandchipco.co.za

About the Franchise

The Fish & Chip Co was acquired by leading food group TASTE Holdings in February 2012 to get into the untapped lower LSM market. To differentiate itself, the brand has acquired South African footballer Siphiwe Tshabalala who is a franchisee and brand ambassador.

Unlike the traditional franchisee model, the low royalties and marketing fees are fixed and not based on a percentage of turnovers, making this model attractive to potential franchisees. With over 290 stores in South Africa and neighbouring countries, the Fish & Chip Co is one of the most popular food brands for consumers and franchisees.

Franchisee selection criteria

Potential franchisees need to possess business acumen and patience

. 

They also need strong people and communication skills which will be beneficial when dealing with customers, staff and associates. Hard working people who can put in the long hours are required.

Whilst the right location contributes to the success of the business, owner-operator involvement boosts profitability.

Franchiser support

To ensure that franchisees are ready for trade by the time they open their doors, a five-day training programme which deals with day-to-day operations, stock control, up-selling, customer service, management skills and marketing is attended by the franchisee and staff.

The standard operation manual which is covered during training equips the franchisees with valuable procedure and business information. Potential franchisees are assisted with site evaluation and identification. They also have an option to be assisted with the preparation of financial applications. Marketing campaigns and advertising ensure brand awareness and the much needed brand differentiation.

The initial training is coupled with continuous support from field consultants and the head office.

Your investment

While there is no standard application approval time, the application process can take three weeks or three months and is largely influenced by the availability of a site and funds.

Individuals who have the required money and existing sites are in a better position to open earlier.

The return on investment can be obtained between 12 and 24 months.

The average size of an operation is 60m2.

Application process

• Enquire about the brand and additional information
• Deposit a refundable R100 000
• Identify a suitable site
• If necessary, franchisor assists potential franchisees with finance application; Based on the low set-up costs, most potential franchisees do not require finance
• Pay the outstanding costs
• Secure the identified and approved site
• Store fittings by franchisor Open for trade.

Y-Age youth entrepreneurship project a failure

Phetane Rapetswane |

Job seekers wait for work. File photo.
Image by: REUTERS

R30 million was spent on setting up the Y-Age Project, an initiative to encourage entrepreneurship and boost employment, but the fruits of the initiative have yet to be seen.

The Y-Age Project launched last  year  in March aimed to recruit 100 000 young people in Gauteng to be trained, mentored, funded and assisted to run their own businesses.

Entrepreneurs would then return to their various businesses where they would each endeavour to employ 3 to 5 people.

Eventually, the growth of each business would translate into the goal, according to the Y-Age website, of creating 1 million jobs.

In an address to the Gauteng Provincial Legislature, during the State of the Province debate, DA MPL Dr Gavin Lewis said “There are no jobs emerging out of the Y- Age Project although we’re are told a few hundred may be rescued from the ashes.”

Lewis said even if the programme were a success, the mistake made by the Gauteng Department of Economic Development (GDED) was assuming everyone is able to take risks and become an entrepreneur. “People want jobs”

He added most successful entrepreneurs first get work experience before venturing into starting their own business.

Lewis said, “There are jobs out there, but the jobs and skills don’t match… there is a need to bridge the gap, instead of funding FET colleges, youths should have internships at established small to medium companies and get training and receive skills necessary to succeed in the economy.”

According to rankings by Indexmundi website, and the Global Entrepreneurship Monitor (GEM), South Africa’s youth unemployment rate is now at 48.2 percent.

Managing Director of the think tank Youthlab, Zama Ndlovu, was critical of the Y-Age Programme, but none the less expressed disappointment at the collapse of a programme aimed at alleviating the youth unemployment.

She said “It’s always sad to see a government initiative fail, for whatever reason, especially if it was not focused on being relevant to its constituency. There was an incredible amount of PR for the project, but there was no definite clarity on what candidates were getting other than the broad "skills training and mentorship."

Spokesperson for the GDED Phindile Kunune said in a statement, “We are currently engaged in a process of rebranding Y-Age, which will now be administered directly by one of our entities – the Gauteng Enterprise Propeller (GEP).”

The GEP will use the database of the 100 000 existing and aspirant entrepreneurs as a source for other internal programmes.

The Y-Age-Project was not available for comment. The number on their website does not work anymore. The SMS number provided for Y-Age is also defunct, but it still deducts R1.50 when an SMS is sent to it.

The rights of children in school

In my work as an educational consultant, I have visited many schools all over the world. I have observed, in both traditional and alternative schools, that children’s basic rights are often ignored. I believe that all human beings, no matter how old they are, must be granted the right to take care of their bodily needs. The child’s body and whole organism are by nature determined to move and learn in specific ways. When we adults refuse to collaborate with the child’s natural development, we create immense, unnecessary suffering. Even seemingly harmless experiences such as occasionally being denied the right to go to the toilet when needed, can leave trauma and health problems that are carried into adulthood.

The widespread assumption that children should sit still and listen, has been repeatedly disproved by scientists, psychologists, and educators. Children are meant to move their bodies and play. This is how they learn best. Furthermore, children in all school models are still being discriminated against, shamed and punished for having different learning styles. Sadly, children who learn more quickly or more slowly than their peers are often neglected in the classroom. Sometimes, learning content simply is not interesting enough or even age-appropriate. If children are unable to relate to the subject matter or the way in which it is delivered, they naturally lose interest. Children are drawn toward classroom activities that are aligned with their stages of cognitive and emotional development.

The “school model” itself will not protect children from abuse. Every single teacher and parent needs to take responsibility for his or her own well-being and for the child’s well-being.

All children have the right to do the following:

1. Go to the toilet when needed.
2. Have drinking water available.
3. Move the body when needed.
4. Learn to take care of personal needs.
5. Learn and process emotions through play.
6. Learn through exploration, trial, and error.
7. Make mistakes and not be judged or shamed.
8. Learn at a personal pace.
9. Fully understand a subject before being tested.
10. Not to be tested involuntarily. Instead, share knowledge by free choice, only when ready to receive feedback on learning progress.
11. Not to be punished. Instead, children should be respectfully encouraged to become more self-disciplined.
12. Not to be compared with peers. Instead, acknowledged as an individual student with individual talents, opinions, and characteristics.
13. Not to be judged for being different.

By Bertha Hill, West Virginia

Discover the Secrets of Success

Regenesys’ Chairman Dr Marko Saravanja’s book, Secrets of Success, is a helpful guide on how to live your life to the fullest and rise to the moments that life presents to you. The Secrets can be applied to everyday life as a long-term self-development plan that transforms negative belief systems into positive affirmations. When repeated, these affirmations can be beneficial and turn our thoughts into reality. In this week’s newsletter, we look at five of the fifty two Secrets of Success that challenge our physical desires and teach on giving back, patience and delayed gratification.

Delayed gratification

Delayed gratification is the act of postponing a reward or satisfaction. Research has shown that successful people have the ability to delay short-term reward for long-term gain. Professor Walter Mischel from Columbia University conducted experiments to assess the ability of four-year-old children to delay gratification. Children were given one marshmallow and told that they would get an additional one if they did not eat it within 15 minutes. Tracer studies, conducted later on, showed that those children who were able to delay gratification were more successful in school, business and life.

Indeed, self-discipline and an ability to wait are vitally important qualities that determine long-term success in both our business and personal lives. Saving money, university studies, sacrifices at work and in the family – these are all examples of delayed gratification. The greatest leaders, strategists and businessmen had this quality – they have all been able to sacrifice short-term pleasures for long-term goals. Nelson Mandela, Warren Buffet and Mahatma Gandhi are some great examples from recent times. Let your greatest gratification be delayed gratification. Awaken your potential knowing that the power of delayed gratification is within you.

Sacrifice

Success in life comes through sacrifices – not merely one or two, but many. Sacrifice is the ability to give up a personal need for a more important organisational priority or a greater societal cause. Every time we make a sacrifice, we earn credits that accumulate and repay our investment multiple times in the future. The evidence can be seen in the lives of Mother Teresa, Gandhi, Mandela and every other truly great leader. Unsuccessful people are not capable of making sacrifices. They are self-centred – driven by fear and greed. They have a mentality of poverty and entitlement – they think that their organisations always owe them something. As employees, they are cynical, always complaining, assigning blame, and poisoning others.

Sacrifice requires the courage to give up short-term pleasure for long-term success – and to be different from the majority. Sacrifice requires compassion, a proactive attitude, and a spiritual wisdom that recognises the transitory nature of worldly pleasures. Look at great business leaders: how many lonely extra miles did they run? How many sleepless nights, late hours and working weekends did they endure? How many family sacrifices did they make and how many other sacrifices did they make which no one ever noticed? In life, in order to go up you have to give up. If you are rich, give your wealth and if you are poor give your heart. Awaken your potential, knowing that the power of sacrifice is within you.

Altruism

Altruistic actions lead to success. All great leaders were altruists – they worked genuinely for the well-being of others. And they became great because of others. Altruism is about selfless behaviour, benevolence, generosity and compassion in action. True altruism is when the motivation for helping others comes out of one’s own heart – and not because of an expectation that a favour will be returned. True altruism is anonymous. Selfish behaviour is driven by negative energy and leads to contraction, narrow-mindedness and misery.

Altruistic behaviour generates positive energy and leads to freedom, expansion and happiness. Good actions create good reactions and bad actions create bad reactions – this is a law of the Universe. According to Steven Covey, our life progresses from dependence to independence and finally to interdependence. As we mature, we realise that everything in this Universe is interdependent.

We realise that our happiness depends on the people around us and we exist because of others – we realise the great wisdom of Ubuntu. When we are gone, we will not be remembered by what we had but by what we gave and how many human lives we touched. The divide between the rich and poor is greater than ever before. Therefore, as individuals, business and government, we must do much more for the poor and vulnerable. Choose a person, project or community you want to help and serve them selflessly. Only through action can we create long-term collective prosperity and peace.

Choose to live in the light of altruism instead of the darkness of selfishness. Awaken your potential knowing that altruism is within you.

Struggle

There is no great person on this earth who achieved greatness without struggle. Sir Richard Branson, Nelson Mandela, Oprah Winfrey and all the world’s great CEOs, warriors, scientists and politicians had to struggle to achieve their success in life. Each had to withstand suffering, risk and pain. Success in life has to be earned and deserved. It has to be won in life’s daily battlefields by conquering fear, uncertainty and temptation; by remaining true to one’s mission and by staying on the road less travelled; by sacrificing short-term pleasures for long-term goals; by persevering and enduring hardship; and by inspiring others and enduring hardship; and by inspiring others along the way.

Struggle is the essence of life, so do not try to escape it. Welcome struggle as an opportunity to develop, and your challenges will cease to be hardships. Only through constant struggle can we continually learn, change and develop. Only through struggle can we conquer our fears, achieve freedom and extend our boundaries of possibility. Let struggle be your way of life. Fight bravely. Love fiercely. And history will remember your legacy.

Proactiveness

Proactiveness breeds success. Proactive people get up, act and solve problems while reactive people do nothing but complain, whine and moan. Proactive people are solution focused while reactive people are problem focused. Proactive people see opportunities while reactive people see difficulties. Proactive people create while reactive people destroy. Proactive people are special human beings – they talk little and do a lot, they are driven by a higher cause and not by ego, power and money. They lead by example, they walk the talk and they are true role models – quietly admired by their followers. Proactive people thrive on a positive energy generates more positive energy. One rotten potato spoils the whole bag. Where reactive people poison their colleagues with negativity, proactive people inspire, enthuse and excite the people around them.

Smell the roses and appreciate their beauty instead of focusing on the thorns. See the half-glass of water as half-full instead of half-empty. Take control of your future – do not give your power away. Stop complaining and blaming others, take responsibility, get up and act. Change your life and you will change the world around you. If we all do it, our world will be a better place in which to live. Be proactive, progressive and professional. Be productive, prompt and proper. Be profound, prosperous and prominent. Awaken your potential by choosing to be proactive.

It inspires me to think that you may embark on a journey of self-actualisation. Even more inspiring is the thought that, once you achieve success, you may choose the path of serving humanity. May you awaken your potential, knowing that everything you need to succeed is within you.

Dr Marko Saravanja

SUCCESS MEANS MANY WONDERFUL, POSITIVE THINGS.Success means personal prosperity: a fine home, vacations, travel, new things, financial security, giving your children maximum advantages. Success means winning admiration, leadership, being looked up to by people in your business and social life. Success means freedom: freedom from worries, fears, frustrations, and failure. Success means self-respect, continually finding more real happiness and satisfaction from life, being able to do more for those who depend on you. Success means winning. Success—achievement—is the goal of life! Every human being wants success. Everybody wants the best this life can deliver. Nobody enjoys crawling, living in mediocrity. No one likes feeling secondclass and feeling forced to go that way. Some of the most practical success-building wisdom is found in that Biblical quotation stating that faith can move mountains. Believe, really believe, you can move a mountain and you can. Not many people believe that they can move mountains. So, as a result, not many people do. On some occasion you've probably heard someone say something like, "It's nonsense to think you can make a mountain move away just by saying 'Mountain, move away.' It's simply impossible." People who think this way have belief confused with wishful thinking. And true enough, you can't wish away a mountain. You can't wish yourself into an executive suite. Nor can you wish yourself into a five-bedroom, three-bath house or the high-income brackets. You can't wish yourself into a position of leadership. But you can move a mountain with belief. You can win success by believing you can succeed. There is nothing magical nor mystical about the power of belief.  Belief works this way. Belief, the 'I’m-positive-I-can" attitude, generates the power, skill, and energy needed to do. When you believe I-can-do-it, the how-to do-it develops. Every day all over the nation young people start working in new jobs. Each of them "wishes" that someday he could enjoy the success that goes with reaching the top. But the majority of these young people simply don't have the belief that it takes to reach the top rungs. And they don't reach the top. Believing it's impossible to climb high, they do not discover the steps that lead to great heights. Their behavior remains that of the "average" person. But a small number of these young people really believe they will succeed. They approach their work with the "I'm-going-to-the-top" attitude. And with substantial belief they reach the top. Believing they will succeed—and that it's not impossible—these folks study and observe the behavior of senior executives. They learn how successful people approach problems and make decisions. They observe the attitudes of successful people. The how-to-do-it always comes to the person who believes he can do it. Belief, strong belief, triggers the mind to figuring ways and means and how-to.  And believing you can succeed makes others place confidence in you. Those who believe they can move mountains, do. Those who believe they can't, cannot. Belief triggers the power to do.