INVESTMENT GROUPS: ANOTHER KENYAN FIRST?

There is a very positive side of Kenyans which has made them shine over other nationalites. Maybe it's the uncertainaties in their living enviroments which have made them natural socialists. We are the only ones who embraced the harambee spirit in a major way. This has contributed a great deal in our country's development. Co-operative movement is another very successful Kenyan thing. After indepedence our fathers came together and formed land buying companies which enabled most of them to possess land. Not to be left behind, our generation, though thinking slightly different are still cooperating. Investments groups are being formed in big numbers by the day.

I wish to share with fellow bloggers a a sneak preview of a report I made to a group of friends with whom we started an investing company now 1 year old.

Month Investment Activity
During the month of June, HFCK was closing its books on a Rights issue they intend to undertake. A rights issue occurs when a Company in need of capital injection for expansion seeks this from its shareholders by offering shares at a discount to them. Once a share holder takes up his/her /its rights, the average price of the shares got will normally be lower than prevailing market prices and as such a capital gain is achieved. I therefore utilized all the funds available then to purchase HFCK shares with an intention of buying an equal amount during the rights issue. However due to some rumours that hit the market about Equity’s intention of acquiring HFCK, the price appreciated greatly. Since I did not intend to have a long term position on HFCK, and the capital gain had by far exceeded my projection I sold them a few days ago 35sh. We realised a capital gain of about 46% on this transaction.

YEAR OVERVIEW
As per our stated objective at formation we have made great strides in our journey to acquire a respectable position within the investing circles. However, in every journey there will be bumps and potholes
· We started off very successfully by participating in the Scan Group IPO which we made a handsome profit of 125,000sh
· We also participated in the Eveready IPO; but we were allocated only 1700 shares out of the 10,000 we had applied for. However we managed to make a profit on them since we bought at 9.50sh and sold at around 15.
· We have also been getting some handsome dividends from companies we have invested in and still expect more to flow in.
· On the flip side, KQ, a counter I had very high hopes and went into heavily had the misfortune of having one its plane crashing in Cameroon. Though there is no financial loss directly to KQ since their insurers will meet the bill, as is normal in stock trading, the price of this counter dropped but it has been recovering slowly
. On our other trading at the NSE, we had a disadvantage: We started trading when the bourse was at a bullish stage. Therefore many stocks we bought then were at a high price. The bear arrived in the 3rd week of January and camped at the bourse up to the end of March. The prices of all the counters at the NSE came tumbling down as it is reflected in our portfolio’s gain/loss. However from April there has been a stabilization of sorts and the prices of the stocks in our portfolio has gradually improved.
· From now to December. I expect the activity to slow down at the NSE due to the looming general elections, and also due to the expected IPOS. KenyaRE is expected to list very soon and as hinted by the Finance minister in his budget speech the mother of all IPO’s, Safaricom, is expected. In this IPO, if the government offloads all the 25% as required by the Capital Markets Authority and decides to list only at the NSE and not cross list in other exchanges like London’s LSE and US’s NYSE as is being rumoured, it will have a major effect on our own bourse. First of all the value of this IPO, at a fair estimate based on the company’s superb performance, will not be less than 35 Billion. This kind of money will cause a liquidity crisis at the NSE due to the fact that most people will crave to own the most profitable company in East and Central Africa. As a consequence, I expect the market to remain depressed until the refunds, for obviously there will be a massive oversubscription, hits the bourse again.
· My projection is that, during this crisis, it will be the time to make a kill at the bourse. Due to the liquidity issue, most counters will be depressed and will present very good bargains. Based on this I intend to immediately place sell orders on all of the non core stocks in our portfolio whether we have had a capital gain or not on them. This will release money in anticipation of the above crisis where we can then buy heavily. Come 2008, after the elections, we will have made a very handsome profit.
· We had a good beginning and if we continue this way, we have a bright future ahead of us.