Different sides of the same coin

They are both listed on the ZSE and are what we call Blue chip counters. No long-term portfolio would be complete without them. Both companies have invested large sums of money in their businesses since dollarization in 2009 and have started to reap the benefits of these investments. In the year to March 2011 both sold nearly $500m worth of products and are very profitable. They both paid a dividend and contributed over $50m in various taxes. In fact I can go on and on about these two companies and at end of the day the only thing different about them is the fact that one is up 21.2% so far this year, while the other is down 12.5%.

If you are an investor on the ZSE, you probably know by now that the two companies I am writing about are Delta and Econet In the last two weeks both companies held Annual General meetings, where trading updates were given shedding more light on what is happening in the respective operations. I attended both and in this blog I will try and give you my take on the two companies and perhaps help you understand why they are so similar but are performing differently on the local bourse. Remember these are just my personal thoughts and not be treated as gospel truth!

As a Long term investor on the ZSE I have been following both companies and watching them release results one after the other. I have seen them struggle during hyperinflation. I have been fortunate to see then fighting back and performing well in this stable environment. At Econet's AGM no numbers were given regarding the company performance but management was very positive and unperturbed about the flurry of activity in the Telecommunications sector, where competition is red hot! for more on developments in the country's technology industry i recommend this link "http://www.techzim.co.zw"

Let us leave the numbers to do the talking for a while:

See the charts below for a dramatic showing of their share price performance since February 2009.

This chart tells a very positive story. The growth in Delta’s price has been a gradual one when compared to Econet’s. Much of Econet’s growth was experienced soon after dollarization when the share price touched 520 cents before settling down in a 450-480 range. The break below 420 is long overdue when one looks at how many investors have been sitting on high profits. In fact Econet rose in one single step to above 420 and has never dropped below this over the last 18 months to be exact!

This is a very depressing chart! All indications point to Econet stopping at 400. Anything lower than that would really be a big surprise, almost unthinkable! But hey anything is possible in our market. For now though Econet has bounced back from 420 and opened the week at 430, will it hold? time will tell.

Counters to watch with potential to recover by the end of the third quarter are
Old Mutual, Riozim, Star Africa, PPC. The following counters are looking overbought Edgars, Truworths, and Fidelity.