*** Why now is the perfect time to invest...

*** The first share for our Dummy Portfolio...

*** The cold hard truth about investing… and more...

Dear Investment Academy reader,

We all know that the markets took a nosedive in 2008. Those who were heavily invested took a pretty bad knock and new investors are now afraid to take the next step and invest in their first shares.

This is exactly what I want to talk to you about today. Why investing NOW can produce excellent long-term gains.

My plan for the year is to select a few shares that I think will do well in 2009. Each week I’ll update the share prices from the date we selected it and you can see how well or badly the share’s performing.

I’m going to discuss two shares today. One, I’m placing on our watch list and the other I’m placing in our new “Investment Academy Dummy Portfolio”.

We’ll track the performance of these shares in the “Dummy Portfolio” throughout the year and hopefully put your investment fears to rest.

Before we continue, I’d like to highlight something upfront. I’m NOT recommending that you run out and buy these shares. This portfolio is for demonstration purposes only. What I want to prove is that, even in an unstable market, there are shares that present excellent growth for 2009. But we'll have to wait and see how we get on.

Let’s get straight into it…

Here’s the cold, hard truth

There’s no doubt in my mind, the JSE’s going to have an extremely difficult time recovering in 2009. According to BOE Private Clients’ investment research team, the economy’s only going to grow between 1% and 2% this year.

But, as we approach 2010 and the FIFA Soccer World Cup, I’m confident that our local market is going to flourish again. This is one of the main reasons why you should be looking for good quality shares at their current low prices. They’re perfect for a three to five year (long-term) investment strategy.

Many good quality shares are finally affordable!

Let’s take Sasol (SOL) as an example:

Source: Sharefriend

This graph (above) shows you the movement in Sasol's share price since 7 January 2008. Sasol was trading at around R360 at that time. The share price climbed drastically and peaked above the R550 mark in May 2008.

Most global markets were already falling. But the problems only hit us when commodity prices started tanking. The local markets began to feel the pain and the share price went into a downward spiral. Today, Sasol’s trading at R278.00. That’s even cheaper than it was at the beginning of 2008!

But is that enough to make Sasol a good investment for 2009?

The first thing we need to look at is the news. Sasol’s been hit with another price fixing scandal. That’s the second scandal in less then eight months. (First it was the wax cartel issue and now it’s a gas issue.)

We could see the share price fall even lower, but it’ll never stay down there forever. I’m going to keep my eye on this share in 2009. I wouldn’t add it to the “Dummy Portfolio” right now, not with all the problems relating to the competition commission looming over its head.

But, I’ll follow the share price and the share very closely and wait for the perfect time to add it to our “Dummy Portfolio”. Sasol's also linked to the oil price. There are rumours that the fuel price will be rising again next week. But, there’s nothing wrong with waiting before making that crucial buy.

So what should you do now?

There are many shares like this on the market at the moment, offering value not seen in years. You just need to keep your ear to the ground and get your timing as right as possible.

Here’s an example of a great share that seems to have everything poised for a good year in 2009.

Anglo American (AGL) - A solid blue chip for the “Dummy Portfolio”

Source: Sharefriend

Take a look at the graph of Anglo American above. This share was doing really well until the markets started diving in 2008. It’s currently trading at R190.00 - that’s 65.89% off its 12 month high of R557.00. It’s currently on a PE of 5.09.

The management of the company can be proud. They’ve dropped capital expenditure for 2009. It’s been capped at $4.5 billion, a reduction of more than 50%. This massive drop means there will be a drive to stop unnecessary spending in the current market conditions and focus on the projects that’ll bring in the best production for 2009.

“Anglo American is well positioned to weather the current weak economic conditions and to continue to prosper for the benefit of all our stakeholders."
    - Cynthia Carroll, Chief Executive of Anglo American

This is a quality share, at an affordable price. And I’d like to test drive it for the year. I’m going to add this to our Dummy Portfolio for 2009. Once the markets settles down, this share should rebound nicely. It’s already following a strong upward trend and I hope to see more throughout the year.

Let’s make 2009 a year of communication

That’s it from me for today… But before I sign off, just two more things:

1. Remember, this is a hypothetical portfolio and I do NOT advise you to buy any of these shares,
2. Let’s make the “Investment Academy Dummy Portfolio” a team effort. If you have a share that you think is going to be a stellar performer this year, send me your reasons for this selection to iacomment@fsp.co.za. If it’s a good one I’ll add it to the portfolio.

Happy investing!
Aiden Sookdin
For the Investment Academy