NED­GROUP IN­VEST­MENTS VALUE

Financial Mail - Investors Monthly - - Analysis: Value Funds -

This fund of­ten buys shares at the same time as the other value funds but it is less in­clined to sell early. The fund is man­aged by Fo­ord As­set Man­age­ment, which at times has had re­turns sim­i­lar to the value man­agers but which more re­cently has taken on the char­ac­ter­is­tics of a mo­men­tum manager. While many of its com­peti­tors have sold their in­ter­est in Stein­hoff, Ned­group Value still has a large 8,5% hold­ing in the share. Co-fund manager Brian Davey says the fund uses value screen­ing tools, look­ing for shares with be­low-av­er­age PEs and aboveav­er­age div­i­dend yields. Ex­pen­sive shares in the Fo­ord Eq­uity Fund such as Aspen and SABMiller are ex­cluded from the Value Fund. “But we do not be­lieve the en­tire port­fo­lio has to be in bombed-out shares. Many of our value shares are closer to re­al­is­ing their value and will soon be ready to be har­vested. Shares such as RMB Hold­ings and Wool­worths were ac­quired when they of­fered bet­ter value than to­day and Fo­ord has been happy to ride the shares. San­tam, while not cheap, is seen as a value share by the Fo­ord team as it has been suc­cess­ful at un­lock­ing value through spe­cial div­i­dends and it has used its cap­i­tal well by ex­pand­ing into re­lated busi­nesses such as the MiWay di­rect in­surer. The fund also holds an un­tra­di­tional value share in re­tailer Tru­worths, which Davey says has been a dis­ap­point­ment re­cently. It has been slow to re­act to in­ter­na­tional com­pe­ti­tion but nonethe­less still has more than suf­fi­cient value to jus­tify a hold­ing.

A more con­ven­tional value share in the port­fo­lio is Sa­sol, which Fo­ord has been buy­ing re­cently on the back of a rel­a­tively new lead­er­ship and a less parochial out­look un­der CE David Constable. An­other share which has added value has been Bid­vest, where Brian Joffe has con­sol­i­dated a num­ber of unloved in­dus­tries such as bath­room ser­vices and of­fice sup­plies. Ned­group Value is the only one of the five funds to choose BHP Bil­li­ton in pref­er­ence to An­glo Amer­i­can.

It has a com­par­a­tively light 16% in re­sources, mainly in Bil­li­ton and Sa­sol. Apart from RMB Hold­ings, its largest bank hold­ing is in Stan­dard Bank, which ar­guably is a value share as it shifts from be­ing an emerg­ing mar­ket bank, with a large Lon­don of­fice, into a pan-African bank, and it has scope to im­prove mar­gins from their 2014 lows. Davey says the fund re­mains well po­si­tioned in a di­ver­si­fied group of qual­ity value shares and is well po­si­tioned for long-term out­per­for­mance. The fund last year was a solid 1,4% ahead of the gen­eral eq­uity av­er­age and over 10 years it has been 2,2% ahead on an an­nu­alised ba­sis.

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