A smaller foot in the global door
Gaining offshore exposure on the JSE is easy, as investors are spoilt for choice due to a surfeit of overseas-inclined conglomerates and real estate companies. So is it worth looking at some of the more modest global investment instruments?
DBX-TRACKERS WORLD ETF Share price: R23.94 JSE code: DBXWDJ
BUY THE DBXWD IS ARGUABLY THE most efficient way for retail investors to gain exposure to global stock markets. This ETF is cost-effective and transparent when it comes to delving into the all important net asset value (NAV). The management fee is less than 0.7% and the NAV can be tracked daily on www.dbxtrackers.co.za.
Certain investors who are inclined towards vehicles powered by stockpicking prowess might see the fund as a staid market-tracking option. But the longer-term (five year) returns are fairly compelling, and offer a perfect proxy on world markets for unsophisticated investors. For those inclined to income flows, the historic dividend yield on the fund is a not-too-shabby 1.67% (with distributions paid twice a year). The top 10 holdings include giants Apple, Microsoft, Google, IBM and AT&T as well as energy groups Exxon Mobil Corp and Chevron Corp, consumer brand icons Johnson & Johnson, General Electric and Pfizer.
Consumer (noncyclical) stocks represent 22% of the portfolio, financials another 22% and technology and communication 11% each.
IM thinks the fund has is a nicely balanced geographic spread that should ensure that investors with rand-hedge dreams sleep soundly at night.
UNIVERSAL PARTNERS Share price: R16.98 JSE code: UPL
HOLD UPL, WHICH HAS A PRIMARY listing on the Stock Exchange of Mauritius — listed on the JSE in August — has not exactly been greeted with much enthusiasm by the local investment community. That’s not surprising, as the company has made no investments yet.
So buying into it at this juncture would be largely a bet on the executive management team — which consists of former RMB executive Pierre Joubert, Global Capital chief financial officer David Vinokur and insurance sector stalwart Andrew Birrell. Other well-known faces among the nonexecutive directors include Larry Nestadt and Neil Page.
IM thinks UP is one of the more interesting smaller offshore investment opportunities. The company has targeted the EU as an investment destination with a bias towards the UK. Investment targets will need strong and sustainable profitability with high cash conversion ratios, and UP will be prepared to take a stake of 25% or more to influence and monitor strategy and performance.
Investments will range from £10m to £30m. IM recommends a “watch and wait” strategy; there might be a chance to buy in cheaply, considering the wide bid/offer spread on the shares. The cash-based NAV is around R16.50/share.
ASTORIA INVESTMENTS Share price: R10.50 JSE code: ARA
SELL AT FIRST GLANCE THERE MIGHT not be too much difference between the DBXWD and Astoria, which is an offshoot of listed wealth manager Anchor. Astoria is US biased, and its top 10 holdings include The Blackstone Group LP, Home Depot, Amazon, Facebook, Starbucks, Apple, FedEx and Johnson & Johnson. The listed equity portfolio comprises about 70% of the investment portfolio and, like DBXWD, the spread of investments is such that none stands out as a “large position”.
In Astoria’s case, no investment in the listed portfolio — aside from its strategic position in property counter Echo Polska — represents more than 5% of the portfolio.
At the time of writing Astoria’s NAV (reflected as $1/share as at end December) was about R13.25, compared with a share price of R10.50. That means the discount has widened to more than 20% — which would normally regarded as being attractive for an investment counter.
But the market is not terribly enamoured with Astoria. Perhaps it is the fee structure relationship with Astoria or the ambivalence around the portfolio structure (more than 20% of the portfolio can be allocated to private equity).
IM suspects it might take time for investors to warm to Astoria.