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?

Financial Mail - Investors Monthly - - Opening Bell - Marc Hasen­fuss

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.

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