Ruthless industrial play
asked fund manager Nino Frodema why the Metropolitan Industrial Portfolio had outperformed its benchmark for the first six months of this year he’d attribute it to “selling discipline”. “Our view is simple: if it’s expensive, sell it!” he says to investors in his commentary to end-June 2010.
Frodema says that’s why the fund reduced its stakes in the likes of media group Naspers, luxury goods giant Richemont and brewer SABMiller during the early part of the year. The projected earnings growth for those companies doesn’t, in MetAm’s opinion, justify the high rating the stocks are sitting on.
“The risk-reward balance for Richemont heavily favours risk. If earnings miss expectations even by a small margin then you can expect the market to punish this counter,” Frodema says.
Investment in an industrial fund does have merit, particularly if you’re nervous about volatile commodity prices and growth prospects for SA’s mainstream banking groups.
Through the Metropolitan Industrial Portfolio investors get access to the likes of high growth stocks such as MTN and Naspers, strong dividend players like British American Tobacco, rebounding retail plays such as Truworths and JD Group and promising small caps, like waste management firm Interwaste.
The fund itself hasn’t covered itself in glory, consistently underperforming its benchmark over one-, three-and five-year periods. However, in a market environment where experts are saying it’s becoming increasingly difficult to find value, it might be appropriate to consider an asset manager prepared to take profits when they’re on the table.