Ruth­less in­dus­trial play

Finweek English Edition - - Unittrusts -

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.

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