Little gain, lots of pain
It’s a painful way to start the year but I have to submit my 2010 stocks to the block for a chop. Ouch! My selections’ average return of 15,71% was only about two-thirds of what the JSE All Share Index raked up over the same period. I hang my head in shame for not being able to beat the market. Three shares in the portfolio that performed well were Hudaco (up 39,74%), Steinhoff (26,7%) and Reunert (17,59%). City Lodge came in at 6,21% with a negative return coming from Basil Read (-11,7%).
But that’s now a demon of the past and I’ll try and do better this year. It’s a shotgun approach, mainly comprising quite established companies because I believe the JSE is in for a sharp correction during the course of the year and these companies should be better able to ride it out.
So here’s my 2011 portfolio:
As a value style investor I think I called this one a little early – around a year early. So I’m sticking with it in the belief it will come through this year. The outlook for the heavy construction sector is not inspiring but Basil Read is well diversified, with activities that include mining. Operations stretch into other parts of Africa.
is the exposure to commodities. Iron ore is about as basic as you can get but should keep doing well as long as China keeps buying. Rand weakness will help exports. ArcelorMittal was under consideration but there are too many funny people there.
I wanted some exposure to the retail market and Lewis is a fine old company. If there’s a pick-up in consumer spending this year furniture retailers could benefit as people buy the household things they probably delayed buying last year. Lewis also offers credit that consumers might take advantage of while interest rates are low.
Admittedly, it’s my wild stab. The telecommunications industry is going to be busy this year and Telkom will find itself under increasing competitive pressure. It may not handle that well but it has to do something. And fuzzy as the investment logic might be, that’s why I’ve included the share, because the group has to do something, good or bad, that will move the share price. It’s also relatively cheap compared with the other telecoms shares.
This is the shot in the dark. My thinking is that if predictions of a gradual economic recovery prove right, more people will use airlines more often, though the emphasis will remain on budget offerings. Comair might have been the more sensible choice but 1Time is appealingly quirky. Having used the airline a few times I know its aircraft are seldom on time but its staff have a good sense of humour, something badly lacking on SA Airways. I also like the share because the directors are its majority shareholders. And the share is considerably cheaper than Comair.
That’s it. Last year I said if my portfolio did badly I’d hide out in a cantina in Mexico and drink bad tequila. I might still do that. If I can’t beat the market this year I’ve come up with the punishment. I’ll subject myself to a lashing by Lady Gaga. It might hurt more than this year’s chop on the block but it will be a lot more fun.