Lit­tle gain, lots of pain

Finweek English Edition - - COVERSTORY - SHAUN HAR­RIS

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.

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