Pro­tect your­self against the ex­ces­sively strong rand

Finweek English Edition - - COVERSTORY - VIC DE KLERK

The world­wide re­cov­ery in share prices over the past 18 months – fol­low­ing the near-bank­ruptcy de­clines of 2008 – seem to cre­ate the im­pres­sion 2009, and es­pe­cially 2010, were ex­cel­lent in­vest­ment years. Yes, those who bought early in 2009 did well. But re­mem­ber all those longterm in­vestors who were in the mar­ket be­fore the col­lapse in 2008 are still look­ing long­ingly for new peaks.

For this year the prospects are slightly dif­fer­ent. The re­cov­ery is com­plete and now the in­vestor must look for new op­por­tu­ni­ties. Let’s first look at the risks for 2011. In­vestors must try to pro­tect them­selves some­how or other against the cur­rently strong rand and the in­evitable turn­around of that which must oc­cur some­time in the fu­ture. Un­like the sit­u­a­tion in the past, it’s not com­mod­ity shares that will now of­fer the best hedge against a pos­si­ble fall in the rand’s value. In fact, it’s the fall in com­mod­ity prices that can cause the weak­en­ing of the rand. Qual­ity for­eign shares – es­pe­cially BRIC as­sets – that are also listed on the JSE of­fer a good op­por­tu­nity.

At the top of my list are and Note the ab­sence of Naspers, be­cause its ex­po­sure to Ten­cent is just too high.

Lo­cally, I pick Un­like Sho­prite and Mass­mart, Mr Price hasn’t yet ex­panded much north of the Lim­popo. There are def­i­nitely op­por­tu­ni­ties for its af­ford­able cloth­ing in the rest of south­ern Africa, where eco­nomic growth over the next decade could be even bet­ter than in SA. Even Mr Price Home can learn a lot from Lewis, and the fur­ni­ture/fi­nan­cial ser­vices di­vi­sion can still ex­pand a good deal.

For the novice in­vestor, there may be two op­por­tu­ni­ties be­tween the small and medium en­ter­prises. In IT, still of­fers a nice op­por­tu­nity, even though its price has climbed con­sid­er­ably over the past few months.

Fur­ther down, the lit­tle ‘un with the mar­ket value of just more than R100m –

– still draws my at­ten­tion. Briefly, the group spe­cialises in se­cu­rity goods. The panic but­ton in your house comes from AER. How­ever, there are mil­lions – and I mean mil­lions – of homes in SA’s for­mer town­ships that don’t have any se­cu­rity pro­vi­sion. In case you didn’t know, there are break-ins in the town­ships too.

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