Is your investment ‘choking’?
Cricket World Cup provided interesting insights into risk and return
SOUTH AFRICAN cricket fans are in mourning as their side again blew an opportunity to secure a Cricket World Cup title. With stock markets also in turmoil globally, Finweek thought it would be entertaining to discover whether it was more profitable to invest in the market or back your favourite cricket captain.
Our criteria were pretty simple: what was your return if you invested R2 500 in eight major JSE stocks or the Satrix RAFI (fundamental) index and would you have made money backing your preferred cricket captain? As you can see from the table, shares haven’t been the best place for your money to be since the start of this year. Only Sasol CEO Pat Davies proved a worthwhile captain, delivering 9% return for shareholders – helped by a volatile oil price. Your next best return was from British American Tobacco, which delivered just under 4%.
If you’d invested in the Satrix RAFI or BHP Billiton you’d be slightly in the red; and if you’d put your money into Standard Bank you couldn’t be faulted for wondering whether the bank and the Proteas traded their brains trust over Christmas.
So would you have made any money taking a punt on your favourite cricket captain? That was slightly tougher to calculate, but essentially we assumed a punter would start with R2 500 and would consistently bet the full amount on his favourite captain and bank the profits. If he had a losing fixture the punter would then tap into that profit pool to get back into the betting process. In theory, if you lost two games in a row you were out.
Armed with odds supplied by Voltbet.com it would appear punters would have done very well backing India from the word go. One of the early favourites, India has delivered a 193% return, while backing an outlier such as New Zealand lost you 99% of your money – ending up with a paltry R41.
Purists will argue you can’t compare sports betting and investing but the above example reveals two interesting aspects: first, it reinforces that looking for outliers or outside bets to generate consistent returns doesn’t always produce the desired results when the favourites are delivering on the goods. Paul Theron, of asset management firm Vestact, has often told our readers the favourites trade on superior earnings multiples than less
GRAEME SMITH Hard to swallow