SOCIAL UNREST IN Africa, debt ceilings in the United States – plus, of course, the sovereign debt crisis in Europe – are enough to put off even the most battlehardened investor when it comes to putting his money into the stock market. The easy answer is to say investors should, instead of following the herd, look for undervalued stocks and wait for the market to correct the “mis-pricing”. Often easier said than done.
When things are as volatile as they are right now, it sometimes makes sense to rely on those who have “been there and done that” to look after your money. If that’s what you’re looking for then it’s hard to look beyond John Biccard and the Investec Value Fund. Biccard has long been admired as one of South Africa’s premier stock pickers and the 1 419,4% increase in the fund since inception in 1997 is a testament to his skills. By comparison the FTSE/JSE All Share Index delivered 579% – so there’s some very real skill here.
It’s always interesting to listen to Biccard’s commentary and his most recent feedback to investors is noteworthy. He says: “While much has been written about US monetary policy, little is said about China, where long-term interest rates of 4% remain a full 10% below nominal growth in the Chinese economy. That situation, we believe, cannot be sustained and is one that suggests rates are too low in China. We agree with the consensus view that most of the problems in the world are concentrated in the ‘old world’ (ie, the US and Europe). However, we believe that as a result of the massive outperformance of emerging markets and commodities most of the risk isn’t in developed world equities but is rather in the ‘crowded’ trades that have been a beneficiary of the flood of money coming from the zero yield US and Japanese markets. Of relevance to SA is that the rand and commodities fall into this ‘carry trade’ basket, with the flood of money into the country leaving them both exposed when the tide eventually turns.”
Those are very relevant points for South African investors who have punted the emerging market story by financial advisers for the past decade or so. Biccard’s answer is to use his 20% offshore allowance to buy value plays in the US, Europe and Japan. On the domestic front he’s gone with high dividend stocks in the likes of Vodacom, AVI and Oceana Fishing, rand hedge stocks (including Sasol, Anglo American, ArcelorMittal and Sappi) and gold shares “that hedge us against an overvalued rand and a US Fed that continues to devalue the reserve currency of the world”.
You can get into the fund with a R500/month debit order or a R10 000 lump sum, so it’s accessible to people who have a bit of extra cash to start nursing. The total expense ratio of 2% plus 1% performance fee isn’t cheap but if your investment is returning an annualised return of 27% net of fees it’s hard to argue against.
When it comes to investing it’s easy to get caught up in the hype of headlines and believe growth stories that have already run their course. “Value” is often found when in fact it doesn’t exist and sometimes that can lead to a lot of disappointment for long-term investors who buy into that methodology. The Investec Value Fund has shown it can deliver consistent value and often sticks to the uncomplicated while the rest of the world is chasing headlines.
If you aren’t sure where to park your money but know you want a sound methodology then this fund might well be your starting point.