Finweek English Edition - - COMPANIES & INVESTMENTS - Marc Ash­ton

Ear­lier this year Fin­week rolled out its “Acorn Port­fo­lio” where we picked a num­ber of in­ter­est i ng pri­vate equit y and in­vest­ment hold­ing com­pa­nies that we fan­cied to de­liver the goods in 2012. The good news is that the port­fo­lio has de­liv­ered a 27% re­turn be­tween 6 Jan­uary 2012 and 1 De­cem­ber 2012. The even bet­ter news is that we think the port­fo­lio can do the same in 2013.

The be­low ta­ble is how the port­fo­lio shaped up in the cur­rent year.

The one ob­vi­ous laggard in the above port­fo­lio was RE:CM & Cal­i­bre but if one con­sid­ers that it spent much of its time trad­ing around R10.50/share in Oc­to­ber, the re­turn from it would have been sig­nif­i­cantly bet­ter. When RE:CM an­nounced its net as­set value ( NAV) re­cently, it came in at R11.26, for a share trad­ing at around R9.65, at the moment there is def­i­nitely value to be un­locked here.

So what are the changes we pro­pose mak­ing to this port­fo­lio?

One of the big mo­ti­va­tors for pick­ing the Stan­lib Fund was that it was man­aged by the very highly re­garded Shawn Stock­igt who has sub­se­quently l ef t t he as­set man­ager. There was also the launch of the RMB Small­Mid Cap Ex­change­Traded Fund (ETF) which we t hink i s a great prod­uct. For us, we would cash in our in­vest­ment in the Stan­lib fund and sub­sti­tute it for the RMB prod­uct.

In­ter­nally, there has been quite a lot of in­ter­est in pri­vate eq­uity group Blackstar, which has made some quite ag­gres­sive moves into the lo­cal me­dia and health­care sec­tors. One of the rea­sons it didn’t make the port­fo­lio in 2012 was an un­der­ly­ing sense that it might be one of those com­pa­nies that would be­come a value trap for in­vestors and fail to de­liver the goods for. The group has done enough this year to sug­gest that they are se­ri­ous and aren’t go­ing to drop off in the next six to 12 months and we’re com­fort­able to buy them at R11.50. The rand-based NAV of Blackstar is R14.20 (as at the end of Oc­to­ber 2012), which sug­gests that the group is be­ing mis­priced.

The fi­nal ad­di­tion for 2012 would be JSE-listed re­source play Pallinghurst at un­der R2.40/share. As we’ve pre­vi­ously in­di­cated, Pallinghurst sits at a deep dis­count to its NAV, the group is ma­tur­ing as an in­vest­ment and has bought into a num­ber of out-of-favour sec­tors – specif ically plat­inum. The deals are be­ing done and the ve­hi­cle is gain­ing mo­men­tum, 2013 could be the first year it really kicks into gear.

This year was ob­vi­ously a year in which Brait was the sig­nif­i­cant out­per­former and it is hard to see it re­pro­duc­ing the same re­turns in 2013. Our favoured pick in the “Acorn Port­fo­lio” for next year is Reinet. De­spite its de­trac­tors, Reinet spent much of the cur­rent year de­ploy­ing cap­i­tal. In prin­ci­ple we don’t like the man­age­ment fees and the com­pli­cated struc­ture of the group, but in its favour Reinet has been able to in­vest in dis­tressed as­sets for much of 2011/2012 and next year could be the one where it starts to reap the div­i­dends.

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