describes their approach as being “pragmatic value”, which means they look for undervalued companies that have superior returns and cash flows. “There are not many of these around at the moment,” says Shear.
The f und’s Class A units have meaningfully outperformed the benchmark since inception, posting annualised returns of 22.4% vs the All Share’s 18.3% per annum. This has come about as a result of picking some outstanding performers, as well as avoiding misery.
“When we looked at Mr Price in 2008 [during the global financial crisis] the company was trading at R12/share, with a single digit priceearnings ratio. Not even seven years later, the share is at R250/share. That’s a more than 20-fold return on investment.”
A more r ecent success stor y − even before t he Swiss f r anc appreciated − is Mediclinic. “The share rose 33% last year, and we think it ’s a very well-managed company. It ’s efficient and has been a steady and solid investment,” says Shear.
Another bright spot for the fund has been investing in the banks. Barclays Africa Group rose 45% last year, and Shear was quick to point out that this investment was made on the basis of the group being the cheapest (on a price-to-book ratio) of all the major banks.
Buying a good company on the back of bad news worked well with Tiger Brands, too. The share was up 42% in 2014. Bad news regarding the Dangote acquisition provided Shear with an opportunity to get in. “We thought it was cheap relative to its long-term value and are very pleased with how it has performed.”