Fund manager in­sights

Finweek English Edition - - FUND IN FOCUS -

“I would guess we have a bias to­wards mid-cap com­pa­nies as op­posed to small caps,” says Sedg­wick, de­scrib­ing how he runs the fund in re­la­tion to his peers. “I am also a huge fan of liq­uid­ity – you don’t want to be caught in illiq­uid in­stru­ments. With the ex­cep­tion of How­den, our top 10 hold­ings are all liq­uid stocks,” says Sedg­wick.

His un­der­ly­ing phi­los­o­phy is to find busi­nesses that are rea­son­ably priced, highly cash gen­er­a­tive and where man­age­ment is aligned with the in­ter­ests of share­hold­ers. “We also pre­fer to see sur­plus cash be­ing re­turned to share­hold­ers, in­stead of be­ing ap­plied to ac­qui­si­tions that don’t im­prove share­holder re­turns,” says Sedg­wick. Com­pa­nies meet­ing th­ese cri­te­ria in­clude AVI, City Lodge, Cash­build, Italtile, Sun In­ter­na­tional and Alexander Forbes. “They are all vary­ing hues of the same colour,” he ex­plains.

New ad­di­tions have in­cluded the likes of KAP In­ter­na­tional. “We added that for the first time a year ago,” he says. “This was post the in­vest­ment of the Stein­hoff as­sets, and the clean­ing up of the port­fo­lio. We have a high de­gree of con­fi­dence in what was be­ing bought and just as im­por­tantly, the busi­ness acu­men in what was be­ing dis­posed of – we think there are some smart guys mak­ing the de­ci­sions. The stock was also cheap at just 10 times earn­ings, so while it’s not the most ex­cit­ing growth busi­ness, it is part of the well-con­nected Stein­hoff fam­ily,” says Sedg­wick. “KAP has sub­se­quently rerated to 15 times earn­ings.”

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