approach, Williams says that there are various types of opportunities that tend to present investment opportunities. “They arise for different reasons, but we would look at them carefully. One of these has been corporate actions,” he says. A profitable example of this type of opportunity was demonstrated by Sibanye Gold, which was unbundled from Gold Fields a few years ago. “The fund tripled its money by buying Sibanye after the unbundling,” says Williams.
He also notes that there are various ways to predict returns. “One of these is competition theory. A company that is dominant in a market can control its pricing and produce superior returns,” says Williams.
The fund bought Comair when competitor 1time went bankrupt. “They were able to boost profits as a result of this. We bought the share at R1.30 and now it’s trading around R5.20/share,” he says. Likewise, furniture retailer Lewis is now well placed to grow profits after its biggest competitor Ellerines went bankrupt.
Commenting on the general level of valuations that Williams sees in the market at the moment, he says: “We think the quality companies are going to have a hard time meeting expectations. So we have been more sellers than buyers recently.”
The fund is happy to have lightened holdings in Mediclinic, Woolworths, Spar and Sasol, which appear to be trading at stretched valuations.