Be pa­tient

Finweek English Edition - - FUND FOCUS - LEON KOK

This edi­tion of Fund Fo­cus is characterised by sig­nif icant ex­cel­lent an­a­lyt­i­cal in­put, and not with­out good cause. Old Mu­tual chief econ­o­mist Rian le Roux sets out a back­drop of ma­jor eco­nomic con­cern con­trast­ing with peak­ing share mar­kets.

Coro­na­tion’s Charles de Kock adv i s e s t hat when t here a r e f e w clearly great op­por­tu­ni­ties, in­vestors shouldn’t get anx­ious about short-term un­der­per­for­mance. “We be­have like the base­ball player who has lots of time to pick the de­liv­er­ies he wants to hit with­out fear of go­ing out if he doesn’t take a swing at ev­ery ball.”

Look­ing at the pric­ing of the var­i­ous as­set classes to­day, it is not ob­vi­ous where the ‘ fat pitches’ are, he says. “From an as­set a l l oca­tion point of v i ew, no sin­gle as­set class stands out as of­fer­ing ex­cep­tional value. Op­por­tu­ni­ties will come; they al­ways do. But un­til then be pre­pared to be pa­tient and wait for the right pitch.”

Re­cently ap­pointed Pru­den­tial CEO Bernard Fick says: “We’re neu­tral on do­mes­tic eq­ui­ties. They’ve run hard, be­come ex­pen­sive and although they ar­guably still of­fer the high­est real re­turn ex­pec­ta­tion, they’re the most volatile and risky as­set. Con­se­quently, we’ve switched some re­cent cap­i­tal gains to cash.”

In­vestec Eq­uit y Fund manager Rhyn­hardt Roodt ar­gues the case for a sound earn­ings re­vi­sion strat­egy in­stead of ag­gres­sively fol­low­ing the ‘herd’.

He warns that an earn­ings re­vi­sion strat­egy should not be con­fused with an earn­ings growth strat­egy. Like sev­eral other lead­ing port­fo­lio man­agers, Roodt is un­der­weight in­dus­tri­als in the do­mes­tic econ­omy and holds over­weight po­si­tions in com­pa­nies with large or ex­pand­ing off­shore op­er­a­tional ex­po­sure.

Old Mu­tual MacroSo­lu­tion’s John Or­ford ex­presses a sim­i­lar view. He says his house’s long­stand­ing view is that global eq­ui­ties are cur­rently more at­trac­tively priced and have the tail­wind of grad­u­ally im­prov­ing eco­nomic growth in the US to sup­port earn­ings, and hope­fully the same will ap­ply in Europe.

Old Mu­tual In­vest­ments mean­while has up­graded its Global Emerg­ing Mar­kets op­er­a­tion to a full fran­chise and its co-CEO Firoz Bassa be­lieves that do­mes­tic in­vestors should look to the GEMs for ex­cel­lent op­por­tu­ni­ties that are sim­ply not avail­able lo­cally. He gives sev­eral ex­am­ples.

I’m sure that th­ese and var­i­ous other point­ers from heavy­weight in­vest­ment houses such as Mo­men­tum, PSG As­set Man­age­ment and Al­lan Gray will pro­vide con­sid­er­able food for thought.

En­joy the read.

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