Fund in Fo­cus:

It’s all about the long-term game

Finweek English Edition - - CONTENTS - ed­i­to­rial@fin­week.co.za

Fund man­ager in­sights:

In­vestors need to be de­fen­sive in the cur­rent South African eco­nomic cli­mate, says David Shapiro, one of the fund’s man­agers. “I have been very ner­vous about growth in the coun­try for a long time,” he says. Some of the fund’s top de­fen­sive stocks in­clude brewer SABMiller, Bri­tish Amer­i­can To­bacco and Naspers. The fund has been fo­cus­ing on com­pa­nies mov­ing their money off­shore, he ex­plains.

When pick­ing a stock, Shapiro says he’s look­ing for long-term growth po­ten­tial in a com­pany. Those cor­po­rates shrink­ing their busi­nesses, such as An­glo Amer­i­can, are not on his radar.

An­other im­por­tant fac­tor that the fund takes into con­sid­er­a­tion when choos­ing stocks is the qual­ity of a com­pany’s man­age­ment team, ac­cord­ing to Shapiro. In this re­gard, the fund is op­ti­mistic about Dis­cov­ery, Bid­vest and Stein­hoff, he says.

“We’ve re­cently started to add Stein­hoff,” says Shapiro. The com­pany’s track record in creat­ing wealth for in­vestors is at­trac­tive, he ex­plains.

Other wealth-creat­ing stocks in­clude the Ru­pert fam­ily’s lux­ury-goods com­pany Richemont, their pri­vate-hospital ven­ture Medi­clinic In­ter­na­tional as well as Stein­hoff – which com­bines the ex­per­tise of Christo Wiese, of Pep­kor fame, and that of Markus Jooste – ex­plains Shapiro.

The fund’s pref­er­ence in terms of in­ter­na­tional eq­uity as­sets in­cludes the US mar­ket. The fund has in­vested in the Deutsche Bank tracker fund ex­posed to the Amer­i­can stocks.

“The US keeps rein­vent­ing it­self,” says Shapiro. Even at 2% eco­nomic growth a year, the world’s largest econ­omy is still ex­pand­ing at al­most twice the pace of South Africa, he ex­plains.

The fund also favours Euro­pean stocks with growth po­ten­tial, es­pe­cially Ger­man man­u­fac­tur­ing com­pa­nies and Swiss phar­ma­ceu­ti­cal stocks, he says.

“The fund aims to gen­er­ate long-term growth,” adds Shapiro. “I don’t have time for day-to-day swings in the mar­ket.”

Why fin­week would con­sider adding it:

The fund was nom­i­nated as one of the top two eq­uity unit trusts in SA by Morn­ingstar Re­search SA. It has de­liv­ered solid and steady an­nu­alised growth over a num­ber of re­port­ing pe­ri­ods.

Fo­cus­ing on the cre­ation of wealth by un­der­ly­ing as­sets, the fund is for the long-term in­vestor who be­lieves in qual­ity com­pa­nies that gen­er­ate cash and steers clear of short­term cycli­cals.

The fund is also min­i­mally ex­posed to base met­als and Shapiro is very scep­ti­cal about the near-term outlook for com­modi­ties. As he puts it: There’s no new China. The Chi­nese econ­omy’s lack­lus­tre per­for­mance and its gov­ern­ment’s in­ef­fec­tive re­sponse won’t end soon. Not good news for com­modi­ties – or the world’s econ­omy.

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