Cashing in on undervalued stocks
The Investec Value Fund aims to provide investors with capital growth over the long term. FUND INFORMATION:
Fund manager insights:
The Investec Value Fund aims to create wealth for clients through active management and an approach that is distinctly contrarian, bottom-up, anti-macro forecasts and valuation biased, says John Biccard, portfolio manager of the Investec Value Fund.
As it is a value-based equity fund, Biccard prefers to buy undervalued stocks that are out of favour. “Its performance will differ markedly from that of the index and peers, so it therefore offers portfolio diversification from other equity funds,” he says.
It is also worth noting that Biccard takes concentrated positions in stocks where he sees value, which may lead to significant exposure to a particular sector or industry.
He says the fund’s positioning remains very different to both the index and the average strategy in the general equity sector, but that the repositioning they did in the third quarter of last year has left it “the most balanced it has been over the past three years”.
The portfolio is now split between five different themes – general mining, gold, mid-caps, offshore and platinum – against just three a year ago – gold, offshore and platinum.
“These changes were made because of the massive underperformance of the mid-cap stocks we have invested in, the value we perceive in select general mining stocks as well as the rise in precious metals shares, all of which meant a slightly more balanced view was appropriate,” explains Biccard.
Mid-cap stocks account for 24% of the portfolio and Biccard says these shares are currently cheap and should benefit from the firmer rand and lower domestic bond yields. He therefore expects good returns from these stocks.
ArcelorMittal SA and African Rainbow Minerals account for 15% of the portfolio. He says the rapid rise in mining stocks in 2016 has resulted in a slightly more cautious view on this sector, but he still sees some value in these stocks.
Biccard’s long-held positive view on the US dollar gold price remains and therefore gold (14% of the portfolio) should remain an attractive asset, he says. As platinum (20% of the portfolio) is a precious metal, the same rationale for gold applies, Biccard adds. The fund has an excellent long-term track record, significantly outperforming the return of the JSE’s All Share Index and its peer group’s return since inception.
At the recent Raging Bull Awards, which honour the top funds in the unit trust industry, the Investec Value Fund won the Raging Bull award for top outright performance over three years by a South African equity general fund.