Where there are bears, there must be bulls
In times of weary entropy, when you can almost hear the fabric of the world fray and tear, it is well to consider that things always change, sometimes even for the better.
The Financial Times columnist Simon Kuper wrote on September 21, that in 1929 Argentina was among the 10 richest countries. It is enduring its umpteenth crisis since then.
Kuper was warning his native UK about the “populism, disappointment, emigration and bafflement” that befell the South American nation. He might as well have been wagging a finger at SA’s political class. We have blundered through greater travails before, but what kind of fool continues to tempt fate?
One can despair that the JSE top 40 index will be stuck forever in the gates. It has been churning between the 45,000 and 50,000 marks for five years. The stasis is exasperating. Which is precisely when one needs to be reminded that market patterns do not persist forever. Sectors take turns to go on bull and bear runs. The index itself may one day heave into life as if nothing was ever wrong with it.
I was raking through old Business Times clippings when I found an edition from February 2004. In it, research showed that in the 12 months since March 2003 the Nasdaq rose 63%, and the Dow and S&P 500 each more than 40%. A graph in the newspaper showed the JSE top 40 tracking the movements of the Dow in lockstep. Sceptics thought it was all happening too fast. But as it turned out, the bull run would last for four lovely long years, the Dow dragging its developing-world cousin along for the ride.
Before that bull market began, the Dow had endured a horrid three years during which the index fell from above 11,000 at the turn of the millennium to below 8,000. Here in SA, the awful feeling took hold among certain pessimistic investors that things would never come right.
They did, spectacularly, which ought to give us at least some hope of better times to come. We surely can’t slip into an Argentinian spiral, can we? Can we?
I like to think we’re a couple of rungs above that basket case. Besides, we’ve shown the wherewithal in the past to drag ourselves into the light.
Consider that even in the dark decade from 1994 to the end of 2003 the JSE returned just under 11% a year. Listed property shares returned 18% a year and bonds 15% a year. Granted, not brilliant when inflation and the weak rand are taken into account, but at least positive.
These are the nuggets on which I slowly chew whenever I look at my withered old share portfolio, or marvel at how PSG has kept my pension afloat for five years despite drawdowns.
In last week’s Bull’s Eye I looked at the stocks Stephen Mildenhall of Allan Gray chose to fit his long-term “value” strategy. Apart from a dalliance in the fraught gold sector, which was going through all kinds of mergers and delistings, Mildenhall stuck to blue chips such as Tiger Brands and Woolworths.
In 2003, Investec was still streets behind Allan Gray in terms of marketing profile or assets under management. In running the Investec Value Fund, John Biccard hewed to a similar long-term line, but with a different spin to that of Mildenhall.
In the 16 years since the fund managers revealed their 10stock portfolios, many companies have gone under, fled the JSE or been taken over. In Biccard’s case: African Bank, Rainbow, GoldReef, Ellerine, Primedia, MNet-SS, and Rebserv.
If Biccard was still holding his 2003 portfolio today, he’d be left with Standard Bank, Truworths and Reunert. Not a bad bunch to form the slightly stale “deep value” core of a core-satellite portfolio. Today, though, I’d be a lot more keen to zoom in on those elusive, fastgrowing satellites. Any ideas?