STAYING FINANCIALLY SECURE IN UNSTABLE ECONOMIES
On 1st november last year, days after finance minister tito mboweni’s medium-term budget policy statement, moody’s rating agency downgraded south africa to negative watch, a hair’s breadth from junk status. fenestra asset management ceo william meyer says for the country to avoid a moody’s downgrade to junk, it has until february’s budget to balance the books or “things are not going to be pretty”.
In light of the volatile economic situation South Africa finds itself in, Meyer has warned investors to plan accordingly, and advises making use of off-shore opportunities and idiosyncratic shares.
“It is critical for investors to have an international strategy. Adding an off-shore equity or currency component to a South African portfolio reduces the risk and volatility of the overall portfolio. If any one currency or country enters a bear market, an investor will be protected by a diversified portfolio,” Meyer says.
“The best countries to invest in have fewer government regulations and interference, less government ownership, fewer trade unions, lower taxes, and no foreign-exchange control.
“Further, a thoughtful allocation of capital that results in an ambivalent attitude towards political risks and currency moves is another way to avoid catastrophe. Idiosyncratic growth stocks can be an important building block in achieving this goal. The profitability of these companies is driven by their own fundamentals, rather than macroeconomic shocks, like the USChina trade war.”
This is sound advice from one of the first South Africans to gain the highly regarded US Chartered Financial Analyst qualification.
As a boutique asset-management firm, Fenestra tailors clients’ portfolios according to their individual needs. In the process, the company has consistently steered its clients away from stock-market meltdowns towards healthy returns, avoiding some of the worst calamities. Notable among these were the Steinhoff and African Bank disasters, as well as MTN being hit by multibillion-rand fines in Nigeria.
Since inception in 1992, Fenestra has regularly outperformed the market, as measured by the JSE All Share Index (ALSI). Its greatest successes have included limiting the negative return in 2008 to less than 15%, when the ALSI showed a 26% drop after the global financial meltdown.
In 2018, Fenestra did not buy or hold any of the worst 20 performing stocks, pointing to a significant outperformance of the market.
In a recent Financial Mail article, Meyer pointed out some of the pillars of his successful approach to investing.“We are very suspicious, paranoid and focused, with 10 to 12 well-researched shares in a portfolio. We avoid banking and mining like the plague, investing in companies which do not have big debt and are easily understood.”
For advice and more information, visit www.fenestrasa.com.