COUNTERPOINT SCI VALUE FUND
● Raging Bull Award for the Best South African Equity General Fund for risk-adjusted performance over five years to December 31, 2022.
CAPE-Town-based Counterpoint Asset Management was founded in 2012 and is headed by Paul Stewart. It manages 15 unit trust funds under the Sanlam Collective Investments licence.
The Counterpoint SCI Value Fund, which invests in shares listed on the JSE, outperformed its peers and its benchmark, the FTSE/JSE All Share Total Return Index, over five-years to the end of 2022, delivering an annualised return of 14.18% over five years, according to ProfileData.
This was well above the benchmark, which delivered 8%. Personal Finance asked fund manager Piet Viljoen about how the fund is managed and the reasons behind its outstanding risk-adjusted performance.
Can you outline the investment philosophy/ strategy of the Value Fund?
The fund employs a strict value philosophy. Our interpretation of value means only buying shares that are trading below their intrinsic value, with a comfortable margin of safety. This strategy often requires investors to be patient and unmoved by short-term news but has historically delivered exceptional outcomes for those able to stay committed to their investment strategies.
In managing the fund, we employ a sensible risk management process which focuses on assessing business risk, market risk and applying sound diversification principles.
The year 2022 was one most investment managers would prefer to forget. How did you navigate the volatility?
We do not regard volatility as risk. Volatility is an opportunity to either acquire cheap assets when downside volatility provides such an opportunity or sell expensive assets when upside volatility provides an opportunity.
So, the fund stuck with its process, and came out the other side in good shape.
Over the past few years, which counters have specifically stood out for you as being undervalued by the markets?
Good quality small caps in South Africa have been, and continue to be particularly undervalued.
I would regard some of the most undervalued assets as shares in the following companies: Astoria, Bell, Fairvest, Lewis, Metrofile, Sabvest and Telkom.
How are you positioning the fund going ahead, taking into account ongoing inflation, higher interest rates, and a possible global recession?
It is not the fund manager’s job to worry about such macro variables. It is the job of the management of the companies in which the fund buys shares to worry about how they deal with those variables over time. The fund manager’s job is to make sure the fund pays a reasonable price for the cashflows the business will generate, considering, among other things, the track record of the management team in dealing with both internal and external factors. In taking account of South Africa’s deteriorating infrastructure, we have revised downwards expected future cash flows of businesses in which we choose to invest. Even accounting for this leaves a number of undervalued small-cap shares that have more than acceptable future expected rates of return.