Investment Seminar

An erratic start to the year and defiant markets have given investors a lot to think about. In the local investment update Leonard Krüger explains why following the herd does not get the results and Jeanette Marais gives us five key principles that underpin long-term investing. Tamryn Lamb reiterates the point that offshore investing should form a core part of your long-term investment plan and that you should invest consistently instead of trying to time the market.

Leonard Krüger

Leonard Krüger cautions against following the herd and looks at the state of the local economy.

Why should you avoid following the herd? (3:33)
Buying the market and following trends is comfortable, but the best investment ideas are often found where others fear to tread. Therefore, unless you are happy to invest in an index, it is a good idea to seek out an asset manager who guards against ‘herding’, and an independent financial adviser who can help you stick to your objectives when you are being tempted by the crowd.
Consequences of the March coup (11:01)
In the wake of the news of our credit rating downgrades, business confidence was severely shaken, unsettling investors. Poor sentiment is a problem, but an even worse problem is the lack of growth and the rate of the increase in debt and debt servicing costs. This is what concerns the ratings agencies, and this is what could lead to a downgrade of even our local currency debt ratings, which could cause a mass exodus of foreign investors. This kind of herding has the potential to derail our fragile economy.
How much risk can you take? (1:57)
Risks are elevated in the current environment. This means you should think about how much risk you are prepared to take on. Think about your risk capacity, i.e. how much risk you can afford to take and your risk appetite, i.e. how much risk you are willing to accept in pursuit of superior returns. Your answers should inform your investment decisions.
How our unit trusts are positioned for the current environment (5:04)
The net equity exposure of our flagship unit trusts matches our risk appetite in those unit trusts and the asset allocation is managed accordingly.
Life Healthcare as an example of herding at individual stock level (4:24)
News about private hospital operator Life Healthcare’s international investments has created negative sentiment about the company and the share price has dropped and investors have exited. This provides a great example of herding at individual stock level. We see situations like this as the perfect opportunity to add to our position at discounted prices.
Net1 update (5:43)
There has been a lot of press coverage on Net1, the parent company of the current social grants payment provider Cash Paymaster Services (CPS). Leonard gives a quick summary of events, noting that Net1 announced that Serge Belamant would retire as chief executive officer (CEO) and director of the company at the end of May and Herman Kotzé, currently the company’s chief financial officer, had been appointed as CEO effective June 1, 2017.
Learn more about how we approach our share ownership responsibilities (1:02)
We integrate Environmental, Social, Governance (ESG) and sustainability issues into all stages of our investment process. As long-term investors we think very carefully about the sustainability of the business models of companies before investing in them and work hard to improve the governance of companies once we are invested. Our analysts and portfolio managers formally engage with company representatives throughout the year. We also provide voting recommendations for general meetings of companies which have a material weight in client portfolios and for smaller companies in which our clients collectively have significant holdings. We publish our voting recommendations, together with the outcome of the shareholders’ vote on each relevant resolution, quarterly on our website.
Performance update (2:37)
The FTSE/JSE All Share Index has largely moved sideways over the course of the year. PE ratios are high and one has to look hard for pockets of value. If you strip out Naspers and SAB Miller, the market has not moved much. Given the current environment, we are pleased that our flagship unit trusts have managed to outperform their benchmarks and inflation over the latest 3-year period.

Tamryn Lamb

Tamryn Lamb argues for consistently investing offshore instead of reacting to news headlines and looks at where Orbis is finding value.

What will the rand do? (9:01)
Predicting the rand is difficult to do and you could lose your money by trying to time it. Consistently investing offshore should be a core part of your long-term investment planning, especially as South Africa is such a small part of the global market.
Yesterday’s risk reduction is not safe today (3:25)
Conventional wisdom says that investing 60% in equities and 40% in bonds to create a balanced portfolio, but that paradigm is increasingly breaking down in today’s expensive markets. We manage the downside risk of permanently losing our clients’ money by casting the net wide and doing fundamental, bottom-up analysis to find undervalued assets.
Key buckets of opportunities (5:56)
In our search for undervalued assets we have found companies that fit into five categories: defensive businesses; businesses with healthy cash balances; business that the market has country, industry or company specific concerns about; businesses undergoing transformation; innovative businesses. Together these businesses give Orbis a well-diversified portfolio of assets.
Orbis’ research process (3:04)
Orbis’ ability to find undervalued assets depends on a global research team that is able to filter ideas and find the best assets to include in our portfolio. This research has created a portfolio that is not far from the classic 60/40 split, but one that is much better suited to the market today.

Jeanette Marais

Jeanette Marais talks about the important role you play in making your investments a success and offers five investment principles that will help you reach your financial goals.

How do I know I’m on track with my retirement savings? (4:47)
It is important to have a goal when you are saving for retirement. Studies show that you need 17 times your final pre-tax salary in order to retire comfortable at the age of 65. After 10 years of working you need to have saved twice your annual salary to meet that target, after 20 years five times your annual salary and after 30 years ten times your annual salary. Knowing where you are in relation to these figures can help you reach that goal.
Mistakes to avoid: five investment principles (17:57)
Successful investing depends on your ability to follow five simple investment principles: 1. Have a plan 2. Start as soon as you can 3. Make sure you are earning real returns 4. Avoid switching and trying to time the market 5. Diversify your portfolio
How much income can I draw? (4:33)
How long your retirement savings last depends on how much income you choose to draw. In order to preserve your standard of living and ensure that your savings last for at least 30 years you need to follow a strict set of requirements. Our research shows that drawing 4% of your savings as a fixed rand amount, increased annually by inflation, while maintaining at least 55% equity exposure will ensure that you have enough capital to maintain yourself for at least 30 years.

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