In the last six weeks South Africa has been aglow with positive sentiment and optimism. The World Cup has had a real impact on national unity and confidence as well as on how others perceive our country – and our continent. At the same time, the economy has continued its recovery, albeit more by way of higher commodity prices and global demand than through local consumption growth.
Many parts of the world have not had as good a time of it. Developed countries, which make up by far the majority of the world's economy and control most of its wealth, are increasingly struggling between conflicting needs for (a) austerity to rebuild national and personal balance sheets, and (b) the space to nurture what little growth there is and for this growth to translate into increased employment.
This is therefore a good time to remember that both our economy and stock market valuations are influenced strongly by people outside of our borders. On top of the impact of their demand for our commodities, for most of the time since our first democratic election in 1994 foreign investors have been net buyers of companies listed on the JSE. They are now significant (and, in many cases, majority) shareholders in JSE-listed companies. In our first piece this quarter, Ian Liddle elaborates on the implications.
Many readers will know that although we acknowledge that businesses operate within a macroeconomic environment, we believe that macroeconomic factors are generally not predictable. At Orbis and at Allan Gray, investment analysts spend most of their time trying to understand the drivers of earnings in the businesses in which we invest.
Jonathan Brodie and Trevor Black, from Orbis, note that 'the story is in the stocks' as they elaborate on how we build our portfolios bottom-up. On the subject of stocks, British American Tobacco (BAT) is a significant holding in our equity portfolios and has been for some time, previously indirectly. In an update of his 2007 article, Simon Raubenheimer explains why we believe BAT provides the rare opportunity to invest in a superior quality business in a stable industry at a discount to the average company.
Ten years should be more than long enough to make an assessment of the Stable Fund's success at achieving its two objectives: capital stability and cash-beating returns. The last decade has been positive for shares, but has had some decidedly challenging periods for fund managers and for investors. Richard Carter celebrates a decade of the Stable Fund by analysing its record and prospects.
Our investment performance is only half of the equation when it comes to creating long-term wealth for clients. A track record without investors is meaningless, and clients who disinvest at the wrong time because of a loss of confidence are poorly served even if our track record looks good. Chris Tisdall discusses why great service is important to help clients achieve their investment objectives.
I mentioned that we have had three good quarters for GDP growth. At the same time, despite small gains at the end of last year, four of the last five quarters have seen a net loss in jobs in South Africa, with a cumulative loss of more than a million jobs from the peak.
The Allan Gray Orbis Foundation's mission is to educate young people who will one day be high-impact entrepreneurs and leaders. It is founded on the belief that the best solution to the chronic problem of unemployment in South Africa is an increase in entrepreneurship, and that the biggest barrier to entrepreneurship is that we have insufficient skilled people. Anthony Farr provides an update on the Foundation's work and an impressive summary of five years of progress.
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