The FTSE/JSE All Share Index (ALSI) returned 12.9% in the third quarter, taking its year-to-date return to a remarkable 31.7%. Over the last five years, the ALSI has generated a US dollar return of 18.3% per annum, ahead of both the S&P 500 and the MSCI World indices at 16.5% and 14.4% respectively. It is unusual for the local equity market to rank near the top of global performance tables across multiple time periods. Our core unit trusts have performed well, but on a note of caution – the level of returns above inflation is higher than one would expect through the cycle.
Gold has been driving the market rally, with the price of the metal up 47% this year to end-September, and the share prices of local gold miners more than doubling so far in 2025 as a result. Platinum group metal producers have also recently joined the party.
However, this does not mean the whole market has done well. SA Inc. shares are floundering, and many others are treading water. Removing the metals from the mix dulls the lustre of this performance, highlighting the risks of a concentrated index: Concentration is risky as a shift in sentiment in the dominant group can significantly shift index performance. Precious metal producers are a case in point, with the group now making up a quarter of the local index weight. But this has not been the case consistently, as Matthew Patterson discusses in his article, which looks at shifts in the index over time.
When it comes to successful investing, the single most important variable is the price you pay. Most compelling are those rare opportunities to buy at deeply discounted prices.
Changes in indices are normal and expected; this is not unique to South Africa. Consider how massively concentrated in technology the S&P 500 is today versus 10 years ago, when the top five companies were diversified across technology, energy, healthcare and financials. While indices change in composition, and weightings see-saw, we prefer not to attempt to predict what will happen next; rather, we do what we have always done: avoid what is expensive, and pursue those shares trading at a discount to intrinsic value.
A treasure hunt
Homing in on a relatable example, Booking.com is a best-in-class share that has been a prominent feature in our top 10 client holdings for the last few years. Booking.com can be credited with changing how we travel. Users of this online travel agency attest to the fact that the company has introduced flexibility into the booking process, enabling travellers to transact in their own language and currency and to curate trips tailored to their specific needs. Given Booking.com’s dominant position and the threat of AI disruption, some argue that the share is now mature, with few remaining growth prospects. Thalia Petousis disagrees, taking us on Booking.com’s journey and mapping out where she sees value.
In our pursuit of value, we often find ourselves peeling back the layers of holding companies to reveal hidden opportunities. Remgro and Reinet, which both have their origins in the Rupert family's business interests, are holding companies in our clients’ portfolios that trade at substantial discounts to the sum of their parts. Jonty Fish and Malwande Nkonyane share some insights into their investment theses and explain why recent actions suggest that there is a high probability of these discounts unlocking over time.
Opportunity is often lurking on the fringes, or in unloved areas...
When it comes to successful investing, the single most important variable is the price you pay. Most compelling are those rare opportunities to buy at deeply discounted prices. Of course, it is natural to feel you may be missing out by not investing in the market darlings, but the moment to derive value from those now-expensive shares has more than likely passed.
Opportunity is often lurking on the fringes, or in unloved areas, as Graeme Forster and Mo Zhao from our offshore partner, Orbis, illustrate in their piece that highlights cutting-edge companies within the biotechnology sector.
We further explore this theme and our ideas in the latest episode of The Allan Gray Podcast. Portfolio manager Rory Kutisker-Jacobson chats to Mark Dunley-Owen from Orbis about a range of global investment prospects beyond those currently in vogue. You can subscribe to our podcast on this page or your favourite podcast platform.
How to access Orbis investments
One of the ways to access the innovation in biotech described earlier is via Orbis’ Global Equity Fund. This is one of a small range of diverse offshore funds Orbis offers, designed to meet the needs of a broad spectrum of investors.
Horacia Naidoo-McCarthy and Radhesen Naidoo explore the role of offshore investing in building portfolio resilience, describe the core funds in Orbis’ range and outline the available routes for South Africans to access Orbis’ investment expertise.
Protect your investments from fraudsters
Fraudsters are always looking for new ways to gain access to your personal details, bank accounts and investments. Keeping your investments secure is a collaborative effort: We are constantly working with our clients, security experts, law enforcement and other financial services providers to stay one step ahead. Unfortunately, our efforts alone will not stop all their attempts. Awareness is key in avoiding scams, along with doing what you can to protect the security of your investments. In this quarter’s Investing Tutorial, Twanji Kalula offers some simple steps you can take to safeguard your long-term wealth throughout your investment journey. You can also visit our fraud and cybersecurity portal and insights page.
As we enter the last quarter of the year, I want to take a moment to thank you for your continued trust and partnership. It is something we deeply value and never take for granted.