Asset Manager Q&A

Asset Manager Q&A

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All amounts invested should take account of the individual investor’s circumstances and be diversified across asset classes if possible. For specific investments in equities, investors should always seek professional financial advice before investing.

What stocks would you buy with R5 000?

Start by investing in a few Satrix ETFs and Newgold to slowly increase the value of your portfolio with minimum risk.

R10 000?

Same as above, but add approximately five ‘momentum’ shares in different sectors: Mr Price, Imperial, Aspen, PSG and Shoprite. These will provide high growth, while the ETFs will reduce risk.

R50 000?

 

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At this level we can liquidate the ETFs and reinvest in a properly diversified portfolio with at least 15 to 18 shares acquired by means of CFDs (Contracts for Difference). Although these are slightly more risky, the initial cost of acquiring shares is much less than on a pure equity account, and you can acquire a complete sector-diversified portfolio based on momentum dividend/earnings yield tailored for your needs.

R500 000?

To reduce risk we can now liquidate the CFDs and opt for a pure equity portfolio. This requires at least R250 000 or the cost of acquiring shares is not feasible. The shares allocated would be similar to the R50 000 CFD portfolio above, but with the added opportunity of acquiring companies not offered as CFDs, such as smaller cap shares.

We would recommend allocating a small weight to these shares: Mr Price, Aspen, Imperial, EOH, CML, Shoprite, Growthpoint, and Vodacom.

R1 million?

We can now start thinking of separating into different portfolios, such as a low risk and a higher risk one. Although Resources have been hit hard in recent times, Kumba has outperformed relative to BHP and Exxaro, and provided the best dividend returns.

Which stocks/market do you regret not investing in?

This must be Imperial. About a year ago we started to notice Imperial but it wasn’t very high on our ranking. At the beginning of 2012 it started to feature but we kept on hesitating and did nothing. We could have bought it at R125, and at its current price of R207 we missed out on 65% return.

What stocks are you watching?

Growthpoint is on the list for two reasons: we currently do not have a property share in our portfolio, and the momentum of this stock has been very good: 39% over 12 months and 24% over six months.

What are your goals when investing?

I like to add a zero to my investments every ten years: R100 000 into R1 million for a compounded return of 25,9% a year. On a more technical level, my goal is to have an alpha of 1,0% a month and beta of 1,3%. As history has shown that we can get at least 14% (including dividends) from investing in the JSE alone, we are looking at a goal return of 30,1% a year.

If one invests R10 000 once off and thereafter R250 each month (escalating with inflation) for 20 years then one ends up with R2,2 million in today’s money.

What was the best investment decision you have made to date?

  • MrPrice: Bought in April 2009 for R29,67c and is currently R134,45c for a 353% profit
  • CML: Bought in September 2009 for R7,79c and is currently R30,05c for a 286% profit

Shoprite: Bought in February 2009 for R59.79c and is currently R165.73c for a 177% profit.

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