Asset Manager Q&A

Asset Manager Q&A

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What stocks would you buy with R5 000?

  • ISA Holdings (JSE Ticker ISA), an information security solutions company with a dividend yield of 9% and an earnings yield of 8,4%. Although ISA has seen a 51% share price increase since the beginning of the year, suggesting that other investors are starting to take notice of this penny stock with good potential and therefore unlocking its value for shareholders, we still view the share as offering value at the current level.
  • Transpaco (TPC), a packaging company with an earnings yield of 14%, dividend yield of 5,2% and price-to-book ratio of 1,6.
  • Onelogix Group (OLG), a logistics company with an earnings yield of 14,9%, dividend yield of 8,2% and a price-to-book ratio of 1,3.

R10 000?

  • I would invest the first R5 000 as above — in ISA, TPC and OLG — and the balance of R5 000
  • I would direct to a global value fund.

R50 000?

  • Once again, ISA et al, as above.
  • Nedbank Group (NED), the fourth-largest bank in South Africa which also has exposure to 32 African countries in sub-Saharan Africa through its alliance with Ecobank, with the region having ‘the lion’s share’ of the world’s fastest growing economies. Its return on equity compared to its price-to-book ratio, a metric comparison most useful in the banking sector, is the best in the sector. In addition, Nedbank is offering a dividend yield of 3,9%, a price-to-book ratio of 1,4 and an earnings yield of 8,7%.
  • Exxaro Resources (EXX), a South African mining company with principal assets in coal and iron ore, both of which are experiencing supply issues which are helping support prices. It’s currently trading at an earnings yield of 9,9%, and a dividend yield of 3,6%. However, I am closely watching the ICT-Sishen case as its outcome may have a material effect on Exxaro’s earnings.
  • SA Corporate Real Estate Fund (SAC), a South African diversified real estate investment fund with a dividend yield of 8,9%, price to book ratio of 0,9 and an earnings yield of 8,9%.

All of the above stocks have risen this year, whereas the JSE All Share Index is down 9,8% for the year-to-date.

R1 million?

I would put it in Cannon Asset Managers’ Superdogs portfolio which invests in some of the deepest value equities on the JSE. Superdogs represents the purest form of Cannon’s value investing philosophy which involves investing in companies that have been neglected by investors in general but are still well run companies with good potential and shares trading at very attractive prices. World-leading academic research shows that value stocks perform better than other stocks in the long run… just ask Warren Buffett, who also adopts the value investing philosophy.

Which stocks/market do you regret not investing in?

JSE Ltd upon its listing. Its revenue stream comes from the trade in South African company shares and its status as ‘The Gateway to Africa’, particularly sub-Saharan Africa.

What stocks/markets are you keeping an eye on?

The JSE and all the shares listed on it showing signs of value.

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

Buying Assore Ltd, a company with excellent management and a product, iron ore, which has low demand risk and is currently experiencing global supply issues. Since Cannon purchased it at the beginning of 2009, Assore has returned around 180% in capital appreciation alone.

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