Savvy Investment Decisions

Savvy Investment Decisions

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Justin Spratt believes that there will be some mild inflation in 2012. “A rising rand (sub R8) on the back of FDI and ‘hot money’ chasing interest yields should temper increasing price inflation on the back of rising energy costs,” he says. “Interest rates will go up next year, which will further strengthen the Rand, but I don’t believe it will be enough to slow growth. There is enough fundamentally good in the economy to keep growth intact,” he says, adding that there is of course the problem that the current growth rate is not enough. ”We need 6% to start addressing some of the endemic issues and that is unlikely to happen without the first world markets getting their act together,” he says.

Who is Justin Spratt?

Justin Spratt is the CEO of digital marketing agency, Quirk, founder of ISLabs and co-founder of Silicon Cape. Born in Australia, Spratt grew up idolising Bill Gates and dreaming of becoming a Wall Street trader. After finishing school in Australia, he spent five years in the UK before settling down in South Africa, where he completed a BCom in Economics and Finance at the University of KwaZulu-Natal with honours in finance, and then went on to do an MBA in strategy and finance at the Gordon Institute of Business Science.

Personal investment philosophy

“I’m a believer in fundamental analysis, which basically means analysing a business’s financial statements and health, its management and competitive advantages and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings and managements. Technical analysis on the other hand focuses solely on the analysis of historical price action,” says Spratt.

Justin Spratt believes that there will be some mild inflation in 2012. “A rising rand (sub R8) on the back of FDI and ‘hot money’ chasing interest yields should temper increasing price inflation on the back of rising energy costs,” he says. “Interest rates will go up next year, which will further strengthen the Rand, but I don’t believe it will be enough to slow growth. There is enough fundamentally good in the economy to keep growth intact,” he says, adding that there is of course the problem that the current growth rate is not enough. ”We need 6% to start addressing some of the endemic issues and that is unlikely to happen without the first world markets getting their act together,” he says.

1. What turns you off an investment?

Hype. If your grandmother is asking you about a particular investment, get the hell out. When the media are focusing on the greatest thing ever, and insisting that the ‘thing’ in question has fundamentally changed the world forever… get the hell out. History repeats, every time.

2. What are you currently investing in and why?

Quirk, gold and property (although I am reducing my exposure to the latter).

3. What do you think makes for a good or bad investment decision?

Herd mentality. No matter how much academics proselytise the ‘rational investor’, humans will continue to build up assets in bubble type ways. This happens when a mass of people chase the same assets. We have just been reminded of this with the sub-prime crisis and increasingly the sovereign debt crisis.

For good investments, look at financial statements to understand the investment’s earning potential, look at where the future of that market could go, look at competition, and then make a bet. If you don’t have financials, revenue and net profit before interest and tax (NPBIT) are good enough to get a view. Surprisingly, most investors don’t even look at these two factors.

4. Where do you believe the best investment opportunities lie?

In emerging markets, no doubt. The first world is technically bankrupt, so the best business fundamentals will come out of the BRICS. First world money is chasing investment opportunities in Africa, so that increase of capital should be a boon for the economy. The best investment you can make, however, is in your own business. Everything else is far removed and the further you are away from the control of the investment, the greater
the risk.

Nadine Todd
Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.