Who is Adrian Saville?
In 1994, while completing his doctorate in economics, Adrian formed an investment vehicle which became the forerunner to Cannon Asset Managers. Adrian’s conviction to build his own asset management company was based on his distinct investment philosophy and entrepreneurial instincts.
Alongside this, Adrian has a Visiting Professorship in Economics and Finance at the Gordon Institute of Business Science (GIBS) where he teaches economics, finance and competitive strategy.
Adrian is a passionate South African, husband and father.
He’s also very active, playing squash and mountain biking, and surfs while on holiday at the coast. He regularly rides the 94.7 cycle race and was once foolish enough to complete it in a cow suit to raise funds for CHOC.
Adrian’s current portfolio of equity investments
As an entrepreneur, Adrian’s investments are centred on the portfolios within his business, Cannon Asset Managers.
“Two thirds of my discretionary savings are invested in the Cannon SuperDogs portfolio and the balance in the Cannon Equity Fund. I don’t hold any individual stock positions. In investment language, I eat my own cooking!
“I have opted to allocate the bulk of my capital to the SuperDogs portfolio because it is essentially invested for my children, aged five and nine. With the benefit of time I can be a patient investor. My investment horizon in this case is more than ten years. I am able to explore some great investment ideas and to let them come to fruition.
“The remaining one-third of my portfolio is invested in the Cannon Equity Fund, which is a deep value general equity unit trust. The portfolios are managed using the same investment philosophy and process, but the Cannon Equity Fund has a broader universe that includes resource companies, whereas the SuperDogs portfolio invests only in financial and industrial companies.”
How did you select the companies you invest in?
Based on some of my favourite ideas in the two portfolios, the first stock I would like to discuss is Conduit Capital, a small cap stock that is little known amongst investors. It represents one of eight financial industry companies in the SuperDogs portfolio and comprises nearly 4% of the portfolio.
We purchased Conduit about six months ago at 70 cents a share, on a p:e ratio of nine times, and it is already trading at 85 cents. The company has paid a 10c per share dividend during those six months giving us a 14% dividend already.
Conduit recently reported interim results to end February 2012 and attributable income was up 98%. Thus, in spite of the higher price, the share is still trading on an attractive p:e ratio of seven times. The company has a market capitalisation of R200 million, yet it has cash on the balance sheet of R250 million and virtually no debt.
With a net asset value 25% ahead of the current share price, this is an excellent opportunity for investors. If the company’s plans are realised, investors will see their capital returned many times over.
A second example of a company with great prospects that I hold in the SuperDogs portfolio and the Cannon Equity Fund is industrial company, Metair. Accounting for just under 3% of our portfolios, we have been invested in Metair for about 18 months. Over that time the share price has doubled, while good underlying performance has kept the p:e ratio (currently at 10,3 times).
Metair’s attributable income rose 47% in the year to December 2011 and the company has a strong balance sheet. It recently acquired a Romanian battery business, Rombat, gaining access to the lucrative Western European market, and is invested in one of the world’s leading stop-start battery manufacturers.
Metair is a competitively priced company, well managed by executives who convert great ideas into effective strategies.
As an investor, I look for companies that offer excellent value: great companies that have been marked down by other investors and can be acquired inexpensively.
Your returns to date?
The Cannon Equity Fund has delivered an investment return of 160% over six and a half years, and has achieved this with 25% less volatility than the market.
Over three years, the Superdogs portfolio has generated a 100% return on initial capital.