Connect with us

Investing

Time to Invest Offshore?

Continued economic instability will result in a volatile outlook for global wealth management.

Mark Appleton

Published

on

Investing-Offshore

The outlook for the global economy is more benign in early 2013 than it has been for some time, and for anyone who has previously been nervous to look outside South Africa for investment opportunities the risks offshore are today lower than they have been for some time – and the risk of investing domestically somewhat higher.

The domestic macro environment

In a post-Budget business breakfast hosted by FNB on 1 March, finance minister Gordhan Pravin pointedly mentioned that sub-Saharan Africa’s growth rate would have been 6.2% last year (actual: 5.7%) were it not for the dampening impact of South Africa’s far lower growth rate.

When one researches individual South African companies, one could be surprised to discover just how much of their revenue today comes from the rest of Africa. Possibly then, we should not view our local corporate growth rate prospects as quite so modest.

While our national GDP may be growing at just 2.3%, many of our Top 40 companies are heavily exposed to a market growing at 6.2%.

A leading investment services house for sub-Saharan Africa reports that while its South African business grew 17% last year (in itself quite robust) the rest of its Africa business grew 66% in a single year. The Nigerian stock market grew 47% last year, and has already posted 20% so far this year, while other markets such as Kenya, Zambia and Zimbabwe are not far behind.

It is expected that within five years many South African businesses will find their revenue from African operations overtaking their domestic operations. Typically, margins in Africa are substantially higher than in South Africa.

That paints a heroic picture of Africa compared to the rest of the global economy, and one that is possibly more immediate than most people have suspected. Five years is not a long time.

For our high net worth clients, this points to a clear investment opportunity in offshore markets. Other emerging markets offer higher fundamental growth than South Africa, while developed economies are currently offering better value from an investment perspective.

The global macro environment

Economists uniformly list three issues confronting the world in 2013: the US economy, the Eurozone crisis and slowing growth in China. Each of the three issues broadly existed a year ago, but for all three the detail has changed.

In the US, the consumer market is improving but the economy is running a deficit that is bigger than Greece’s, percentagewise. The US will have to go through a phase of austerity like that of Greece and other European countries.

Although austerity in Greece, Portugal, Spain and Ireland are familiar themes, the Eurozone crisis too has evolved a long way. These countries have all made dramatic advances in reform programmes, and their people endured serious hardship.

There has also been a softening of stance by the European Central Bank, which has advised it will do everything necessary to stimulate growth in Europe. So the right decisions have been successfully implemented, but it will take time and one cannot point to any economic growth in Europe during 2013.

China was the main driver of global growth during the worst of the recession back in 2008, so its impact on this current bout of recession may be the single most important theme of 2013, given the country has only in March finally completed its leadership transition.

No brave decisions could be made in the lead up to the transition, nor the period immediately after. On top of that there is the question of whether or not China is going through a major structural adjustment. The sense is that future growth levels for China will be 7-8% rather than 11-12%. This will have a significant impact on future global economic growth rates. Brazil and India have also demonstrated rapidly cooling economies.

Where’s the money going in 2013?

Capital flows into South Africa either into fixed direct investment (FDI), equities or bonds. Flows into our equities have been quite modest by global standards, a trend that will continue until investors gain greater confidence in the emerging market story. Instead, developed world capital looking for higher yield to service its liabilities has gone into the bond market where South African returns are high compared to the US and Europe.

These flows will continue and for this reason the rand is more likely to remain stable than to weaken during the remainder of 2013. However, as a result bond markets the world over are expensive.

As to the investment case for South Africa, like other emerging economies that have seen sharply lower growth this year, we remain hostage to the global environment, which has seen planet-wide growth slip for each of the past three years: 2010 (5%); 2011 (3.8%); 2012 (3.1%); and 2013 (projected 3.4%).

South Africa has an additional layer of its own challenges, especially around labour issues. The social compact between labour, business and the ANC has forever changed. Successful demands for higher wages inevitably mean fewer jobs.

For South Africa, these issues of modest global growth, anxiety around structural changes and leadership transition may result in inward investment continuing to ebb and flow for the remainder of this year based on shifting risk appetite.

Where should you invest globally?

One point to watch: pundits frequently suggest offshore markets are better value than the domestic one, arguing foreign companies which have a substantial exposure to emerging markets are the bets to pick. While this is not untrue, does the same argument not apply to South African companies with strong exposure to African markets?

Take MTN, it trades in 21 countries and pays 76% of its earnings in dividend, for an after-tax dividend yield higher than you could get on the money market.

Fortunately, most of our clients would already be comfortably exposed to the Top 40 JSE-listed companies, leaving offshore markets as the stand-out investment theme of the moment. Although some offshore markets had a good 2012, we at FNB Private Clients still reckon that offshore equities are the space to be in over the next five to 10 years.

Notwithstanding markets such as the US currently standing at their all-time highs, you are still getting quality companies at a discount to what they have been at over the past 20 years and will handsomely reward the investor over other asset classes – albeit they are more expensive than last year. Remember, that previous high was reached back in 2007 and many companies have continued to record good increases in earnings in the years since.

There are some particularly good pockets of value to be had at the moment, especially for the contrarian investor. Europe, for all its desperate situation, offers value as it has seen most of its companies sold down and it too offers a discount at the moment.

Other emerging markets are demonstrating exceptional value. Some companies on emerging market bourses are trading at 20-15% discounts over developed markets (which themselves are at a discount to their historical levels).

Over the past three years, these markets were sold down faster than developed ones, plus they have the advantage of stronger fundamentals.

In particular, investors should be on the look-out for those companies paying high dividends as these will be the first to run when the search for yield hits equities.

Mark Appleton is a South African Strategist at FNB Private Clients. He has over 30 years investment management experience, having managed the Unilever Pension Fund (R2,5 billion) followed by a 5-year stint as chief investment officer for Marriott Asset Management (R2 billion). Mark has been with FNB Securities as chief investment officer for over 12 years and RMB Private Bank as a South African strategist for three years.

Investing

(Infographic) The 10 Things You Should Cover In Every Investment Pitch

If you want to wow potential investors, you need to cover your bases.

Matthew McCreary

Published

on

investment-pitch-elevator-sales-pitch

If you’ve ever watched Entrepreneur’s original series, Elevator Pitch, then you’ve probably seen smart founders make dumb mistakes while pitching their ideas to potential investors. They might flub an answer or get tongue-tied, or they might just be a little boring. Other times, you might notice that something seemed off about a pitch, but you can’t quite put your finger on why.

Investors are gambling every time they put money into a new project or idea. Your job when pitching is to prove to them that you’re worth the risk. That means you’ll need to not only show them the possible upside of what they have to gain, but also be clear about what they could possibly expect to lose and their odds. In other words, you need to give them a holistic view of what you do, not just the one good idea.

You might have pitched an investor yourself and thought you crushed it, only to hear that the investor isn’t interested. If that’s the case, there’s a chance the pitch was missing one of 10 essential elements.

This infographic by Buffalo 7 breaks down 10 slides you should have in your next investment pitch deck. If you’re not presenting formally, though, you can still keep track of these aspects in your head and make sure you cover each one. They include:

  1. The vision, where you concisely explain your idea.
  2. The problem. Why is your vision necessary or helpful?
  3. The opportunity. What is the market size, and how can you position yourself to earn a share of it?

Related: How To Pitch Your Business, Product Or Idea To Industry Experts

This is just the start, though. Check out the infographic below to see the rest of the slides you need when pitching investors.

1541174287_investment-pitch-infographic

This article was originally posted here on Entrepreneur.com.

Continue Reading

Investing

‘Shark Tank’ Investors Reveal Top 5 Tips To Make Your Business Famous

Is your business worthy of fame? If so, pay attention to what the Sharks have to say …

Eric 'ERock' Christopher

Published

on

Shark Tank

Shark Tank enters its tenth season as popular as ever. Over the past decade, millions of people have watched fascinated as entrepreneurs pitched their business ideas and startups in the hopes of winning an investment and support from self-made millionaires and billionaires.

The multi-Emmy® Award-winning reality-based show has had a tremendous impact on the business world and has been a major influence on the increased popularity of becoming an entrepreneur. Over the years, the show has evolved into one of the world’s top platforms to launch a business and recently reached an astonishing $100 million in deals offered in the Tank.

I was recently invited to attend a private event hosted on the set of Shark Tank to celebrate their 10th season and met with all the Sharks and most of the guest Sharks for the current season. This year’s guest list includes luminaries:

  • Charles Barkley, Hall of Fame NBA star and TV analyst
  • Alex Rodriguez, legendary baseball player and businessman
  • Rohan Oza, an iconic brand builder and marketing expert
  • Sara Blakely, founder and owner of SPANX brand
  • Matt Higgins, the co-founder and CEO of RSE Ventures and vice chairman of the Miami Dolphins
  • Bethenny Frankel, TV celebrity, author, and founder of Skinnygirl brand
  • Jamie Siminoff, the CEO of RING, who rejected an investment offer in season 5, but went on to sell his company to Amazon for a whopping $1 billion.

My better half was also invited, and we arrived promptly on time at Studio 24 inside of Sony Pictures Studios in Culver City, CA. We were greeted by the cordial staff who informed us that the Sharks were still filming the last takes of the day. After several minutes, we were invited to chat with the Sharks on the main floor where nervous entrepreneurs excitedly pitch their companies to the investors under the bright lights of the studio set.

I was curious to know what excited the Sharks the most about their tenth season and what they believed to be the best advice for an entrepreneur to help make their business famous.

1. Create an ingenious product

When asked, Lori Greiner said, “It’s a mix, right? Of smart marketing and ingenious product. For example, Scrub Daddy was a technology. So, taking that one sponge, which was revolutionary, changed the whole sponge arena. We now have, to date, 20 different SKUs, and we have 30,000 new retail locations and 170 million in sales. That’s what takes it from one idea to a global brand.”

Of course, skillfully promoting your product on a platform like QVC is another excellent way to make your business famous. The day after the Scrub Daddy episode aired, Greiner helped CEO Aaron Krause sell their entire inventory of 42,000 sponges in less than seven minutes on QVC.

Related: 6 Great Tips For A Successful Shark Tank Pitch

2. Leverage social media marketing

barbara-corcoran

During my chat with Bethenny Frankel, she stressed, “Social networking is so important. Also being a little bit disruptive now … and you have to be creative. You have to be creative. The President was the most disruptive candidate that there’s probably ever been in history. He got people’s attention, and young entrepreneurs need to get people’s attention in some way. So be a little disruptive.”

Matt Higgins responded, “I’d say that you have to understand social and digital marketing. You can’t survive unless you understand Instagram, Snapchat or all the tools out there. You have to be contemporary.”

Barbara Corcoran claimed, “Every one of us successful entrepreneurs, for the last two years, were phenomenal at social media. It’s true. No exceptions.”

No smart entrepreneur will deny the power of social media when it comes to making your company famous. With more than 2 billion people worldwide using some form of social media, any business can put their business in front of a large audience, especially if they can create content that goes viral.

3. Build a community

Daymond John stressed the value of building a community. “You’ve got to build a community,” stated John. “Nobody needs to buy anything new in this world. They only buy it because there’s some form of community and/or need that you are supplying for them.”

John speaks from experience. He built a successful clothing empire by creating a vast community of his own via his clothing brand FUBU. John wisely invested in celebrity endorsements, making him an early pioneer of modern influencer marketing.

If you lack the resources to build your own community from scratch, you can leverage the power of others. Partnering with influencers who have cultivated their own communities allows you to introduce your product or service to larger audiences. In fact, some consider Shark Tank to be the world’s largest business influencer platform.

4. Devise a publicity hook to win earned media coverage

Barbara Corcoran also said, “I’d say you need a publicity hook. Some hook, angle or gimmick that grabs the attention unfairly from your competitors.”

Remember, Shark Tank is a unique combination of reality television, business acumen, and entertainment. Doing something unique, different, or disruptive can get you significant media attention and abundant free publicity… especially if you’re able to leverage that publicity and captivate the show’s producers, who decide your fate as to whether you’ll appear on the show.

Regardless if you want to appear on Shark Tank or not, being featured in the media is a way to differentiate your business from the competition and reach a broader audience. Be creative and willing to take educated risks when it comes to getting noticed by the media. You should always be actively building relationships with media representatives and ask for their insights when formulating your plan.

Related: Shark Tank Funded Start-up Native Decor’s Founder on Investment, Mentorship And Dreaming Big

5. Know your strengths and stay focused

When I asked for billionaire Mark Cuban’s insights, he thoughtfully replied, “Knowing your unique advantages, play to that, and your strengths. And focus. You know, what happens is very often people start with an idea, get a little bit of traction, then it gets hard. And when it gets hard, they start looking for other things to do as opposed to playing to their strengths. Because businesses aren’t supposed to be easy. You know, if they were easy everybody would already be rich, and we’d all be sitting on a beach somewhere. And so, when it gets tough, you gotta dig in and work hard. I’d say the final thing I’d add is that sales cures all. There’s never been a business that succeeded without sales. So, if you focus on selling … if you’re able to sell … and that’s something that is one of your core competencies, then you’ll be okay.”

These are wise words from one of the world’s few billionaires.

This article was originally posted here on Entrepreneur.com.

Continue Reading

Investing

The Best Way To Get Your Teenager To Start Investing Right Now

Jeff Rose advises a young fan on where to start his investment journey.

Published

on

teenagers-investment

In this video, Entrepreneur Network partner Jeff Rose talks about receiving a letter from a young investor, who is looking for advice on how to begin investing.

Rose talks about the act of actually doing the investing versus worrying about reading books or asking others about the process. Taking action gets the most results, since you are able to make mistakes and start the learning process. Taking action also leads to more experience, which is to say if you begin investing as a teen, you will be much more savvy about investing as a twenty-something.

In answering this young investor’s concern about investment direction – the fan hopes to balance short-term gain and long-term gain, as well as to establish some padding for a future business – Rose turns him in one specific direction: A Roth IRA. When he was younger, Rose didn’t even know what a stock was until far into his college years; during this time, he discovered the Roth IRA and learned of its compounding power, as well as the accessibility of an initial investment.

As another route, Rose also mentions starting a business. This path, Rose explains, will help you achieve the most return on investment.

Related: Making International Investing Simple And Transparent – CybiWealth Digital Platform

Click on the video to hear more tips for a younger investor.

This article was originally posted here on Entrepreneur.com.

Continue Reading

Trending