Sanlam Namibia Growth comment - Jun 05 - Fund Manager Comment22 Aug 2005
Key features of the second quarter of 2005 were
- The rand which weakened 7% to R 6.65 per $ at quarter end,
- The oil price which rose a further $10 to reach nearly $60 per barrel,
- A 7% rise in the SA equity market, reflecting mainly the effect of rand weakness. International equity markets were largely flat.
Against this backdrop, resources shares particularly oil related, such as Sasol, were the star performers, while certain of the more rand sensitive industrial shares like Richemont also showed good gains. Conversely financial and retail shares gave back some of their large relative gains enjoyed over the last few years.
Our investment philosophy, which is one of pragmatic value-oriented investing, steers us away from pursuing the momentum of the 'flavour-of- the-month', and specifically we avoid buying into price spikes or bubbles as experience has all too often shown a very painful downside to this approach. Crude oil is a case in point and we decided to sell out of our Sasol holding during the quarter, preferring to concentrate our resources exposure in the diversified mining companies.
The portfolio continues to retain a large exposure to non resource rand hedges such as Richemont and SAB, to diversified industrial companies such as Bidvest and Imperial, and to companies linked to local infrastructure spending and cellphone growth. These companies have good, predictable earnings growth, and are generally undervalued.
Sanlam Namibia Growth comment - Mar 05 - Fund Manager Comment26 May 2005
What influence the performance of the fund?
The first quarter of this year was a carbon copy of the start to first quarter 2004. Resources performed strongly on the back of sector rotation out of the financial and industrial sectors. This was also driven by strength in commodity prices like iron ore and oil with new record highs being achieved. Given our underweight resources and specifically Billiton, Sasol and Kumba we were negatively impacted.
However, we remain of the view that it is very difficult to find value in the resources sector. The shares are trading at expensive ratings on record earnings. Current peak commodity price levels are therefore priced in, and no cycle is taken into account. This contrasts with the financial and industrial sectors where one can still find stocks trading at single digit PE ratings in addition to having attractive dividend yields.
View on the ahead
We expect to see some rand weakness induced by the commodity cycle rolling over. On the back of this we've increased our exposure to non-resource rand hedges, the likes of Richemont, SAB and Imperial and reduced exposures to SA consumption.
With the latest bout of negativeness towards emerging markets, we are of the view that our market won't escape this entirely therefore we would start concentrating on companies with a more defensive nature and also those with high current and prospective dividend yields.
Sanlam Namibia Growth comment - Dec 04 - Fund Manager Comment15 Feb 2005
Sanlam Namibian Growth fund experienced an above average performance for the fourth quarter and calendar year 2004.
Reflecting back on the quarter and the calendar year the highlights were as follows:
oFrom a main sector perspective we were positioned optimally by being overweight Industrials and Financials and underweight Resources.
oIndustrial stock selections that added substantial value were our overweight positions in Naspers, ABSA, Standard Bank, JD Group and Bidvest. Strong underweight exposures that enhanced our performance even further were Harmony, Anglogold, Amplats and Billiton.
oOn an asset allocation (timing) level we also added value, especially during the fourth quarter by being fully invested for the entire period.
Unfortunately this was negated by some oversights in our portfolionamely:
oVery low (underweight) exposure to retailers and small caps.
oNo exposure to some of the best performing large caps, such as Iscor, PPC and the selling of Edcon from the portfolio prematurely.
View on the year ahead
The main surprise of 2004 was the unrelenting strength of the rand which in turn led to lower inflation, and the surprise interest rate cut in August. It fuelled a major consumer spending boom reinforced by ballooning consumer borrowing.
Our view on 2005 is that it will be as challenging as ever. The commodity cycle appears to be at a peak, and there are clear signs, notably in the oil market, that the down leg is imminent. We also expect the rand to weaken over 2005 in line with a fall in commodity prices. While interest rates are likely to remain low in the near term, longer term inflation concerns are likely to rise should the pace of consumer spending remain unchecked, and particularly if the rand weakens.
We continue to favour local stocks especially non-resource weak rand beneficiaries.