Sanlam Industrial comment - Oct 03 - Fund Manager Comment21 Nov 2003
Performance & Reason
The fund has made a good start as a pure industrial trust. From the beginning of the month, the mandate was changed to incorporate only industrial shares, which necessitated the sale of the financial holdings over the month. Despite this abnormal level of activity, the fund performed in line with the Industrial index and better than most peer funds in the new Industrial Sector.
Stock selections favour cyclical shares such as Richemont, JD Group, Barloworld, Imperial and Edcon. Shares in the portfolio which performed well during October were MTN (+24,1%), Telkom (+22,1%), Naspers (+15,0%) and Richemont (+12,5%).
Outlook
The case for the industrial shares continues to improve. The OECD leading indicator is rising, commodity prices are improving as world demand increases and domestic interest rates are likely to continue to fall. The market seems to be looking through the strength of the rand to stability or weakness anticipated in 2004, and while rand strength persists, the fund manager's favour consumer shares over producers.
The risk to this view is that recovery in world growth is not maintained and that investors switch to bonds and defensive equities.
Sanlam Industrial comment - September 2003 - Fund Manager Comment23 Oct 2003
Performance & Reason
The market sold down financial shares to buy resources during the quarter as the bottoming in the OECD leading indicator and improving commodity prices encouraged a move into cyclicals. Share prices would have risen further had the rand not strengthened by 7.7% against the dollar.
Shares in the portfolio that performed well during September were MTN (+9.6%), Telkom (+8.7%) and Investec (+6.5%). Aveng (-12.4%), Uniserv (-8.6%) and Foschini (-7.7%) performed worst.
Outlook
Despite its name, the fund has been mandated to invest in financial as well as industrial shares. From the beginning of the new quarter, the mandate has changed to incorporate only industrial shares. The financial holdings will be sold.
The case for industrial shares continues to improve steadily. We expect further interest rate cuts this month. The market seems to be looking through the strength of the rand to weakness anticipated in 2004. While rand strength persists, we favour consumer shares over producers.