NAV on 2021/09/23
|NAV on 2021/09/22
|52 week high on 2021/05/19
|52 week low on 2020/10/30
|Total Expense Ratio on 2021/06/30
|Total Expense Ratio (performance fee) on 2021/06/30
Ninety One Fund Managers SA (RF) (Pty) Ltd.
87.5% FTSE/JSE All Share index + 12.5% MSCI AC World NR
John is a portfolio manager at Ninety One with responsibility for our Value Equity Strategy. He joined the firm in 2000 as the Sector Head of Industrials, a position he held until early 2003. Prior to joining the firm, John worked at HSBC Asset Management as a director of Institutional Asset Management for two years and prior to that, at Simpson McKie Stockbrokers (now HSBC Securities) as the head of financial and industrial research. He was also a director of the company. From 1990 to 1996, John was an analyst in the retail, construction, furniture, motor, media and general industrial sectors, and was ranked in the Financial Mail rankings between 1991 and 1996 in most of these sectors, achieving the top ranking in retail in 1994. John graduated from the University of the Witwatersrand with a Bachelor of Commerce degree in Economics and obtained his Honours through the University of South Africa. He is a CFA Charterholder.
Investec Value comment - Jun 13
Market review South African equities ended almost unchanged in the second quarter, but volatility was high during this period. The sector laggards remain mostly confined to resource stocks with gold (-33.5%), platinum (-23.9%), coal (-10%) and diversified miners (-10.8%) all experiencing double-digit losses in rands. Year to date, the resources sector is trailing the overall market by 19.4 percentage points. Industrial stocks mostly held their ground over the quarter and defensive stocks, on average, achieved strong absolute returns. Financials lagged, with banks down 6.2% and life insurers flat for the quarter after a particularly weak June.
Portfolio review The portfolio continued to underperform over the second quarter of 2013. We have underperformed the benchmark for seven consecutive quarters and the length and quantum of this underperformance now exceeds the 2007/08 period when we held no commodities at the height of the commodity 'super cycle'. The second quarter of 2013 was characterised by our worst absolute and relative performance since the period of underperformance began. Large-scale capitulation by investors holding gold and platinum shares caused these stocks to experience sharp losses over the quarter. The 23% fall in the dollar gold price during the review period prompted a wholesale liquidation out of the gold mining sector. Given the slide in bullion, it is not surprising that the biggest two detractors were our holdings in AngloGold and Gold Fields, which fell 35% and 28% respectively over the quarter. Our holding in Anglo American Platinum (-23%) also detracted significantly from returns. These three stock holdings, which constitute the majority of our long gold and platinum position, represented more than two-thirds of our underperformance over the quarter. This commentary focuses on why we continue to hold these stocks. The Investec Value Fund's offshore holdings continued to contribute meaningfully to performance, with the offshore portfolio rising 6% in US dollars and 15% in rands over the quarter, bringing the 12-month performance for these stocks to 50% in rands. The offshore holdings added approximately 4% to performance over the second quarter.
Portfolio activity Over the quarter, we added to our AngloGold, ArcelorMittal and Anglo American Platinum positions. This was funded almost entirely by reducing our Sasol position.
Portfolio positioning There was no change to our positioning over the quarter, and further underperformance resulted in additional small purchases of gold and platinum shares. Our position is summarised by five major themes. We will briefly touch on the first four and then spend more time elaborating on our long gold position, as this position has been the major detractor from performance and is the most controversial: 1. Limited exposure to 'SA Incorporated' shares' (approximately 32% of the index). These shares (retailers, food producers, industrials and to a lesser extent, banks), have led the market higher over the last five years and continue to appear very expensive to us on an average historic price earnings ratio (PE) of 16x. This all-time high rating seems unrealistic, given South Africa's unimpressive GDP growth rate and rising socio-political risks. The recent increase in South African bond yields, on the back of a more hawkish outlook for rates, is especially worrying for this group of stocks trading on such high ratings. We are amazed at how little these shares have fallen in the face of a rising discount rate. 2. No exposure to Naspers, SABMiller and Richemont (approximately 22% of the index). Our continued bearish view on the rand would suggest there is an investment case to be made for holding these three big multi-national rand hedges. However, we believe the current historic PEs of 30x, 24x and 20x respectively are too demanding. 3. Lower valuation rand hedges (approximately 20% of the portfolio). The portfolio holds meaningful positions in Steinhoff (a PE of 9x) and Sappi (trading at book value). These rand hedges have low valuations. 4. Long SA platinum shares (approximately 16% of the portfolio). In our view, South African platinum shares represent a text book case of a deep value opportunity. The sector is trading at the lowest price-to-book and price-to-replacement value in history. Investment history shows that purchases made on these multiples prove extremely lucrative over the medium term, unless the industry is in terminal decline (for example, Kodak). We do not believe that this is the case for the South African platinum industry. The outlook for platinum remains favourable. Platinum group metals (PGMs) are essential in the production of automotive catalytic converters. Currently, there are no substitutes and many countries require catalytic converters to be fitted to motor vehicles. In addition, 75% of the world's platinum supply comes from South Africa, and supply constraints remain. 5. Material exposure to gold shares (approximately 18% of the portfolio).
The Ninety One Value Fund aims to provide investors with capital growth over the long-term. The objective is to achieve returns well in excess of the FTSE/JSE All Share index, measured over three year periods.
The fund invests in value shares, which are equities trading at a discount to their fair value. The fund manager seeks value by selecting South African shares whose ratings are low relative to their historic performance, their earnings potential, their net asset value, or the ratings of other shares in the same sector. The fund also favours equities with attractive dividend yields and strong cash flows that are undervalued by the market.