🔒 Webinar: Strong rand offsets Apple’s big move; Global Portfolio delivers 28% annualised growth

While many may not agree with Donald Trump’s vision and policy formation for the globe’s largest economy, US markets have taken a liking to him with the S&P 500 snapping record highs. His reign has also seen a slight shift in the sage of Omaha’s portfolio, with some analysts arguing that Warren Buffett’s latest stock plays serve up some clues for reading the Trump-era economy. His faith in retail stocks seems to have disappeared, while his enthusiasm for global tech stocks has suddenly exploded. Buffett has snapped up both Apple and airlines after previously shying away from them. A year ago Apple did not feature as one of Berkshire’s 15 biggest shares, today it’s the second biggest, behind Wells Fargo. Apple is also one of the top three holdings in the Biznews Global Portfolio, and as you’ll discover in the February update below, we’re delighted that Buffett’s joined the club. That plus our relief that patience has been rewarded as the stock has surged 51 percent since bottoming at around $90 last May. The portfolio has delivered 28 percent annualised growth since being launched in December 2014. The full webinar has been transcribed below. – Stuart Lowman

Well, good afternoon, it’s Alec Hogg coming to you from London for our monthly update on the Global Share Portfolio. The portfolio in Dollars, as you can see, has risen by 33 percent since inception. We started this with $200,000 on the 5th of December 2014. As you can see, that $200,000 has now grown to $266,000 and over that period, very easy to work it out, it’s just over two years, the portfolio has gained by 28 percent annualised. About half of that has come from the shares themselves and the other half of that has come from the depreciation of the Rand.
___STEADY_PAYWALL___

Let’s go and look at the top there, it’s quite nice to be able to offset or to get a gauge of how the market has done. In other words, if we’d taken our Rands and just put them straight into the S&P 500 Index, which is reflected here by the Vanguard S&P 500 there at the top, you would see that over the period we would have gained 15 percent, so about 7.5 percent rise per annum over that period. The benefit has been our stock picking. It hasn’t been perfect, but we’ve had a really good ride from Amazon and Alphabet, which have significantly outperformed the market as a whole, as has Tesla Motors and there is a story there as well, which we’ll get into in a little with Facebook, also a recent acquisition to the portfolio. It’s nice to see Metro Bank also starting to make a contribution, but the big move this month was Apple.

Apple is a company that we bought into, as you can see there, on the 23rd of June 2015. It is our third-biggest stock in the portfolio at 13 percent of the shareholding and in this past month it went from $121 to $137 a share where it closed last night, helped along by some good financial results, some excitement about the next Apple cellphone that will be launched in September and also a big position from Warren Buffett, the best investor in the world, who has staked a huge bet on Apple. In fact, he has $18bn of his portfolio in Apple shares now and this is quite unusual because a year ago Buffett had none. He’s seen the opportunity there and he’s made that investment.

That has helped to lift the Apple share price. He has bought them, he said in an interview on CNBC, for a bit less than the current price, but it doesn’t seem like the $136 is going to be the end of the road for this company.

Let’s look at how it all boils down in Rands. In the past month the Rand has appreciated again. You can see, a month ago it was at $13.27 to the US Dollar, that’s down at the bottom there, the Rand rate, it’s now R12.98, so another knock to the portfolio because remember this portfolio is all in US Dollars or British Pounds and if you look at the British Pound, we’re at R16.10.

That’s the same rate that the Pound was at in 2001, can you believe that? It’s been quite an extraordinary run for the Rand against the Pound and not surprisingly, some pretty smart investors are saying that the best bet you can make on the market today is by going into the British Pound, certainly if you take a position against the Rand. We’re quite happy that we have two stocks in the portfolio that are in Pounds. Both of those have done pretty well in UK terms. As you can see, there’s Barclays PLC, which we bought in at 1.74, that was before Brexit. It took an awful pounding; we’ll get into the details of that later. It’s still at 2.25 today and it’s nice to see Metro Bank, which is the UK’s version of Capitec gaining a couple of Pounds in its share price in the last month.

We have a little bit more insight into the reasons behind that, but generally speaking in Rands, we have a 61 percent return and that’s since the start of the portfolio and the portfolio has been running at 28 percent annualised growth. In the last month, there was about a $7,000 improvement in the Dollar version of the portfolio, in other words, US Dollar portfolio went from $259,000 to $266,000, but the Rand offset pretty much all of that. Then you have an extra month to add to it. We’ve now been going for 26 months instead of 25 months and that declined the annualised return to 28 percent rather than 29 percent, still very healthy in any circumstance. There is the individual portfolio’s performance of the individual stocks.

The Rand has depreciated against the Dollar by 15 percent since we started the portfolio in December 2014, so it has fulfilled our view at the time, which was to say we would like to invest outside of the country because we didn’t like the economic policies and indeed, those policies have just gotten worse and worse, so it’s quite a surprise for many people to see the Rand appreciating as it has been, but if you look at the individual stocks in the portfolio, you’ll see that Amazon in Rands, up nearly 200 percent in the period, Alphabet, which is the old Google is up 79 percent, and just the overall market in the United States, which is hitting new records now daily, that’s up by 33 percent in Rand terms since we started the portfolio. Berkshire has done well, IBM is pretty much up there, and Apple has finally started to make a contribution after being a laggard for quite some time, Stuart?

A question from Lionel, he says, “Please can you explain how to get around the US’s estate tax, as it is 40 percent.” He says, “If you don’t have sufficient funds to make an offshore trust viable, you’re a bit stuffed”. I’m not sure if I quite get it, but I don’t know if you could help with that.

No, it’s completely outside of my area of competence, Lionel. I think you’re going to have to talk to somebody who is an expert in that field, I presume a lawyer, etcetera; maybe speak to the people at Webtrader. They might have some insights, but I know where my circle of competence ends and it certainly does not include that area. I’m sorry I can’t help you there. I can show you how well Amazon has done for us as has Alphabet and then the rest of the stocks are in line with or below the market overall.

We got a little bit of extra cash into the portfolio from dividend receipts in this past month with dividends being declared by IBM, which as you can see declares four dividends a year. It’s held that at $1.40 for the last year and it paid that again on the 8th of February and Apple, which has held its dividend at 57 cents a quarter and together they gave us just under $300.

Let’s go into the individual constituents and starting off with Vanguard, the S&P 500 Index. The reason why we like this one as a core holding (and indeed, why we bought the Vanguard S&P 500 Index), at the outset we put one third of the portfolio into this index tracker. The idea being that it would give us the ability to track the market and then as we found new investment opportunities we could sell off the index and allocate them into, potentially better possibilities that we have here. When we look at Vanguard, there’s a cost of five pips, or five basis points, one twentieth of one percent and the way they do that is, they have a huge portfolio and they can actually lend out the portfolio to, or lend out shares for which they get paid which then offsets all the costs. Stuart, I see you have a question.

It’s from Archie. He says he still has Novo Nordisk in his portfolio; he’s not sure what to do.

Archie, we had the good fortune of selling Novo Nordisk a few months ago, you must have missed that webinar unfortunately, but we were very unhappy at what was going on with the company when the Chief Executive was disposed of. We also didn’t like the fact that it seemed they had been booming the company, not exactly telling the truth about many things. You might remember that the previous Chief Executive, who was given his marching orders was actually rated the number one CEO by Harvard Business School for two years in a row. It just shows you that sometimes even the smartest guys can get fooled. We got out of Novo Nordisk and I suggest you do the same.

It’s not the company that we bought into and as Warren Buffett has suggested in the past, if the circumstances change at an organisation or if you feel that what you’ve been sold is not what you actually bought into, that’s the time to sell. Our view on buying shares is that you invest in human potential and that you hold the shares forever, but when there is a dramatic change in the underlying business, we have no compunction but to sell. Buffett did the same with Tesco. If you remember the British retailer, when they came out with some dodgy figures, or it was exposed that they had not been telling the whole truth, he dumped those shares and took, at the time over half a billion Dollar loss on it. It’s best to do that, take your punishment, get out, and reallocate it, Stuart?

Another question from Lionel, “Would you buy Vanguard and Berkshire at current levels?”

Definitely, on both of those it is a play on the market. Buffett again, and I’d recommend anybody to go online, Google Berkshire Hathaway and you can pick up his latest newsletter to shareholders, it’s a wonderful read. He says there that he’s not worried about the market overall, he doesn’t think that it’s in bubble territory. Also, Buffett, in an interview said that he’s not too unhappy with the way that Donald Trump has been handling things, but he certainly wouldn’t be voting for him in four years’ time.

He did praise Trump’s appointment of Rex Tillerson and that’s also a man that, in those of you who have been following BizNews over the last few months will see that we’re also quite keen on. I have some interesting insights into how Tillerson managed to get appointed in the Trump cabinet and let’s just put it this way, he wasn’t the first choice, but the first choice, Rudy Giuliani, was apparently falling asleep in too many meetings and then of course got fingered as having potentially a corrupt relationship, so Tillerson was brought in, Trump liked the look of him and hey presto, he’s in the cabinet.

Buffett likes him, I like him because he was the chairman of the board of Boy Scouts of America, he was also an Eagle Scout and that’s an organisation I know quite a bit about, if you get to Eagle Scout, it’s like Springbok Scout in South Africa, it gives you a very good grounding in honour and honesty into the future.

Let’s move on though, away from scouts and to the actual portfolio performance and the Vanguard S&P 500 Index. What I’ve done this month is taken all the share prices from the time we bought them, so you can see, if you go right back to the left-hand side of the screen, it did nothing, the market in America did nothing from December 2015 until, wow, you could almost say the end of October, early November 2016.

As you can see, the price was virtually unchanged and then after Donald Trump won the election, things have been looking much brighter for US shares and you can see the S&P 500 Index continues to trade very nicely above that very simple moving average that we’ve put in there and it is trending higher. So to answer your question, Lionel, yes no problem, just replicate this portfolio and you quite happily can buy it, remembering that you are buying these shares for the long-term, this is not a trading portfolio at all, so please just know that when you buy it, it could take some time to perform, as you can see from the S&P 500 Index, which indeed, you would have held on for almost two years before seeing any action there.

Alphabet, one of our top performers, this is a company that has released financial results in the past month. There was also some analysis recently, into the most valuable brands in the world and I’d like to just go through that. It might have helped the share price, as you can see it’s done quite well in the last month and then before dipping right towards the end, but what was interesting is the brand of Google, which is the major underlying business in Alphabet, is worth $109bn, the most valuable brand on earth, 19 percent of the market cap. I like Amazon very much as those of you who have been following this portfolio will know and not surprisingly, because it has given us a wonderful run, but Amazon’s market value of its brand is $106bn, so only a little bit behind Google, but that’s 26 percent of its market cap.

Now, if you ask me which of those two companies has more of an operational model that’ll generate cash, I would say it was definitely Amazon because it’s doing very well in the retailing business and it of course has a huge lead in the cloud services, where in the last year it generated $12bn in sales, whereas Google generated $1bn in sales. That gives you an indication of what a stranglehold Amazon has on that hugely successful and rapidly growing market. Well, not surprisingly, because Amazon started there 11 years ago.

Just a few of the other brands, Apple brand is worth $107bn according to Dotnet, a reputable brand analysis business. And then Facebook, which is also in our portfolio has a brand value of $62bn, make of those what you will, but what it does say to both of those, Apple and Facebook are worth around 15 percent of their market capitalisation, it’s embedded in their brands. Other news to come out of Alphabet in the past month, it bought Waze, a navigation app. If you haven’t used it yet, I rely on Waze completely and I suggest you go and download it. It takes you away from the heavy traffic and Google has big plans for Waze. I think they paid about $1bn for Waze. It’s now starting to compete with Uber by adding to Waze a carpool service.

It’s launched it in a few cities in the United States and it’s tested it in Israel and obviously the test must have gone pretty well. It’s also looking to launch Waze into Latin America. If that takes off it’ll be interesting to see how that digs into Uber’s profitability. Uber is worth more that $50bn on its market cap, but there are threats and if Alphabet/Google is to get into this market and to put its support behind Waze, well it’ll be interesting to see how long the market cap of Uber stays where it is. Other very good news to come out for Alphabet in this past month was that YouTube is now generating one-billion hours of videos watched per day. It announced this after breaking that huge barrier and it compares with about 100-million for Facebook and 116-million for Netflix, so way, way ahead.

In the same way as Amazon has a dominant position in the cloud, Google through its YouTube subsidiary has a dominant position in video watching and it’s getting very close to the point now where YouTube’s watching time is going to exceed all of US television watching. There is a flag waving for network television, which for quite some time has been tipped as a business that is going in the wrong direction. That’s the big story on Alphabet, doing very well in this quarter. Its financial results did see a little bit of a dip and if you go back there you can see between January and February you can see a little bit of a dip there. That’s after the results were released.

The share price was hit because the earnings were slightly lower than forecast; they came at 756 cents against 763 cents, which had been estimated. I wouldn’t’ be worrying too much about that because the reason was a tax charge and that’s on share options. Under the new financial director, Ruth Porat, Google is starting to get a lot better in disclosing what it’s doing. It spent something like $1.8bn a quarter in share options that it gives to its staff. It’s now going to be taking that above the line so we won’t have to look around for that in future. I have a feeling that when Alphabet’s next set of results come out you might see a reversal of the down tick in that time. We’re very happy to have this in our portfolio, Stuart?

Thanks Alec. Jürgen Schoeman just wants to know, “What is the cheapest and safest way for South Africans to buy American and UK shares?”

Well, through Webtrader. It’s a very good system. That’s why we’re partnering with Standard Bank on this. First of all, it’s safest, because Standard Bank’s reputation is unimpeachable and secondly, it’s very good value. They have a third party that they use to make sure that you can have access to every stock and dozens of stock exchanges. We focus on the US and the UK because we think that’s where the best value is, but that’s the way to do it, I would suggest you just talk to the guys at Standard Bank Webtrader.

Onto Amazon.com, well I’ve already told you about their cloud. The other big news that came out in the last day, in fact, was that Amazon got six Oscar nominations, which if you’re not a movie fan and you aren’t still horrified by the fact that “La La Land’s” team was up on the stage accepting the best picture award when PricewaterhouseCoopers had to say, “Oops, sorry got it wrong, it wasn’t you, it was ‘Moonlight’”. It’s a very strange thing to have happened at the Oscars, but what this means as far as an investor is concerned, is that the streaming services, both Amazon and Netflix, are now starting to gain real traction in the movie game. Amazon won two Oscars at the awards ceremony, it won for the best actor, and for the best original screenplay for a movie that it made called “Manchester by the Sea”.

This is the first time any of the Oscar’s major categories have been won by a streaming service and it also shows how the world is changing. Hollywood is now becoming more reliant on Amazon. The other story to come out of that is Netflix, the competitor to Amazon, also won an Oscar, and although, it wasn’t in one of the major categories, it was in the documentary slot for a film called “The White Helmets”, but it is interesting to see how everything Amazon’s touching nowadays seems to turn to gold. The share price continues to go very nicely in the right direction. It’s been a big winner for us. There was a little bit of concern from some analysts with the results, and you can see that slight little dip between January and February after the results were released.

That was on the grounds of growth of 22 percent in North American revenues, after 26 percent in the previous quarter. The analysts got it wrong on this one because the retail sales for North America as a whole, that was in the three months at the end of December, were actually down by two percent, so if you want to compare like with like, you’ll see that Amazon’s actually continuing to take market share away from bricks and mortar retailers. It’s a stock that’s going in the right direction. There’s an annual Harris Corporate Reputation Poll where they poll 23,000 people and once again this year, Amazon was number one in that poll. It actually gave buyers through Amazon a bit of a discount the next day after winning that poll.

So clearly Jeff Bezos, the founder is very excited about that, and then just to close off with that, Amazon Web Services, just to reiterate again, in 2016 it generated revenues of $12.2bn compared with Google, which is the closest competitor with $1bn in revenue, as it just shows that when you are first to market, it’s very hard to be caught.

 

Onto Berkshire Hathaway and here Warren Buffett has been having a pretty good time of it lately, but I wanted to include this table for you. The letter to shareholders that Buffett released over the weekend gave us the breakdown of the Big Five; in fact it was the Big Four up to that point. Now Buffett has a share portfolio of over $122bn and of that, 75 percent is invested in these five shares. Wells Fargo, as you can see is the biggest holding, $29bn is invested there, but the second-biggest holding is Apple Inc. at $18bn.

It wasn’t at this level at the end of December, but Buffett did tell CNBC, and we have a story about it on BizNews that he’s doubled his shareholding in Apple Inc. He owns 123mn himself, that he’s bought and one of his portfolio managers bought another 10mn, so put it together, they have 133mn Apple shares worth $18bn and it is now the second-biggest holding in the portfolio. This is cause for great celebration on many points, not least because we own Apple shares, so we’re very happy to see that the world’s greatest investor is in there as well, but secondly, it’s taken Buffett a long time to go for tech shares.

He must have seen huge value in Apple to make this kind of investment.

IBM is the other tech related company that Berkshire has bought into over some time. The share price there has improved, so IBM today is, as you can see, one of the Big Five. In fact, a year ago, there was no Apple in the portfolio at all, so it just shows you how much Warren Buffett likes that stock. Berkshire Hathaway share price itself has done incredibly well under the Trump administration. As you can see, it was trading just over $140 a share, it’s now gone well past $160, and it doesn’t look like it’s going to stop there.

A question from Lex, some of the stocks are around R10 000 a share. He wants to know, if his funds are limited, is it better to focus on the South African market until he has more capital available?

That’s quite a nice question. Lex, I’m not sure. It depends on your own circumstance. I wouldn’t really be in a position; I’m not a financial advisor either. I suggest if you want to, go and talk to a financial advisor about this, but what I would suggest is that this global portfolio, the starting point here is that we believe that the South African economy is being poorly managed by the ANC government and as a consequence of that, the share price of South Africa, the South African Rand, is going to be weaker, so that’s our starting point. We believe that the best place to put your money is offshore, not in South Africa, or not in South African shares. The second point on this is that when you put your money into Webtrader, you don’t have to buy a hundred shares when you buy into the international markets, you can buy only one share at a time if you want to.

My suggestion here is to have a look at our portfolio, try to work out how much money you have and just get yourself disciplined into making those investments at least as a starting point. I would much rather be putting my money into the S&P 500 Index as a beginning place and then allocating as you can, as you grow your portfolio into the global stocks that are there. This is really the intention here; it’s not to necessarily substitute this with investing into South African shares because they are vulnerable to the Rand. I hope that helps.

Let’s move onto Apple.

Apple Inc. as you can see has had a wonderful run and I can remember during a webinar around about the middle of last year, being given some stick and rightly so, because we were very, very early in buying this share. As you can see, when we bought in June 2015, the share price seemed to only know one way and that was down, all the way until it got to just over $90 a share in May 2016, but since then it’s risen 51 percent, so thank goodness for that. Thank goodness also that Warren Buffett is a big fan and that the hedge funds who have gone short on this share of nearly $6bn have been proven very, very wrong at this point. Why has the share price run so hard? Well, I guess there’s always a reason if you want to look for it, but the analysts on Wall Street are saying is that there’s anticipation of the next launch of the iPhone, which will be in September.

This is the tenth anniversary of the launch of the iPhone. Morgan Stanley came out with a forecast that it’s likely that because there’ll be so many changes in the new iPhone, that Apple will be able to ship 260-million of them in the year to September 2018 and that is against the general Wall Street view of around 240-million iPhones being sent. It doesn’t sound like much, but when you’re talking about ten percent extra, the margin improvement there on the bottom line is enormous. The new iPhone (will it be the iPhone 8, which is what it should be consecutively in the numbers, or will it be called the iPhone X, that some people are saying because it is ten years since the original launch?)

The view is that they’re going to be coming out with an organic light-emitting display or OCED, which gives you the ability to have a screen that’s a lot more flexible and in fact, it could even be a curved screen, which apparently is a whole lot better. That’s one of the things. Also, the rumour is that the new phone will have edge-to-edge display and better battery. Those are anticipated to spark a rejuvenation of iPhone sales that people will then start trading in their old phones, or upgrading to the new one and that’s what’s given the Apple share price a good boost, remembering that over half of Apple’s profits at the moment come from iPhone sales. My view on Apple is very different.

There’s an ecosystem that’s been created here with more than a billion of its devices in the marketplace and those billion devices are in an ecosystem, where once you’ve bought an Apple it’s actually so much easier to buy another one. If you have an iMac, as I have on my desk, then I will have an Apple Air laptop, I have iPhone’s only, Apple TV, and well, the list goes on and on. I buy all my music from iTunes and so on. Once you’re locked into the ecosystem, it’s just so easy to use these beautiful products and we’re seeing it go all around the world.

Let’s move on then to the next stock, which is IBM. Again, it’s one that, in the beginning of last year we weren’t looking so clever. You can see we bought into this stock at around $160 and it got down to below $120 at one point, but I always felt confident because Warren Buffett had been buying the shares as well.

At one stage, Buffett was showing billions of Dollars in losses, now he’s looking pretty sweet as well. He has a huge position and his position was accumulated at around $170 a share, so even buying today you’re not acquiring the stock at too high a price.

Moving onto Barclays PLC, the first of our two UK shares that we own, as you can see, on the moving average, it’s fallen down there, broken below the moving average, I don’t really go in with the technical analysis because if you were to follow them, you’ll be buying and selling shares very regularly, which adds to the costs. As a consequence of that, it will affect your long-term benefits, but Barclays does have Deutsche Bank coming out with its latest analysis, puts a target price on the shares that’s trading, at the moment at £2.25, puts a target price of £2.73.

It’s still trading well below its net asset value or what we call ‘book value’ amongst banks and it’s just done a big deal with Barclays Africa, continuing to extricate itself from the Barclays Africa operation. That’s going to give it more capital and that capital’s going to be applied, one presumes, or put to very good use, so very happy with Barclays PLC at the moment. Also, the shares have been impacted in Rand terms by the Rand’s strength against the British Pound.

Facebook, one of our stocks that we really like, again we bought too early as we can see here, buying in at a price above $130. Although, what we did do this time around was we staggered the purchases over three months and I recommend that you do that. Lex, I know that you were talking about investing in this portfolio as well. The same thing, if you are going to make your acquisitions here, try and stagger them over three months. It does give you the advantage of taking out the Rand and taking out the share price movements over that period and in the longer term, as you can see here from Facebook, it worked out pretty well for us. Facebook is on a little bit of a rip at the moment. It’s back above $135 and an interesting point that came out of the end of the year is that Facebook is the most widely held stock in US hedge funds. No less than 27 of the 50 biggest US hedge funds have the stock in their portfolio, so the experts, the professionals really like this share.

Second best there is Visa and third is Microsoft, neither of which we have in our portfolio, but I’m very happy with Facebook and well, who wouldn’t be if you see the way that it’s performed in this past couple of months starting the year at around $115, now over $135 and Tesla, here’s a graph that’s very interesting.

We again staggered our purchases here, we’ve got very lucky, we’d done all our buying at lower levels and the reason why we’d bought the shares there, was that our view was the deal, the acquisition of SolarCity, which had caused quite a lot of discomfort amongst analysts on Wall Street, was actually just noise because Tesla was over 90 percent of the merged party, whereas SolarCity was obviously below ten percent of it and a little too much was done about that, but it did depress the share price.

Well, the share price has really run well, it got as high as $287 at one point and when you have a look, we bought it comfortably under $200 a share and that’s only a couple of months ago. This has been a very good run. Then came the earnings announcement and well, there was a huge short position. The biggest short position of any stock on Wall Street was built up in Tesla Motors; it was built up before the results came out. I’m a sceptic on these things. If you’ve got the hedge funds, who’ve already gone short on a particular share, they’re going to put a spin on anything that you do produce and in this case they exaggerated the news about one of the Tesla models not being able to achieve its objectives and the share price has come back to below $250, but if you bought it under $200, certainly you don’t need to worry at all.

This is of course the South African connection, Elon Musk, the Pretoria Boys High educated Californian, who is regarded in the United States as their greatest entrepreneur. He’s done an incredible job by managing to not only run Tesla motors as well as he has, but those of you who have been watching the SpaceX story, will also be delighted to see that this countryman of yours has managed to not only send up a rocket into the stratosphere, but bring it down and land it on a tickey, so he’s revolutionising that industry as well. The way you can get into the Musk genius though, is by buying Tesla shares and we’re very happy to be invested in this one, I suggest you go with it as well.

On Tesla, Alec, Lex wants to know should he wait or buy now and then Derek’s got a similar question, “Should we worry about a Tesla slide?”

Well, I wouldn’t worry about the Tesla slide. As I said before, it was a huge short position that had been held up or created on Wall Street. With short positions, in other words selling shares that you don’t’ have, you’re allowed to do it as a hedge fund. In fact, anyone is allowed to do it, but you have to disclose it and they took a view, not surprisingly, I mean this is a share that’s gone up 630 percent in the last five years and as you can see from December it’s rocketed. From below $200 it got to $287, so 50 percent rise in two months is a little bit ridiculous. Clearly they saw that it had been overdone, they then sold when the news came out and it’s now come back to the $250 level. I would again apply the policy that we’ve been doing with our purchases, if you have $50 000, for argument’s sake, that you want to invest in Tesla, or say, R50 000, just stagger it over three months.

Buy the one third this month, right now, the next one third in a month’s time and then your final one-third in two months time. That will take the price differentials out. What we’re doing with this portfolio is not encouraging trading, we are encouraging long-term investment and with the long-term investment you have to try and be as conservative as possible in your entry levels. By staggering your purchases over three months, it takes the heat out of it and usually ends up in getting you a reasonable price. You have to be very, very unlucky to be buying in a weak Rand and in a high share price over a three-month period.

Moving onto the final share in the portfolio, Metro Bank PLC, this is a company that was recommended to me by Gerrie Fourie, the Chief Executive of Capitec. I asked him whether Capitec would be entering the UK market and he said, no he didn’t think so because Metro Bank existed there and the more I looked into Metro Bank, the more excited I became about this Capitec lookalike. It’s only been going for a few years, it is now on track to deliver its first profit in 2017 and the losses have dropped from £56.8m in 2015, the most recent results just out, this is at a pre-tax level, show that it’s lost £17.2m in 2016 and now projecting a profit in 2017 and we know after you break into profit in banking, well you can grow like Topsy. It’s very similar to Capitec, a very similar story. They’re using technology, branches are open seven days a week, much longer than the other banks, and well, I’m going to be moving my account there as soon as I get my act together.

I’m very impressed with everything I see about Metro Bank and well, if it repeats the Capitec story, watch out. Good news for us is that we managed to get into this share early. We bought round about the 32 level and staggered over three months. It didn’t get in right at the bottom of the market, but as you can see, after the financial results were released in early February, the share price went very well and it has just slid back a little bit, but it has given us a position where in fact, we’re in front.

That’s the final slide in the presentation today to just show you the portfolio in Rands and just a repeat of what we had a little bit earlier. The impact of Amazon.com and Alphabet is enormous in this portfolio, but we’ve also had the benefit of a weaker Rand and an improved run on the New York Stock Exchange generally, Stuart?

Thanks Alec, two last questions. The first from Lex, “Besides Vanguard, are there any other ETF’s you would recommend? You mentioned something about tech ETF’s that would have encapsulated Apple, Amazon, Facebook, etcetera.”

It sounds like a good idea, Lex. If you do not want to go into the individual stocks, ETF’s can give you those kinds of exposures. I like to have share picks though, I like to follow the companies, I like to do my research and homework in a company and then know what it is that I’m buying. In ETF’s, it’s a far more passive way of approaching it, but you can achieve pretty much the same result, if you are really keen on a sector.

For me, I doubt any ETF would have reflected that kind of a return that Amazon has achieved and when you do manage to get lucky because who would have said two years ago that we’d have been up double in Rand terms on Amazon, but you can achieve the same objective. The whole idea of our acquiring ETF’s or the Vanguard ETF, is to give us a stake in the US market, that was the initial idea and as you can see we still have R319,000 there, so were we to find another good stock or another stock that we feel will outperform the market, we will certainly have no compunction in selling that ETF and putting it into a stock selection.

Thanks Alec. LH, I think it’s more seeking information. He says, “Investments aside, I’d like to propose tax-free fixed deposits for low risk and to encourage savings, for example, for funds under a million, who should I speak to?”

I mean, Standard Bank is sponsoring this, talk to them. They would have as much as, they’re our partner in the global portfolio and they’re also a big bank, so LH, I guess that’s the way you should be looking at it. What I would do though, is I would take the benefit of the tax-free investment, which I think now is R33 000 a year and put that through Webtrader and just invest it in this portfolio or at least part of this portfolio and have a little bit of fun while you’re doing investing as well. Fixed deposits are pretty boring aren’t they and on the other hand, once you take the tax, well you’re talking about a tax-free fixed deposit, I guess you are going to be using the tax-free option, but again, it’s outside my circle of competence. I might be able to help you a little bit on these shares because I follow them very closely, but when it comes to fixed interest investments, best to go to the bank.

That’s it from us today. Thank you for the attendance of everybody who was here. I look forward to updating you again next month. I’m very happy with the way the portfolio has been performing, but that doesn’t mean that we aren’t watching very carefully for new opportunities, I have my eye on a couple. What I would, however, say to you is that the Rand is very strong at the moment, so if you have not invested in an offshore portfolio or you’ve not taken advantage of following us here on Webtrader, I don’t think you’re going to get too many better opportunities than right now, so with the Rand at its current level, I think you are going to be very well-served in the long-term buying anywhere around R16.00 to the Pound and R13.00 to the US Dollar.

We will see how that all works out, but certainly, the decision that we took just over two years ago, that the South African economy is being poorly managed, has been reflected in the economic growth rate, which was only 0.5 percent last year and they were hoping for 1.3 percent this year, both of which are below the growth in population. That means GDP per capita is going backwards and quite clearly the policymakers are not changing to have more of a free enterprise approach, they are sticking with the approach that has got them into the trouble in the first place. That does not all go well for the Rand in the long-term, so as an investor, there can probably be no better time than right now to start replicating the portfolio that we’ve given you. Thanks for joining us, look forward to being back again next month. Cheers for now.

Visited 54 times, 1 visit(s) today