On a day when the JSE All Share index cruised through the 50 000 mark, “liquidity junkie” Kimon Boyiatjis explains why when investing for clients he sticks to the 60 largest cap stocks on the JSE. The market veteran (next year he celebrates three decades) says he has still bears scars from trading in less marketable counters. His preference remains with JSE-listed stocks with global revenue streams – led by the diversified mining groups which Boyiatjis reckons offer great value right now. He also explains why, despite Telkom’s proposed acquisition of BCX, it is the share he loves to sell short. – AH
ALEC HOGG: Let’s get a more in-depth view of how the market is trading today, particular that 50 000 level on the All Share Index. Kimon Boyiatjis, Director at Trident Capital is in our Cape Town studios. Kimon, is it important? Fifty-thousand is obviously a big number. Is it something that you guys watch?
KIMON BOYIATJIS: I do look at technical things Alec, and they are important to a certain extent. However, I think what is important is the fact that they’re also making new highs, we’re going along for the ride, and we’re being quite bullish on this as you know. I think this trend’s going to continue for a little while longer. Some of the valuations are looking a bit stretched, but certain sectors can keep on going.
ALEC HOGG: We were just talking to Rockwell Diamonds, which is an interesting small company. Another small company listed on the JSE today – Visual International. Did you get a chance to look at it?
KIMON BOYIATJIS: No, it’s out of our radar. We really look at the top 60 stocks in terms of volume and capital, so that’s really, where our focus is, mostly because I’ve been a liquidity junkie. I like to go where the liquidity is and we like to stay under the radar when we’re investing.
ALEC HOGG: That sounds really bad Gugu – a liquidity junkie.
GUGULETHU MFUPHI: Seeing that you’re a junkie Kimon, where are you finding your fix?
ALEC HOGG: What kind of liquid?
KIMON BOYIATJIS: I need my fix. All too often, you find with the smaller stocks that to get in and out, you end up paying across the bid offer spread and you don’t want a significant order to affect the price too much of anything that you’re looking to trade. When I invest in something, I’m also looking at what happens when I would like to exit, so liquidity does play a significant factor.
ALEC HOGG: So you wouldn’t go for a stock like ARB, which has been quite hot. It’s a small electrical distribution business based in KZN, going up strongly, because I guess somebody today wanted to get out and pushed the price three-and-a-half percent against them. That’s the risk.
KIMON BOYIATJIS: Well, that’s exactly what I’m looking at. If you go back historically… I’ve been in the market…it will be 30 years, next year. Whenever we’ve had a crisis of sorts and the liquidity is drained away from the market, the smaller cap stocks always suffer. I learned my lesson a long time ago. It would be different if you had a little flutter for yourself, but it’s not something that I’d necessarily put my investors in, unless we really like the company and we’re looking to have a major stake in it. It’s more the exception than the rule when we look at those types of stocks.
GUGULETHU MFUPHI: Kimon, let’s pick up on that 30 years of experience in the industry. You’ve seen the rises and the falls. Is there any particular sector where you’re not putting your money in at the moment?
KIMON BOYIATJIS: Yes, I think we discussed this a couple of weeks ago. We’re putting our money in the resource sector, but not in the single miners, so in the diversifiers. The stocks where we are putting our money are really global stocks that have diversification across several continents. We tend to not put our money in the stocks that are localised, particularly within our borders. We tend to avoid those.
ALEC HOGG: Would Telkom come into your universe?
KIMON BOYIATJIS: Yes. It’s one of my stocks that I have loves to ‘short’ for the past ten years.
ALEC HOGG: You’ve done pretty well so far (see graph right). With this deal with BCX, might that change the stock you love to ‘short’ into one you love to ‘long’?
KIMON BOYIATJIS: I don’t know yet. The short-term answer is no. One of the reasons I disagree with so many value investors is that they always said the assets are well valued and therefore, the price is cheap. The way I look at it, it might have many assets, but the problem with Telkom for me, is that those assets are outdated and I don’t think the market really factored in how much they’re outdated by. I don’t put too much value on their assets. They have fixed lines. I can just talk about my area where our offices are, and at home. When I look at communications and the way they handle it, I think it’s abysmal. Perhaps there might be a bit of upside, but it’s not a stock I’m going to rush out and buy right now. No.
GUGULETHU MFUPHI: What about the healthcare sector? This week, we saw the likes of MediClinic and Netcare publishing their numbers, but a new one on the market is Advanced Healthcare, which has been flying since its listing.
KIMON BOYIATJIS: Yes, I like that sector. We’re all hopefully going to be living longer, but that’s only going to be with good medical care. I think they’re in a sector of the market that’s going to be around for a long time. We all need doctors, sadly, at some point in our lives. That sector is something that I really like. The challenges that they have, is how they grow as well as growing their customer base. As the middle class in South Africa grows, those stocks will do particularly well. We all would like to have good care. I like Netcare’s stock and MediClinic are really good companies. I think their growth potential is massive. Not only that, they would also be the kind of stocks we’d look at because I believe they’ll be expanding into our neighbouring countries, so I think that expansion into Africa is on the cards for them and part of their strategy. It’s a good sector to be in.
GUGULETHU MFUPHI: And interesting one to look out for. Thank you so much Kimon, for joining us today. Your 30-year anniversary, I take it, in the market. That was Kimon Boyiatjis, the Director at Trident Capital. Do stay with us, because after the break we take a look at the book written by Tony Leon, ‘Opposite Mandela’.
