BNC#6: Piet Viljoen Q&A – Property, market trends, economic forecasting and more

In his Q&A session at BNC#6 in Hermanus, renowned investor Piet Viljoen shared insights on his nuanced approach to property investment during an engaging discussion with Bronwyn Nielsen. Viljoen emphasised the importance of strategic capital allocation, patience, and emotional control in navigating market cycles. Touching on various topics including ESG investments and activism, Viljoen’s pragmatic perspective offered valuable guidance for investors amidst evolving economic landscapes.

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Summary of the Question and Answer session with Piet Viljoen at BNC#6 in Hermanus

Piet Viljoen, a prominent figure in the field of value investing, offered unique insights into his contrarian approach to investing, particularly in the property market, market trends, and economic forecasting.

Viljoen’s perspective challenges conventional wisdom, advocating for a deep understanding of market dynamics rather than relying solely on mainstream narratives. He emphasizes the importance of critically assessing prevailing market sentiments and being prepared to go against the grain when necessary.

In discussing property investments, Viljoen highlights the significance of analyzing underlying fundamentals rather than being swayed by short-term fluctuations or popular trends. He suggests that a disciplined approach to value investing can uncover opportunities that may be overlooked by the broader market.

Moreover, Viljoen shares his thoughts on market trends and economic forecasting, cautioning against over-reliance on forecasts that often prove to be inaccurate. He advocates for a nuanced understanding of economic indicators and their potential implications for investment strategies.

Overall, Viljoen’s insights offer a refreshing perspective on value investing, emphasising the importance of independent thinking, diligent research, and a long-term mindset. By challenging conventional wisdom and staying true to fundamental principles, investors can position themselves to capitalize on opportunities and navigate uncertain market conditions with confidence.

Edited transcript of the Question and Answer session with Piet Viljoen at BNC#6 in Hermanus ___STEADY_PAYWALL___

Bronwyn Nielsen [00:00:07]:

Regarding Calgrow industry, I recall your conversation with Alec at the Business Full Conference. You mentioned a caution against property exposure, suggesting only one property investment is acceptable.

Piet Viljoen [00:00:29]:

Yes, just one.

Bronwyn Nielsen [00:00:31]:

Exactly. You highlighted Calgrow industry, particularly low-cost housing, especially in the Western Cape. This contrasts with your usual stance. Could you elaborate?

Piet Viljoen [00:00:56]:

My view remains that property isn’t a strong investment unless sold, as Calgrow does. They build and sell houses, avoiding the pitfalls of rental income, maintenance costs, and taxes.

Bronwyn Nielsen [00:01:33]:

Your narrative seems to have shifted slightly, moving away from identifying undervalued companies due to mismanagement. Can you explain?

Piet Viljoen [00:02:26]:

Traditionally, we relied on mean reversion for undervalued stocks due to short-term issues. Now, we recognize that active managers’ selling pressure can unduly depress stock prices. Hence, we’re leaning more towards technically undervalued, high-quality businesses.

Bronwyn Nielsen [00:04:43]:

With the surge in passive investing, many active managers struggle. Do you see a way out?

Piet Viljoen [00:04:50]:

It’s a challenging landscape akin to Microsoft’s prospects in 2015. Active managers face tough times, but there are overlooked opportunities for those willing to go against the tide.

Bronwyn Nielsen [00:05:30]:

It’s been a long-standing issue. Do you ever feel discouraged?

Piet Viljoen [00:05:30]:

True, active management has faced headwinds for over a decade. Yet, fishing where others aren’t yields rewards.

Bronwyn Nielsen [00:07:39]:

Does size hinder large asset managers?

Piet Viljoen [00:07:43]: Long-term, yes. Diversification is essential, but smaller managers can exploit overlooked opportunities.

Bronwyn Nielsen [00:08:06]:

Could a large manager create a small fund to compete in your arena?

Piet Viljoen [00:08:21]:

The trend is away from this approach. Big firms follow indexation to appease clients, leaving niche markets open.

Bronwyn Nielsen [00:10:01]:

Updates on your Merchant West Value Fund?

Piet Viljoen [00:10:01]:

We’ve made minor adjustments, reducing banking exposure due to changing credit cycles. Our core strategy remains, emphasizing quality businesses.

Bronwyn Nielsen [00:11:22]:

How about your Global Fund approach?

Piet Viljoen [00:11:22]:

Unlike the Value Fund, it’s more about asset allocation. We aim for real dollar returns, with a significant offshore bias and careful selection of indices.

Bronwyn Nielsen [00:13:16]:

Congratulations on the recent award. How has the merger impacted Merchant West’s outlook?

Piet Viljoen [00:13:16]:

Thank you. The merger has strengthened the company’s position, evident from recent awards. I’m optimistic about our future.

BizNews Community Member [00:14:39]:

You’ve shown resilience in sticking to your value philosophy. How do you manage during tough times?

Piet Viljoen [00:14:39]:

It’s challenging, but I maintain a stoic approach, focusing on patience and emotional control.

BizNews Community Member [00:20:13]:

Do you include gold in your portfolio?

Piet Viljoen [00:20:13]:

Yes, indirectly in the Value Fund and directly in the Worldwide Fund.

Bronwyn Nielsen [00:21:46]:

How do you view ESG investments now?

Piet Viljoen [00:21:46]:

Acronyms like ESG often attract hype, leading to inflated valuations. I’m cautious about investing based solely on trends.

BizNews Community Member [00:27:52]:

Is there enough activism and education around capital allocation?

Piet Viljoen [00:27:52]:

Activism can be challenging. I prefer a passive approach, focusing on sound investments rather than challenging companies.

Bronwyn Nielsen [00:29:25]:

Given the current market, where do you see value?

Piet Viljoen [00:29:25]:

Many undervalued opportunities exist, presenting potential for substantial returns.

*The above transcript has been condensed and paraphrased for brevity and clarity, and may not capture the full context or nuances of the original interview with Piet Viljoen at the Biznews conference, BNC#6.

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