The BizNews Share portfolio, launched in December 2014, has delivered spectacular returns for South African investors. Every month, BizNews updates the latest developments at the companies whose stocks are held in the portfolio. Although the strategy has been to buy and hold, the portfolio has seen some adjustments over the five and a half years since its creation. Today roughly two thirds of the assets are invested in US exponential growth stocks and the balance in carefully selected JSE-listings. Listen to the February update below. – Alec Hogg
Alec Hogg on Apple and 2U:
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The performance during February; a big pullback by Apple. It’s our second biggest stock in the portfolio, with nearly a 12% decline. What happened there, was a lot of excitement after the Apple financial results. Indeed, they were record numbers and all looked very well. Then – and we’re seeing this increasingly in a bull market – it’s buy on rumour, sell on fact. We had a similar story with 2U, that share price went up to U$55, but it subsequently came down to U$48. But, it’s still an improvement of nearly 12% on the month.
On South African stocks:
The best performers were the South African [stocks]. Discovery up nearly 16% in the past month. I think this is primarily a result of very conservative budgeting by Discovery, for the pandemic – which is not appearing to be as bad or certainly as harmful for the company, as was originally anticipated. Then Wilson Bayley, which is lifting its head.
Maybe people are now starting to believe that Cyril Ramaphosa has got his hands on the situation here in South Africa. It’s very hard for people to see through the noise. But if there is to be an economic recovery in this country – and clearly you have to have that with the high rate of unemployment – that’s going to come from increasing infrastructure spend.
All round, Wilson Bayley has improved nearly 10% in the past month, as the concerns about the infrastructure programme not being kicked into gear are now going into the background. But that gives you a good understanding of exactly where the moves were in the past month.
On Xero:
We bought Xero for the first time last month. There were many reasons why we like Xero and continue to like it. I did say that our best case scenario would be for the Xero share price to actually stay low – or, in fact, fall – over the next couple of months. Because we buy these shares, as we do with every purchase – unless in exceptional circumstances (talking about every international purchase) – over a period of three months. The reason for that is to take out the volatile South African rand from the calculations. The rand itself has been extremely strong in the past month against the US dollar.
I’m quite happy that we now managed to buy 133 Xero shares in the second tranche, after only being able to buy – for the same money – 120 Xero shares in the first tranche. Hopefully, the share price will weaken still further. Maybe we’ll buy 140 Xero shares for the same money in the next tranche of purchases.
On buying stocks:
If you’ve identified a stock that you want to own, then don’t buy it when everybody else is rushing into it. Discipline yourself – as we’re doing with Xero – to buy over three months, because you would then eliminate the insanity that the market often brings to bear when talking about equities.
On PGM shares:
The big story at the moment – and where PGMs are also benefitting (but not totally) – is the battery story. Sibanye has now positioned itself for going into those minerals and metals that are used in electric cars. It’s almost like Mr. Market has the electric car bit between his teeth and he’s rushing off, excessively valuing anything that produces products for electric cars.
Sir Mick Davis has identified batteries – or battery metals and minerals – as being the next big thing. He’s now raising money again and he will be investing into that area. It’ll be nice to follow Mick Davis, no doubt. But, you do have the options already on the market. Sibanye moving in there, Neal Froneman is extremely shrewd when it comes to identifying the best prospects for his industry. He is a very good miner and you could probably add Sibanye – if that’s the play that you like – to your portfolio.
On Chinese stocks:
We did have investments in direct investments in both Tencent and Alibaba. Then we had Donald Trump, and at the time the fundamentals were really changing. It was quite a volatile period for both of those stocks. This is a portfolio where you want to go to sleep at night and know that the underlying asset that you have is one that you don’t have to worry about.
I’m still not keen on Alibaba. I think if you followed what happened with the Alipay proposed listing – it was supposed to be the biggest IPO in history. Two days before it was due to be listed in the Hong Kong stock market, the Chinese authorities showed their muscle and actually aborted the listing. It caused all kinds of embarrassment for Jack Ma, the founder of Alibaba, but it actually showed that in China, this arm wrestling that’s going on between the Communist Party bureaucrats and the entrepreneurs can always be won fairly easily by the bureaucrats.
When the entrepreneurs overstep the mark, they are brought back to heel. Now, that’s not a good place to be if you’re an investor, because you just don’t know what is going to happen in a country like China, either.
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