WEBINAR: Global portfolio celebrates 2nd birthday, 31% annualised returns

The Biznews Global Share portfolio celebrated its second birthday in December, delivering excellent returns, annualised 31% since inception. Each month Alec Hogg goes through details on each of the holdings, updating listeners on any relevant news and the performance of each. It's an interactive webinar, which is reproduced below, where you can watch the recording or read along through the transcript. The portfolio can also be replicated through the Standard Bank Online Webtrader system. – Stuart Lowman.It's December the 15th, I'm Alec Hogg talking to you from London, and today we update our global share portfolio. It's the last one of the year for obvious reasons. We do this every month and it is an opportunity to look at what we've got in the portfolio, how the companies involved have been performing in the past month and look at news events that might have come out from them during this period. It's been an active day for the portfolio today, we did some more transactions and the way that the portfolio works is that when we add new stocks to it, we buy them, we faze them in over three months. I strongly recommend that as you follow this portfolio you do the same thing..___STEADY_PAYWALL___.The reason that we do it this way is that we find great companies to invest in and we try to take out the issue of timing on both the price of the companies in US Dollar terms and of course because we're buying these companies in Rands to reduce the price or rather to take out the volatility of the currency as well. As you can see, for those who have just joined us, I see there are many people just coming in right now, it has been an active day today, we have acquired another 55 Facebook, another 18 Tesla and another 157 Metro Bank shares. It becomes clearer now, when you have a look at the overall portfolio in US Dollars, you can see the constituents of the portfolio on the left-hand side, the first one there, the Vanguard S&P-500 Index, this is an index tracker. When we kicked off the portfolio two years ago, we put roughly one-third of the cash into the Vanguard S&P 500..We started off with $200 000 as you can see we're now at $245 000, if you go down to the bottom there, the value total, so over the past two years in Dollar terms the portfolio has appreciated by more than 20 percent. It's also appreciated in Rand terms and clearly, the easy way to confirm that is to have a look at, did we or did we not beat the market. Well, the portfolio is up 23 percent, the Vanguard S&P 500, which follows the market in the United States, the S&P 500 is the 500 major shares listed on the New York Stock Exchange. They are balanced according to their market cap ratings and that's up ten percent in the last two years, so we've outperformed the market by 13 percentage points in Dollar terms..Of course that's really good if you're investing in Rands because as you're aware, the Rand has fallen by more than 20 percent over that period as well, so the intention when we began the portfolio two years ago was to encourage an investment offshore to offset the negative impact of poor government policies in South Africa, which we believed would affect the Rand negatively. The second thing was to start learning more about the international markets and to understand that there are multiple companies to invest in, many of them a lot better than what you'll find on the Johannesburg Stock Exchange, so it was a way of opening our minds to what does exist outside of the country and every month in the last two years we've had this updated webinar and the progress has been well beyond what we anticipated..What we were really hoping for was that we could track the S&P 500 Index, at least track in line with the market, but of course with a little bit of luck and a little bit of good fortune, by finding the right shares, that has enabled us to outperform and as you can see there our star performer is amazon.com, which is up 134 percent in value since we bought it when the portfolio began in December 2014. A fabulous return as well has come from Alphabet or what used to be called Google back then. Berkshire has had a good run recently but it's tracked the overall market in the United States. Apple, we bought in at the wrong time, we'll get onto that in a little while, it was at the wrong time, but certainly the share price was a little bit higher than where it is at the moment, IBM underperformed in Dollar terms..Barclays has been an interesting one, we bought just before Brexit, it took an awful hiding, and then the last three months we have seen the improvement in the Pound, but significant improvement in Barclays' share price. Finally, the last three that you see there are our recent acquisitions and we've now completed our purchasing of Facebook and Tesla and we have had two of three months' purchases of Metro bank, but I'll give you more details as we go through the portfolio and why we've invested in them. Here's the important table for South African investors. It converts everything into Rands and as you can see in Rands the annualised return has been 31 percent. The Rand has been all over the place, the 5th of December 2014, R11.27 against the US Dollar, it's now at R14.09. Again, the improvement in the returns achieved is exaggerated because of the Rand depreciation..That was part of the whole strategy in the first place and then moving onto the individual performances of the shares, you can see that the really big participants in the portfolio have been Amazon and Alphabet. The market as a whole, Vanguard S&P 500 has done 19 percent annualised in Rand terms, as has Berkshire Hathaway, which has had a very good run since Donald Trump was elected as president. We'll get into that in a minute. IBM is our value proposition, Barclays has done really nicely in a short period in the portfolio, and Apple is lagging a little bit, we're not worried about that one, great long-term investment, and there's the pictorial look at how the portfolio has performed..Again you can see outperformance by most of the stocks that we have, dividends also play an important part. We were invested in Novo Nordisk and then decided three months ago to exit that investment. All the investments that are made in this portfolio are done on the basis that the period of holding is forever. We really felt that Novo Nordisk (a Danish company that is dominant in the insulin market around the world); we felt that this was a really good one, indeed we weren't the only ones to feel that way..Harvard Business School has made the Chief Executive of Novo Nordisk, Sorenson, the number one CEO in the world for the past two years, but things started going a little bit dodgy when they moved into the United States and we were very fortunate to get out of this stock. As I say three months ago, it came shortly after it appeared to us that there were some structural changes for the worse in Novo, Sorenson was duly retired early, and he's been replaced as chief executive. That was just before a very big profit warning came out, so we dodged a bullet halfway there, we kind of managed to lose just a little bit of money on Novo Nordisk over the period, but it's unlikely that we will be selling shares in the long-term, but when you do have a structural change as it occurred in Novo Nordisk, we certainly will not be scared to do that..The second point as far as the changes in the portfolio is concerned, it really happens when you find a better opportunity that presents itself, then we will be selling shares. However, we're still sitting with about ten percent of the portfolio in mere cash, as we would look at it, that's in the Vanguard S&P 500 Index and the market generally, so that still gives us some potential to be able to make further acquisitions when we do find another really good stock that appeals to us. Those who have been following the portfolio from the outset, though, know that I do my research and I do my homework over an extended period and follow the share prices over a period as well until they come into a range which offers value or certainly 'appears' to offer value and that has served us very well..We give each of these stocks an intrinsic value that we work out, it's with our own calculation, very difficult with exponential companies to have a defendable intrinsic value, if you like and I talk about companies like Amazon and Google, who are growing very rapidly, both top and bottom line, but you need to have it in your own mind what the intrinsic value is and then you give yourself a margin of safety. Both of those concepts were pioneered by Benjamin Graham and of course followed by Warren Buffett and as you well know, I wrote a book on how to invest the Buffett way, so that's part of the reason that shapes this portfolio..Just getting onto the market generally and what I've done here is taken the graph of the Vanguard S&P500 and I like this one because its total all-in costs is five basis points, that's five one-hundredth of a percent, 120 of a percent if you want to put it differently, is what it costs you to invest in this, so it really tracks the index very closely. As you can see, the market has cheered since the election of Donald Trump, the very business-friendly Donald Trump in the United States and many of the old economy shares of Berkshire Hathaway, you'll see a similar picture there, have benefited from Trump's election, reason being, Trump and those who he is installing into the key jobs in the White House and in his cabinet believe that America has been negotiating really poorly on a global basis over the past eight years at least..He has replaced politicians with business people, amongst them, Rex Tillerson, the Chief Executive of ExxonMobil, who is going to be the second most powerful American after Trump by being appointed the Secretary of State. ExxonMobil is a massive oil company, it's got a $370bn market cap, that's bigger if you like, than the South African economy and Tillerson has been in charge of this company during very difficult times and is rated all over the world as an exceptional chief executive. I like him as well because he was an Eagle Scout and he was the Head of Boy Scouts of America from 2010 to 2012 while he was still running Exon of course. I think this is an honourable man and certainly, a great negotiator who is going to negotiate the best for the United States..As the investors are looking at this and they're saying "Well if the US has not been a beneficiary of globalisation, then if you have really hot people who are doing the negotiating for it, well then maybe the US is going to turn that around, whereas China has been on a rip, perhaps the US is going to be the one who will be benefiting from globalisation or from this new grouping that Trump is bringing in. The immediate impact on this has been a lift in the market. Among the important proposals that the Trump administration has already put on the table, is that it's going to encourage American companies to bring cash back to the country, so reinjecting that cash into the US economy..At this point in time, for reasons best known to the politicians who have been running the place, the US companies, multi-nationals who have cash outside of the country and that's pretty much most of them, are unable to bring the money back without being heavily taxed on it and what Trump's saying is, "That's insane. Rather get our companies, i.e. American companies to bring the money back to the US and stimulate the economy in that way". A huge beneficiary of this is Apple, which has some of its $200bn cash pile around the world, again in context, that's over 50 cents in every Rand that's spent in South Africa in a year, it'll be able to bring all of that money back into the United States without getting the penalties and of course, encourage further investments and there are some big ones that are going on at Apple at the moment, which we'll touch on in a moment..As you can see since we started this portfolio two years ago and that's since December 2014, the S&P 500 Index did pretty much nothing until Trump's election and it's been doing pretty well since them. Moving onto the first of our individual stock selections, here is Alphabet (it used to be known as Google). In the past month, Alphabet made some big announcements about its driverless cars initiative. It's now had 58 of these cars that have been driving around California. They've clocked up 2.2-million miles and the last time I looked they'd had seven accidents, six of which were due to driver error and the last one was somebody who hit them in the back of the car. You can't really blame the car for that. There's still quite a lot of work that needs to be done, they are kept off the roads when there's snow..Of course in California, there's never snow, so they haven't quite managed to work out how the computers can get these driverless cars to work when it is snowing, but if you live in California that's not really a big problem. Driverless cars are identified by both Alphabet and Apple as being huge opportunities into the future, Uber as well has been investing heavily there and in this past month Apple spun off its driverless cars operation and Alphabet spun it off into a company called Waymo. If you want to go and look into that, you can get more insights into what they are thinking about, but they believe this is going to be a huge future industry for them. The Alphabet share price since we bought in, indeed at the time that we bought in there were those who felt that the company wasn't really going very far or wasn't going anywhere indeed..We held onto this one for six months before the share price did much and this again emphasises investing is for the long-term, find the right companies, make your investment, put the money away and just let it fulfil what your homework has shown you. You can see there in July 2015 all of a sudden the market started believing in Google as it then was or it subsequently became Alphabet and part of the reason for that was the quarterly results that came out, they had a new financial director, Ruth Porat, who had been brought in from Morgan Stanley and Investment Banking, New York and Miss Porat had reflected her ability to start cutting back on costs..The problem always at Google was that while the market loved the business model, they didn't like the investable part of it because they felt that these techies were just spending money hand over fist. As a consequence, now that they have a very strong financial director in place, investors love it and you can see how the share price has appreciated since then. Usually, in the quarterly results, there's a good surprise and Alphabet's share price in the past month, in fact, has gone up nearly $30, it's a $550bn company and only the second highest market cap in the world behind Apple, which has just over $600bn. This is an interactive engagement. My colleague Stuart Lowman is online, Stuart any questions?.No Alec, nothing yet. Just to remind listeners on the control bar on the right-hand side of their screen, they can drop down the questions menu, plug them in and we'll answer them as soon as possible..As Stuart was saying, on the right-hand side of the screen, just click on that menu, type in your questions and we'll get to them. Onto amazon.com, our superstar performer, in the past month though Amazon's down a little, about $6 a share, but that's Jeff Bezos, the genius who controls this company, the entrepreneur who runs this business and when you live in a place like London you understand why Amazon is doing what it's been doing on the share price. As you can see, when we bought in there, the shares were around $300 a share. They got above $800 briefly just before the election. The tech stocks have not reacted as positively to Donald Trump's election, the view there being that they're not going to be as big a beneficiary but I think that's a fallacious argument, a reason yesterday indeed, Donald Trump had the top 12 tech stock chief executives meeting him at Trump Towers..Amongst the invitations was Elon Musk. Musk never got to the meeting, he had other engagements, but I understand from the family that he will, in fact, be meeting one-on-one with Trump in the next week or so. Elon Musk is very much involved in the discussions with Donald Trump, who is very keen, he knows that America has a huge advantage on the technology side, he's very keen to support companies like Amazon, Alphabet, Apple, and etcetera. Incidentally, Larry and Sergei from Alphabet were at the meeting as was the Chief Executive of Apple, Tim Cook, and the CEO of Oracle, etcetera, so it was really the heavy hitters of Silicon Valley going off to New York to meet with the new President-Elect in the United States. I spent a little bit of time on the US political situation because it really is a game changer..Donald Trump, whatever you think of him as a human being and his morals, which presumably have been quite well exposed, he is definitely for business and investors are cheering him for the right reasons. Amazon continues to perform really well. As you can see from this graph again it didn't do a whole lot for the first four months. In fact, for the first six months that we had it in the portfolio and then it went on a tear from early this year and never looked back. It is a stock that you just have to have in your portfolio. I would recommend if you're wanting to find out more about this company, go and read the transcript of the 2016 Berkshire Hathaway Annual General Meeting and you will notice there, it's all on BizNews, that Warren Buffett, when talking to the faithful in Omaha, mentioned Amazon or the Amazonisation of the world half a dozen times, so even he is not getting into it..Of course, Buffett doesn't buy into tech stocks. He feels to buy incidentally into Apple, but he doesn't buy into tech stocks because he wants to know what the returns are going to be like in the next five years and if he can't quantify that he rather stays away. Talking about Warren, there he is playing Bridge with his good friend Bill Gates. That's a stock we missed out on, unfortunately. Bill Gates' company that he started, Microsoft has also been a fabulous performer, but I guess you can't win them all, but Berkshire, as you can see there, has really rocketed since the election of Donald Trump. It's come from around the early $140's and it's now sitting very comfortable over $160, approaching $170 a share, so after doing very little in the two years that we owned it, it's now moving strongly into the future..The latest news from Berkshire is, it's broken through $400bn in market capitalisation for the first time ever, and that's something that Buffett will have looked at and been quite excited about. It does have $65bn of that in cash and another $130bn of that is invested in the Berkshire portfolio, which incidentally now does include two of the stocks that we have in our portfolio, both Apple, which has been added to the Berkshire portfolio recently and of course, IBM which is one of Buffett's big five holdings, but they still have that $65bn in cash, which is kept at the ready for further acquisitions..In the past month numbers have come out from the New York Stock Exchange where companies like Berkshire have to put forward their dealings and the company has bought into airlines, American Airlines, Delta, United, Continental, and Southwest, on the view that the oil price is, or the lower oil price is going to help their profits and that that perhaps the intense competition that has made airlines such a bad investment for so long is now starting to just slow down a little bit..It's interesting to see Warren Buffett who has been a huge critic of the airline industry. I remember listening to him at one of the Berkshire Hathaway AGM's saying that if a capitalist had been around at Kitty Hawk when the Wright Brothers took the very first flight, he would have shot both of them because the airline industry that they created through that historic flight has cost capitalists an enormous amount of money over the years and now Buffett himself is investing, but it just shows that clearly airlines in the United States, if you're looking for something unusual and interesting, are offering value right now. Apple, I love this company, it's the biggest market cap company on earth, and it is a business that has an amazing culture and an incredible ecosystem and one that is so well-entrenched now that the future of this business looks very bright..Investors, however, like to gauge the Apple share price on how the iPhone sales are going and you can't sell iPhones indefinitely. There are people who will always buy the new model and the iPhone 7 has done pretty well. What Apple tends to do as well, is it holds back production so that the market demand continues. Getting an iPhone 7 is not that easy right now and of course demand is high, but iPhones will not be able to continue growing indefinitely. There's still an enormous number of iPhones that are sold every year, but because the iPhone is generating the most revenue for Apple Inc., this is where investors of Wall Street are focusing their attention. I would suggest that you look at other reasons to invest in Apple..Have a look at the way its services businesses are high margin like iTunes, the Apple music service, the app store, podcasts, which are now being sold as well and the other services businesses in Apple, how strongly they're growing, they're already making 30 percent plus growth per annum, so Apple is for me a fabulous business. They've had a new launch in this past month; they launched the new wireless headphones which again are sold out before ordinary mortals can get their hands on them..One of the reasons why they brought out the iPhone 7 without a plug-in jack for headphones is because they have these wireless headphones (or EarPods as they call them) that you can connect on that side. The other big thing on at Apple are the driverless cars (they call it Project Titan). They're now moving away from what Alphabet has been doing and some of the other players on the driverless cars (or autonomous vehicles as they prefer to call them) and they are now looking to just invest in the software. That opens up all kinds of new opportunities because when other motor companies want to get involved in driverless cars they would be able to presumably do a deal with Apple on Apple software. Stuart, before we go onto the next stock, any questions?.Yes, Alec, there are a few questions. One from Des Van As, he asks, "Given the market hitting new highs, is it still an opportune time to buy over the next three months or should he wait?".I believe that if you understand the potency of share market investing, there's never a bad time to buy, but you don't want to throw the dice on a single day, so Des, what I would suggest is do your purchases over the next three months, but split them up one-third this month, one-third the next month and one-third in three months' time. The markets will go up and down, but generally, in the longer term, you will benefit by being in equities. I think it's a particularly good time to be investing in US stocks..You might recall if you've been following us for a long time, in early 2015 George Soros indeed and many other great investors believed that you should switch out of the American stocks and into Europe. Well, fortunately, we didn't listen to that, we stuck with our companies that we like and now those companies, with the rejuvenation of the American business that Trump is promising and whatever the consequences of his policies might be, that's one thing that is almost certain is going to happen. There could be other negative consequences of his policies, but that's going to happen. It's a very good time to be invested in US Inc..A follow-up from Andrew, "Given the fed interest rate increase of 25 points yesterday evening, how does it affect the shares that you currently hold and why would you not add gold?".Gold is a trader, a trading metal, so as much as for instance, I think that gold in Rands is not a bad investment in the long-term because of the likely depreciation of the Rand and the reflation of Western economies to get rid of all the government debt that's there, to me Gold must always be seen as a trading vehicle rather than an investment. My view on these things is actually quite Catholic. If you're going to invest in a company, youre' investing in human potential, you want to leverage human beings and their initiative and against that, if you're investing in Gold, you're investing in fear and you're investing in an inanimate object. I would much rather invest in human potential and I believe that's really what share market investing is about, putting gold on the one side..Of course interest rates are an option, or you do have the option between equities and bonds and when bonds become cheap, people will move out of equities into bonds as a whole, but there are always reasons to be invested in great companies and the great companies will see the long-term trends, so that's what we're trying to do here. Our intention here is to identify great companies, make those investments in great companies, and just stick with them through all the cycles. As Warren Buffett says, he can't call the big cycles and if he can't, well, I'm sure as hell not going to try..Thanks, Alec, another one from Gavin, I think it's on a similar path, he says, "A number of the technical analysts are calling a big correction in US equity markets next year, what are your views and any implications for asset allocation?".No, if Buffett can't call a technical correction and technical analysts do have their advantages indeed; as you can see from these graphs, what I do like to do is to show you the very simple moving average. In Apple's case, as you can see on the screen, it's moved above the moving average, which really is just telling us it's now back into a bit of a bull run, but technical analysts are for traders, this is an investment portfolio, and this is not a trading portfolio. .What you need to understand here with our global share portfolio is we are helping you to understand the companies, what is happening within the companies. If you get a Novo Nordisk where the underlying structure of that business is changing we will sell and we will sell aggressively, but generally speaking we do an enormous amount of homework to try and find is this a good business for the long-term and that's where we look at it (the long-term being the average period of holding forever). Apple Inc. would be affected by any kind of a meltdown on the stock market, but long-term you'll be getting your money back and then some by being invested here..While we're on the tech stocks, a question from Matt, he says, "On Biznews you've recently reported Naspers investing in technology companies with an interest in the education sector. There are also Chinese companies that look interesting. How do you choose and eliminate tech stocks given this is such a hard sector to read?.I don't believe in eliminating tech stocks at all. My view is that you need to understand the business and that's the most important thing in any business that you look at. I understand Google, I've had the benefit of being a pioneer in internet publishing from 1997, I started publishing company called Moneyweb, and that has given me an insight into Google's business model. Their major benefit there is that as the internet grows, they will grow with it because they dominate internet advertising and that comes through their search engines and through having a thing called AdSense, which if you want to start a website tomorrow, you can just plug AdSense in and become Google's partner, so that's a tech model that I'm excited about and I keep learning, as we all must about the new inventions and the new opportunities that they go forward to..One of the most difficult things for investors is to actually get exponentiality; we're not as human beings. Remember if you take human beings' history into account, we spend 70 000 years as hunter-gatherers, 10 000 years in communities as agriculturalists and only 200 years in the new world that we're in. We're hard-wired to think like hunter-gatherers and hunter-gatherers can't imagine that where there was a route yesterday there are going to be a thousand routes tomorrow, so we have to understand and get our heads around the whole question of exponentiality. I would strongly recommend you go and read some of the work that singularity university has done on this subject and then you'd understand, for instance, why Naspers and of course it's investment in Tencent has been such an exponential success..That's also why you'll understand, there the Alphabet story, the Amazon story, that's an exponential story that we're seeing in our lifetime as Amazon goes more and more into the retailing arena, going more and more into movies. In the past week, in fact, they launched global streaming of movies, Amazon Prime Video in 200 countries. Now, start thinking about the impact that can have on your bottom line because they only charge £7 over here or $8 a month for unlimited, all you can eat movies. If you are paying £4 per movie at the moment that you might be downloading, all you can eat makes a great appeal from Amazon Prime and it's a similar thing that Netflix is doing. The expansion of Netflix has been exponential and continues to be exponential because they've kept the prices low and worked on volumes, but sometimes as investors, it takes us a little while to get our heads around it..You need to be doing that kind of understanding to understand whether or not to invest in a particular tech stock. Moving onto this one, IBM, which is a tech stock and it is the only CEO of any tech company who is on Trump's economics advisory committee is Ginny Rometty, the Chief Executive of IBM. It's also one of Warren Buffett's big five holdings because IBM, a bit like Apple, is a value stock as a tech stock. Now that makes it doubly appealing. When you're buying into Amazon or Google, or a Netflix, or even a Tesla, which says it's a tech company which happens to build cars, you are looking for the exponential upside that can be achieved there, Naspers and Tencent, also fall into that category..IBM, on the other hand, is a company which has been downgraded by the investment community because of the strategy that it's following, it's getting rid of its old business models and bringing in new businesses and getting rid of being a box mover and going heavily into services, cloud, artificial intelligence, etcetera, but the new businesses take time to grow. Where IBM has a massive advantage is that it has relationships with the top 100 companies in the Fortune 100. The top 100 countries in the world already do business with IBM, so it's like your salesmen have got an 'in' and anyone who has been in business understands that the first place to start a business relationship is having a relationship in the first place, so it's kind of a chicken and egg situation. It's nice to see that IBM, as you can see from this graph, has improved since the Trump election..It is going to be a huge beneficiary of what Trump has in mind for business and as the US economy and as business in the United States benefits, IBM is going to be one of the big beneficiaries there as well. Ginny Rometty is one of the 16 CEO's that Trump has put on what is called the strategic and policy forum. It's a good idea if you want to know more about these things to go and Google that and have a look at it, but she's sitting next door to the Chief Executives of JP Morgan, General Motors, Walmart, Walt Disney, Boeing and the tech guys had their own meeting yesterday, as mentioned..She's also driving a company that really is benefiting from so many wins that are coming from behind, but at the moment there is still many investors who are not quite sure whether IBM is going to pull off this transition or this transformation that it's been working now for five or six years, lots of cash in the bank, it pays good dividends, buys back a lot of its stock, and I think maybe this year the penny started to drop. As you can see, in February this year the stock was around $120, IBM is now trading just below $170, so Warren Buffett is just about breaking into profit on his massive investment that he's made in IBM. Here's a company that is well-known in South Africa through its past ownership of ABSA. It's in the process of selling that. We bought Barclays in April 2016..You are aware that there was an election or rather a referendum in the UK on the 23rd of June and Barclays, like other shares in the banking sector, took an awful hiding. The reason why we bought into Barclays was because it offers terrific value, it's trading at a fraction of its liquidation value, priced to book, even today after the recent run in the stock, it's still 0.67 times and what that means that if you were to liquidate the company today, you would get, just from the assets that are there, forget about the brand name, you'll be getting a Pound for every 67 Pence that the share prices is costing you. Now that is what we call great value. The other big thing I like about Barclays is that it is primarily, in the UK anyway, a High Street bank and the Brits don't move their bank accounts much. They're starting to do it with Metro Bank now, but they certainly haven't been doing so historically..The other big thing for this company is that its book value, although the shares are now getting up to, well at the most recent times, £2.26, it's up another 13p in the past month. The underlying book value here is £3.39, so you have a long way to go. Banks, by the way historically would trade at a multiple of their book value, so they're paying 1.5, even 2.5 times their book value, so you can see the upside that exists in Barclays. That big improvement that came in the beginning of December followed the annual stress test by the Bank of England. What they do every year on the 1st of December, is they go through all the banks in the country and they have a look at whether or not they are properly capitalised and this year all of them including Barclays got a tick, a green light. Barclays jumped up five percent on that day on that news..Also, good news for big banks is that the tier one equity, the projection is that it's only going to be at 11 percent by 2019. Now the amount of tier one equity that you have to keep in your balance sheet depends on how much money you can make because if you have to sterilise a lot of your capital to look after the potential for bad debt, clearly you can't invest that and make good returns and there was anticipation that, that would be gradually rising. The Bank of England said, "No it's fine, we'll leave it at 11 percent until l 2019", so Barclays has had a good run. It's a turnaround situation; we've always looked at it as a turnaround situation. I'm not sure if I would like to be invested in big banks forever, but certainly, at the kind of share price that it was trading at and with the immediate opportunities that existed for Barclays, it really was one we had to have in the portfolio..We couldn't protect Brexit going the wrong way and that sharp decline was a consequence of it, but nice to see that Barclays is now in profit, even for us. Our three new acquisitions, I'll go through these and then we'll take some more questions. We've been watching Facebook for the last year as you can see, it would have been good to have bought it a year ago, we didn't. It's continued to grow or the share price has gone and then we decided three months ago that we would start adding Facebook to the portfolio. It is a phenomenal business. Again, it's a business that I know very well because of my insights in internet publishing and this is one of the giants of today, let alone into the future. Facebook is sitting on a market cap of over $339bn. It's a massively valuable business around the same as Amazon..I think both of those companies in the future, if you can get your head, again, around exponentiality, they will both be benefiting. Here again, you can see the value of staggering your purchases. If we bought all the purchases in October, we'd be sitting with a purchase price of around 130, but we didn't, we bought the first chunk in October, the second third in November and now we've just bought the third, one-third of the investment that we're making there. Onto Tesla motors, another one of our newbies, this is a company whose share price we expect to at last start performing. We bought in, probably at the right time; we finished our purchases of this one as well. It has done very little as you can see for the last six months, mostly in the last few months because of the merger between Tesla and SolarCity, I think that's a great merger for both companies..Tesla was 93 percent of it, but SolarCity was really a bit of a bolt-on acquisition, but there was quite a lot of criticism of the Pretoria boy, Elon Musk as a consequence of that transaction, that, however, is to do with governance, etcetera. The feeling there was that because he was the biggest shareholder in Solar City and because his cousins are the directors of SolarCity, that this wasn't the kind of executive type decision that should have been taken. My view is completely the opposite, it's great business for both sides and in fact, we spoke about that extensively last month. If you would like more detail on that, do go onto the podcast onto the transcript for last month. To close off with, our most recent addition, Metro Bank PLC, you look at that and you think, "Crumbs, that looks a bit like a retail outlet". Well, that's the way they want you to think of it, it is the Capitec of the UK..I was recommended to have a look at this company by Gerrie Fourie, the Chief Executive of Capitec when he was over here in London. We got together, had a long chat and a lovely interview and I said to him, "When are you guys going to be bringing your services to the UK market because the High Street banks here could do with some competition?" He said, "Well have a look at Metro Bank" and Metro Bank is a fabulous business. It really is Capitec in the early stages and if you have a look back at Capitec and their business model and what they've delivered for investors by having that model intact, Capitec has grown, its shares have grown at a compound annual growth rate of over 50 percent in the last 20 years. That would give you an understanding of the potential of Metro Bank..Sure, Metro Bank is trading at a multiple of its book value, all of the matrixes look very unattractive when you compare it with, say a Barclays, or a Lloyds, or some of the other competitors that it has, but this is a bank that is adding hundreds of thousands of new customers a month as does Capitec. It's a bank that is revolutionising the retail and its case, small business banking model in the UK and it's put together by a guy called Vernon Hill who did exactly the same thing in the United States..He started a bank in the United States more than 20 years ago, he decided that the bank would become would become a store, it would have fans rather than customers, it wouldn't have banking outlets, it would have stores, it would have fans rather than customers and he built the company that he started there from scratch into the 18th-biggest bank in the United States on this model, the Capitec model, the Metro Bank model and I believe that Metro Bank is going to be a repeat of that and everything that we've seen from Metro Bank so far suggests that is the case. In the last month, they made a couple of big deals. They did a deal with the post office, how's this for a fabulous alliance? The post office in the United Kingdom is a listed company, it has 11,5 000 branches..Metro Bank only has in the forties branches, so it's had its customers saying, "We need more branches", so with this transaction business customers will be able to deposit cash and cheques and get change from any post office in the country. That's a transaction one wouldn't expect in South Africa where the post offices are perhaps not quite as efficient as the British post offices, but another big transaction that was done in the past month for Metro Bank that I'm quite bullish about, again it has a South African connection, is an alliance that's been struck with St James' Place. St James' Place is a FTSE 100 company, it's the UK's largest wealth manager and it was started by Sir Mark Weinberg (a contemporary of Donald Gordon, a South African who comes out of Johannesburg), isn't that fascinating? .Well, Mark Weinberg has obviously still kept in touch with the old country, seen what's happened with Capitec, got himself involved with Metro Bank and he thinks that there can be many other deals that they can do together. Metro Bank is a relatively small company in the context of our portfolio, it is only a market cap of £2.6bn, but it is a company that I would strongly recommend that you have in your portfolio as well and don't be put off by that share price, this is one that we're going to be with for a very long time. There's the portfolio in Rands, just to recap on everything, but Stuart, while we're having a look at that, any more questions?.Yes thanks, Alec, on our investment portfolio, Ryan wants to know "How does one actually invest in the BizNews portfolio?", and then Dale Steven asks, "You recommend phasing your investments in, what is the minimum amount you recommend given brokerage costs, etcetera?".Right, well at the bottom of this you'll see Standard Bank Webtrader and this has been a partnership with Standard Bank Webtrader since they launched their offering more than two years ago. We like Webtrader because it does give you access to any stock market anywhere in the world and the costings are very reasonable. My feeling, as a rule of thumb, Dale has been that if you are investing in anything less than R10 000 per acquisition or per purchase, and then it's probably not a smart idea to do that. You can do the sums for yourself, but once you start investing around R10 000 in an individual equity, you eliminate pretty much the impact of brokerage..If you're dong it over three months the impact, and if it is an amount of R10 000 at least per purchase, then you will be eliminating the cost of brokerage or the impact of brokerage and the impact of price changes in Dollars and prices changes in Rands. You can participate in this portfolio by doing it yourself. What we're doing here, is we're giving you the outline. We're saying to you, "Here's the portfolio that we have, these are the stocks that we suggest that you invest in". There if you have a look at the right-hand side percentage of the portfolio that is the allocation that we think you should be putting into each of those shares, i.e. 10 percent in Vanguard, 18 percent in Alphabet, 16 percent in Amazon, etcetera"..Then we will get back to you on a monthly basis by having a look at those and being able to update you on the progress that's being made in those individual stocks and also recommend when you do have a Novo Nordisk moment or in Warren Buffett's terms, he had a Tesco moment like that, he lost something like $400mn by selling out of Tesco's once he felt that the structure of that company was different to the one that he'd been sold..That was of course when he had the big scandal of Tesco fiddling its books, etcetera, so that's what it's about. You can invest up to R1mn without going through exchange control approval. It is part of the whole strategy that until you go past R1mn, that's when you have to apply to the reserve bank, so you could open a portfolio, you can open an account today with Standard Bank Webtrader and you could give them up to R1mn and allocate your money in these stocks, in US Dollars, that would be the way to go about it..Thanks, Alec and just one quickly to end off on from Dave Roberts, He wants to know if any gaming shares are offering value, things like Nintendo, Sony, etcetera..Dave, that is interesting. Gaming is a market opportunity that I haven't looked at yet. If you know the industry and you know who the market leaders are, it is the kind of sector that is for the future. I would do my own homework if I were you if you know that industry and make your investments accordingly, but just remember two big things on this. The first one is, if you like, say Nintendo and if you believe that's the best gaming or electronic arts, whichever one it is, that's the market leader, then don't throw all your money at it immediately, buy in over a period, stagger your purchases over three months. The second thing is to keep an eye on that business by having a look at the news flow, reading the annual report, doing the kinds of things, in other words, that I do with each company in our portfolio, but you'll have to do that yourself..Unfortunately, I can't help you there because it is outside my circle of competence and that that is something that, as Charlie Munger said, he and Warren Buffett, their great secret is that they know where the limit to their competence ends and they stick within their circle of competence. For me, I know nowhere near enough about gaming companies to even start giving you any recommendation, but if it's something within your own circle of competence, then certainly do a little bit more homework on the business, keep your eye on it, and make your investment. Thank you, Stuart, for once again fielding the questions, thank you to everybody who attended the webinar today. Our next webinar will be towards the end of January. We'll let you know exactly when in due course..I'm off to Davos; it'll be my fourteenth consecutive visit. It's always a very good event because they get together the brightest academics, politicians, business people dominate there, and I always come away from Davos with some pretty good ideas about investment opportunities where the world is etcetera. This is going to be a really interesting Davos given the changes we've seen in the United States, Brexit, and growing changes in Europe. Don't forget to join us towards the end of January for the global portfolio update. Until then have a wonderful festive season. For those of you who are celebrating Christmas, to you and your families, all the very best and to those who are just having a holiday, be safe, cheerio.

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