WEBINAR: Tesla, Zumafied Rand offset Dow losing streak; maintains 28% annualised growth

Have investors seen the end of the Trump dividend as the Dow Industrial Jones experienced its longest losing streak in six years. This after President Donald Trump lost his first real battle when failing to replace Obamacare. But despite the downturn, Musk's Tesla sparkled as car production is expected to skyrocket and challenge the likes of Mercedes and BMW. The global portfolio was also aided by a sharp fall in the South African Rand after President Jacob Zuma recalled Finance Minister Pravin Gordhan from an investor roadshow, with many seeing it as signs of a much talked about cabinet reshuffle. The Rand lost 5 percent against the dollar in under two days. On the back of this the portfolio maintained its 28 percent annualised growth since inception in December 2014. Watch the video or read the transcript below for the March update. – Stuart Lowman.Hello there, it's Alec Hogg and we're coming to you today from Standard Bank. I'm here with my friend and colleague Stuart Lowman..___STEADY_PAYWALL___.Thanks Alec. Good to have you in South Africa we're coming from the Standard Bank Headquarters in Rosebank. It's a slightly different setup but we'll get there..Yes, I think we will and Stuart will you just explain how one gets to ask questions?.On the right-hand toolbar, if you just look for the Questions tab, just drop down that menu, and write the questions in there and we'll answer them as soon as they come through. It's third from the bottom..We're using a Windows PC today, so if there are some technical glitches, you know it's not Steve Jobs' fault. Okay, let's get into it, it's the 28th of March, our portfolio is growing at 28% annualised over the last, oh it's more than two years now because we started in December 2014. It gets tougher every month to keep that 28% annualised growth going, but thanks to Jacob Zuma's idiocy, we managed to, once again, have a late boost. In fact, it's so late that it came through in the last 24 hours. The Rand was doing terribly well; it hasn't been a great month for US stocks. I'll get into that in a moment, but the Rand's sharp decline over the last 24 hours lifted our portfolio because remember, it's an offshore one..Just to recap, for those of you who might only be joining us for the first time, what we decided in late 2014 was to partner with Standard Bank – they have Webtrader which gives you access to shares all around the world – on the basis that we believed that it was time to take money outside of South Africa. Not that we don't think there are great South African companies, but our feeling is that the economic management of this country, especially from mid-2014 was going in the wrong direction and we believed that would be reflected in the value of the share price of the country, which is the exchange rate. Well, since then the Rand has depreciated. It's had a fantastic run recently, through no real benefit or no real actions of the South African economic authorities though..We know that the South African economy is growing very poorly. We also know that some of the decisions that have been made on economic policy have been dubious to say the least, but the rest of the world is, for the first time, starting to handle or be hit with change. We're seeing change in the United States with Donald Trump, change in Europe with the whole Euroland coming under pressure, change in the UK with Brexit. As a consequence, because South Africa was already transparently bad, these other guys are now worried about their own economy and relatively speaking; the Rand has appreciated, as there has been panic elsewhere. In addition, emerging markets have benefited a little from an uptick in the oil price, but it's nothing to write home about..One thing that has helped emerging market economies and what's interesting, I was reading through the Anglo American annual report the other day, and Anglo's basket of commodities, so that's iron ore, chrome, nickel, copper, diamonds is in there as well, platinum, that basket was up 25% on last year. So, that lifts emerging markets currencies and of course, it's helped the Rand as well. The Rand has been a beneficiary of the commodity uptick and of the fact that relatively speaking it's transparently known where the economy is going from here, which is not going very far, whereas the economies where there were higher hopes have come under pressure, particularly the UK post Brexit..The Rand in fact had appreciated 25% against the Pound since Brexit. Of course, that puts pressure on our portfolio because all of our investments are in US Dollars or British Pounds. Fortunately, the stock markets have kicked in, we've had some good share selections, and that has given our portfolio a good run. As you can see from the table that is in front of you there, we've added stocks to this portfolio over the period. The way we did that, was we sold half of the Berkshire Hathaway holding and we sold about two thirds of the S&P 500 Index tracker and invested that into individual stocks that we thought were undervalued..Barclays unfortunately we went into that just before Brexit. As a consequence in Rand terms, although it's up 12% in Pound terms, in Rand terms it's still on the wrong side of the profit and loss account, but we had a wonderful run in Tesla and of course, it's the one that we only put 4% of the portfolio into. It just shows. What we will do today though is take you through the portfolio, take your questions, and then give you updates on the important shares..Just on the Rand, Alec, (I'm not sure we can answer this) Karel wants to know how far will the Rand drop?.I'm going to talk about the Rand, Karel, a little later. I'm not ducking the question at all, but when we have the charts in the presentation, I think that'll help to understand it a bit better. Just looking at this in overall terms, as you can see, the number down the bottom, our portfolio, which started with $200,000 on the 5th of December 2014, is now sitting at $267,500, a very nice round figure and that's up by about $1,000 on last month. The US market itself is going through a little bit of a tough time and the primary reason is that Donald Trump is not walking on water the way that investors thought he would..You might remember that after he was stunningly elected as President, he made all kinds of promises, both on the campaign and afterwards and the American cheques and balances in that system are holding, and one of the biggest promises was to dump ObamaCare (that was supposed to happen last Friday) and to replace it with the Republican Party healthcare. Well, he eventually tired of the Republican Party not supporting him or not all coming onside and he issued an ultimatum. A high-risk game and he lost badly because the vote to get rid of ObamaCare wasn't even put to vote. They knew they were going to lose..That has been interpreted by investors as, "Whoops, maybe Trump isn't going to be able to cut tax rates, maybe he isn't going to be able to massively increase investment into infrastructure, maybe he isn't even going to be able to build that wall between America and Mexico, which Stuart, I must tell you, is the dumbest thing I've ever heard because the people are prepared to swim or get onto boats from Cuba, 75 miles. I think they will just go into the sea if they want to go from Mexico to America, but that hasn't registered with the Americans at this point anyway, or certainly some of the Americans. The reality is, Donald Trump's promises are now being reassessed and Wall Street is thinking twice and the Dow has actually had its longest losing streak in six years. In the last eight days, it's fallen every single day..It's almost like the "Trump Trade" as they call it is over, at least for the time being..If you then go onto the portfolio in Rands, as you can see, the Rand in the last month has actually depreciated slightly, it was R12.98 a month ago. It got very close to R12.00 against the US Dollar, and it's now trading on the wrong side of R13.00, and similarly, against the Pound, it has depreciated in the past month. We were sitting a month ago at R16.10 against the Pound. In fact, last night after the selloff, we were at R16.10 again, this morning we were at R16.34 and it's continuing to go South at a rate of knots. If you translate all of this into the portfolio into South African Rands, the overall picture there, have a look down the bottom, annualised return is 28%..Now if it wasn't something we were anticipating, in fact, 28% is excessive, you can't expect that any portfolio will grow at that rate indefinitely, but we've been going for just over two years now and if you could make double what the market's making then I think you would have every hedge fund manager in the world trying to recruit you. That's what we're doing at the moment, but it's only over two years. The market, as you can see there, from the Vanguard Index, has grown quite a bit less. It has a 31% profit in Rand terms and if you look at the bottom, 62% overall. So, we have outperformed the market in Rand terms by double. It's pretty good going and that, I think, is largely due to some very fortunate stock picks and primarily due to alphabet and Amazon, two of the things that have really brought home the bacon..A question from Francois, we might have to send this to the Standard Bank experts, he says regarding the Vanguard, what are the tax implications if you purchase via the Webtrader platform? He's referring to US withholding tax and how they manage it..Do you know what Francois, we can, but Standard Bank Online has a really sophisticated system. I know because I'm a client and all you do at the end of the year is just download the material and you send that to the tax authorities, so don't worry too much about having to recalculate those things. Of course, nobody likes paying tax, particularly if you don't think you're getting value for money for it, but in this case, it is one of those things that Standard Bank will handle for you. They have a very sophisticated programme, but nothing wrong with double-checking by asking them..When you have a look at this slide, you can see that the top performer quite clearly was Amazon, Alphabet has done very well. Both of those really outperformed and we'll get a little bit more detail in a while, but as you can see, when we started the portfolio on the 5th of December it was trading at R11.27 to the US Dollar, it's now R13.00. So, our initial bet, the big bet that we took which was take your money offshore because we think that the Rand will be weak, that philosophy still holds..We'll go through the individual constituents of the portfolio in just a moment but you can see the Rand profit since we started the portfolio, or since we bought those shares and the best performing share actually, out of all of these, if you were to analyse them, is Amazon but the second best performing is Tesla. We got into Elon Musk's company at just the right time and you can see that it now has been really performing terribly well for us. It's up by 29%, and we've only had it for the last five months and you might remember, the way we buy shares in this portfolio, we stagger it over three months. That takes out the issue of finding the price going against you or indeed, the exchange rate..A question from Joanna Abrahams; she is a first-timer. She wants to know, (I think this is simple enough) how the stock pick was initially done, fundamentals versus technicals and then she would like to know what was the intended benchmark return?.Joanna thanks. It's a good question on two scores. I wrote a book called, "How to Invest like Warren Buffet", which was published in 2016 and it's actually been a bestseller. That's defined in South Africa, by selling over 5,000 copies. I think it's sold 8-9,000 copies now and we have used Warren Buffett's philosophies throughout. There are variances however, in certain instances, and an industry that I know very well, having been an internet entrepreneur for the last 20 years, is the online market. Therefore, I really like the business models of both Google and Amazon and despite the fact that these are not Buffett type shares, they were stocks that I could see, from my understanding of the industry, companies that I rated most highly..Similarly with Tesla, you could never pick Tesla on a value base situation, or Facebook, but they all came into the portfolio on an understanding or a belief in the power of exponentiality. It's fundamental, it's a value-based portfolio mostly, but then using, if you like, the experience and the understanding that I have of my own industry, which is the internet industry to select some of the stocks that at the time look terribly cheap. Facebook we watched for a year before buying it, Apple, we watched for a while before buying it and then bought it and it promptly fell straight afterwards, but now, as you can see, it's moving well into profit. Metro Bank was a purchase on the basis of a long-term bet in the UK of its equivalent of Capitec..We were recommended to have a look at Metro Bank by the CEO of Capitec and when I did my research into it, I really, really liked what I saw and it is a very similar model to Capitec's and one that is flourishing in the UK. Then Berkshire, IBM, and Apple were all bought on value basis. What we did there was we've used the normal Warren Buffet approach, which is the value of a company's stock is actually only worth the cash flow that you will receive from it, from today until judgement..We don't know when judgement day is, so I like to use 10 years in the international markets, five years in South African markets, South Africa being a lot riskier. When I see, or I believe that the cash flows that you'll get in the next five years, plus the likely selling price of that stock in five or ten years' time and to use US ratings, that gives you what is called an intrinsic value, once you've established your intrinsic value, you don't buy at anything higher than 80% of it and that gives you what is called a margin of safety. If all of this is sounding a little Greek to you, do get hold of my book and read through it. It has been written with the first-time investor in mind and it'll help you through a lot of these..They're really not difficult concepts once you apply your mind and investing is a whole lot more of just holding your nerve and being patient and doing your homework, sticking with what you understand and know, rather than getting sucked in by the day-to-day movements of shares or certainly, recommendations that come from pundits. So, you'll see, this is a long-term portfolio. We've only sold one share that we ever held in this portfolio and that was Novo Nordisk. That is a company that sells insulin. It looked like a great business, in fact, it did very well for this portfolio for a lengthy period, and then out of the blue it started going off the rails. Our belief is that you have to keep reassessing all the shares that you're holding, all the stocks that you own on a regular basis and that's why we do this every month..If you then see one of the companies that you've spent a lot of time understanding or trying to understand, doing things that make you concerned, then you must not be scared to sell the shares. We got our direction in this respect from Warren Buffett who put a huge investment into Tesco, a big retailer in the UK and sold out when he believed that Tesco management hadn't told him the whole truth. Similarly, with Novo Nordisk, we don't think the management told us the whole truth. We could see that they were starting to go off the rails and we sold only a few weeks before they came out with a profit warning and in fact, the share price, I think we kind of got out with our capital intact, but the share price on that one continued to decline afterwards. That, if you like, is the way that this portfolio is structured..A question from Francois, he wants to know what your perspective on passive investing as recommended by John Bogle is. He says "If one doesn't have the time to do share picking as you and your team does and one doesn't believe in active value investing via unit trusts, does one go for a passive investment strategy or do they just know your recommendations?".Francois, I really do like passive investing as a concept and it isn't difficult to work it out. You buy an ETF or an exchange traded fund. It's going to mirror the market as does the Vanguard S&P 500 Index and as you can see, it's our third-best performing stock in this index. It's not really fair, it should actually be number four because Tesla's only been there for a few months, and I think Facebook might also have been outperforming it, but even so, the market is always going to be 50% of the stocks because that's the way these things work, it's just the middle of averages..If you are an active manager, you have to try and outperform the market, so you have to beat 50% of your peers plus you have to take your fees, your cut and as we have seen from this wonderful bet that Warren Buffett made 9 years ago against the best hedge fund managers in the world, he offered $500,000 to any hedge fund manager who could beat him and his selection was the S&P 500 Index. It's that very same one that we have in our portfolio. Now with one year to go, the numbers, off the top of my head, are something like Buffett 68%, hedge funds 2%. He has completely crashed the marketing spiel, but remember, these exchange-traded funds do not advertise. As a result, they're not out there with billboards and at the airports telling you that you should invest with them because they save that money by keeping the costs down..John Bogle's view is; if you have lower costs you have to have a higher return on investment in the long-term if you're just tracking the market and it all makes a lot of sense. Again, 50% of active managers will beat the market; the other 50% will be behind the market before costs. When you put costs in, it becomes 30/70 and then not the same 30% every year, it can get a lot worse than that. What we do here is we try to go one step further. We say, "Do your research into stocks that you think are superior to the market generally, buy them at a price where you have a good margin of safety and hold them indefinitely. Don't sell the shares. That's where you start losing traction..That's where I love partnering with Standard Bank because Standard Bank has the same philosophy. They want you to make money as an investor. They want you to buy their stock and to actually see that your portfolio has appreciated, they do not encourage you to trade because they know just as well as we know that trading is, well, once you start adding up the costs of trading you're taking away your greatest advantage of an investor, which is hold it the long-term and it'll take care of itself, provided you make the right share selections and provided you keep watching them. I hope that answers the question..Thanks Alec..Moving onto the individual stocks now; well, you've seen the Rand performance of the individual stocks, there's a picture of it. I've put Tesla, Facebook and Metro in blue because they've been bought in the past year, so you can't really compare them like for like because they haven't been in the portfolio for that long, but as you can see, Tesla has been a fantastic performer for us, There are the dividends. We have another little divvy coming through in this past month and that was from the S&P 500 Index. As you'll see there, the Vanguard S&P 500 pays a dividend every quarter..Here's the story that I wanted to touch on. Now, because the Rand is a very, very important determinant in this whole portfolio and the performance of the portfolio because remember we start off by investing in Rands and if the Rand were to appreciate against the US Dollar, then you would have been better just keeping your money in a bank account, but as you can see here, this goes back to the beginning of this portfolio, which was in December 2014. At the time the Rand was R11.27 and it blew right out in January 2016. In fact, it all started, if you look very carefully at Nenegate. I'm not sure if you can pick up the cursor on the screen, but Nenegate was in December 2015 and you can see how the Rand shot up there..That's the wrong way by the way because this is the number of Rands to buy a US Dollar, then it came back after Pravin Gordhan was appointed and unfortunately, continued to go in the wrong direction to the US Dollar. That was mainly because of Dollar strength, but since then, the management of Treasury by Pravin Gordhan has been impeccable, He was on a roadshow and now, those of you who know these things will understand as a small country like South Africa, first of all, to get top investors into the room, is quite an achievement. You go there a few times a year to make sure that these international investors, these huge banks who could buy and sell South Africa many times over, that they have a relationship with you. It's just like a share really. If you're a company CEO, a lot of your time is spent on investor relations..South Africa has a lot of international debt and it wants to pay as low as possible interest rate on that debt and the way it does that is by making that debt attractive to purchasers of the debt, and in this case, it's these international investors. Pravin Gordhan was there the day before yesterday in presentations with these investors like Goldman Sachs and Schroders and you name it, the big money players of the world and he was recalled instantly, immediately, "Come home", by Jacob Zuma, the most inappropriate instruction you could imagine for somebody who's trying to sell the country, you have this off the wall instruction and well, what could Gordhan do? He says that at the pleasure of the President, he had to abort the roadshow..His deputy, haven't even left the country, Jonas was only going to meet up with him in New York, so Jonas never get on the plane that he should have done last night. Gordhan's back in the country today. Yesterday Jacob Zuma, the President met with various people to inform them of his decisions and his choices, including the South African Communist Party, to whom he told that he will be firing Gordhan. Well, here comes fun and we've already seen the way that the market has reacted, even though there's no confirmation of it yet, but that graph will give you a very, very good idea..This is what happened to the Rand over the last five days and as you can see, we were getting down towards R12.25 to the US Dollar and we're now on the wrong side of R13.00, so the decision by Zuma to recall Gordhan, although there has been no confirmation yet, apart from the Bloomberg story and from what he told the South African Communist Party, that Gordhan is going to get fired, his decision to recall him has already taken 75 cents off the Rand. This has real implications in the economy. For one thing, it's going to have an impact on the petrol price, because remember, this country imports two thirds of all the oil that is used to fuel the vehicles and the second thing that it's going to have an impact on is interest rates..Where the Reserve Bank was perhaps even considering a cut in interest rates, that definitely is not going to happen, so you're going to pay more for petrol and you can pay more for interest rates because of what Jacob Zuma did yesterday. Goodness, things happen very quickly, but as you can see, the Rand is pretty important when you are making offshore investments and it's the best way to hedge yourself against lunacy. Going through the individual constituents of the portfolio, this is the S&P 500 Index. We started with a third of the portfolio in Vanguard S&P 500 and we've been selling it down progressively as we've found what we believe to be good share picks..It's been a reasonably good performer, as you can see, starting from December 2014, it didn't do a lot for just about the whole of 2015 and most of 2016. Then when Donald Trump was elected in November, the share prices on Wall Street have rocketed and so has the S&P 500 Index, which reflects that, so this is a passive investment and it is a good place to put your money if you believe that in the long-term shares are good investments..Onto Alphabet, that's the old Google. Since December 2014, you can see the return there has been quite sensational and it is a stock that is going to continue to be a core holding in our portfolio. What we did was, initially we put a third of the money into the S&P 500 Index, another third was split between Alphabet, or Google, and Berkshire Hathaway two very strong companies and two companies that we thought had excellent business models. Berkshire Hathaway is a little bit like the S&P 500 Index because it is well spread across the US economy, whereas Google has the perfect business model..Google does have a big slug of its revenues coming through advertising. In fact, 86% comes from those search ads or adverts that you see on YouTube. It owns YouTube as well, but that's down from 90% a year ago, so it's still the lion's share, but at least they are making progress and trying to diversify their advertising to a degree, but as anybody who uses the internet knows, Google is synonymous with searching and as a consequence it's a very strong business model..What got me onto this, while at a Berkshire Hathaway Annual General Meeting, one of the questions to Warren Buffett was, "Why have you not bought into Google and what is wrong with the company?" He said he and Bill Gates, his friend, who he plays bridge with once a week, one of his closest friends and of course, the man who founded Microsoft, had spent a lot of time trying to poke holes in the Google business model and they couldn't. Well, you can imagine, when 30,000 people heard Buffett saying that after they left Omaha that weekend, a lot of those value investors bought into Google and certainly, when we started this portfolio, we decided to go with the perfect business model and that's what it has. In the past month, Google has had to ride a little bit of the rough waters..You'll see the share price was down in the last week or so after some adverts on YouTube, or there were some arguments with the advertisers because those adverts were being placed on inappropriate videos on YouTube, but it's not something that is likely to be life threatening in any way to Google. Their results, just to cap up on what happened most recently, their advertising clicks are only 36% up year-on-year, but the prices thereof are down by 15%. That's primarily because the prices that are paid for internet ads, which are on mobile are lower than the adverts, which are on desktops. Advertisers like desktops for whatever reason, but still you can see that the numbers are still going in the right direction in a big way..While on Alphabet Joanne wants to know your thoughts on Alibaba..In China, it's quite interesting, the two great entrepreneurs of China are both with the surname of Ma, Jack Ma, who's with Alibaba and Pony Ma, who is the CEO of TenCent. TenCent of course has a South African connection. Alibaba is a fantastic company. I don't know about the valuation. I've looked at it, but I haven't been able to make up my mind on Alibaba as a prospect. I'm very nervous of China because in any authoritarian government, you can have a decision that is taken that is going to affect a company without the company having any ability to resist that decision. Although, I think there's no question that China is a wonderful place to be doing business, I'm not so sure yet about investing in Chinese companies, not yet..It isn't a market that I'm comfortable enough, it's a very immature market still, for investors and you know, they don't call it Chinese accounting for nothing, so I'm a bit worried about those numbers, put it that way. Sorry, would love to help but I can't..This one I love though, Joanne, Amazon.com, it's Jeff Bezos, one of the smartest business people ever born and his share price, as you can see, we actually held onto Amazon for quite a while. This is from inception of the portfolio in 2014 and it really wasn't doing much, it was bumping along for at least a month to three months and then a set of results came out. As you can see, in February 2015 and the share price went up, then the next set of results, the share price went up and so on and so forth..There was a little bit of a reverse in the beginning of 2016, but this is a share that, if you can buy on the dips and just hold them through, you will not be sad in the long-term. It is an amazing business model; it is chewing up the retail competitors. The benefit here is what Discovery calls a shared value model where everybody wins. The company wins because you win because you get stuff cheaper and more efficiently delivered. When you have a shared value model, it is the ultimate in disruption and Amazon has the scale now where it really is. What it did in the past month was strike a deal in the Middle East, where it's now bought the e-commerce pioneer for the Middle East, a company called Souq.com and that's the kind of thing that Amazon is doing now, expanding into the global community..I live in London and we buy so much of our stuff from Amazon, not just watching TV via the Amazon Fire service, but also Amazon Food is now starting to take on some of the online food offerings and it's also clearly the right place to go when you want to buy anything for your home or books, etc. Another bit of news to come out of Amazon was that the long running lawsuit with the IRS in the United States, (their version of SARS) ended and it came in Amazon's favour. They stood to lose about $1.5bn and that's quite significant if you consider, this is a company that's still developing. Even though it's been around for a long time, it's profits are now only about $2.5bn, so if it had to pay the IRS $1.5bn for supposed tax problems from 2005 and 2006, you can imagine what the knock-on effect would have been..It was all to do with using Luxembourg as an offshore haven, but Amazon won the court case and that issue has been taken off the board. It should be good for Google as well, who have similar issues that they're dealing with, but a great stock. It's one of those you put in your portfolio and just forget about it, as you can with Berkshire Hathaway. It's been quite an interesting one to watch and you can see there, since November, the election of Donald Trump, this has been the trump dividend for Berkshire. It's been a very strong performer immediately after Trump's election because Trump was saying how he wanted to support old America, if you like, companies where Berkshire is most focused. What is interesting, though, was Berkshire invested about $20bn, just before his election..If you put that it into Rands you're able to buy top ten companies listed on the JSE, that's how much cash we're talking about there, a billion rolls off the tongue but you have to kind of count a little bit and see how long it would get you to get to that number, but Warren Buffet, the cofounder and Chief Executive of this company invested $20bn in shares just before Donald Trump was elected, so that's helped as well. They bought into Apple in a big way at around $110 a share; it's now sitting at $140. Apple is the second biggest shareholding in the Berkshire Hathaway portfolio and they've only bought it in the last six months..So, why did Buffett buy Apple when he had been steering away from tech stocks for a long time, but he used Philip Fisher's, another great investor of a bygone era, "scuttlebutt" and Joanne, if you buy my book, there's a whole profile in there about Fisher and "scuttlebutt". What "scuttlebutt" is, is finding out from people around you why they're using certain products. What Buffett did is, remember he's in his mid-eighties now, he asked his family about their iPhones and he discovered that it was central to their life and to their existence as my iPhone is to me and I suppose your Samsung is to you, Stuart, not really hey?.Nope..It is to me and Buffett said, "If it's that strong, Apple clearly has a strong brand, it was a relatively low valuation. It's sitting on a price to earnings now of 14.5% whereas the average for the S&P 500 is 18% and that comes from FactSet who analyse all these things in the United States and it also has been conducting share buybacks, which Buffett loves. So, if you look at it from a value investor's perspective, then Apple looked really good and off he went and bought the stock in a big way. I think he has $20bn worth of Apple shares today. What is also interesting about Apple, and we're talking a lot about Apple rather than Berkshire, is that it's the largest share in the iShare's gross exchange traded front and also the largest single holding in MSCI value exchange rated front. So, Apple is both a growth and a value stock. You don't' get that very often..Just on your simple moving average there, Alec, Joanne wants to know how many days have you taken..Just a very simple little 15-day moving average to give you a feeling; I'm not a technical analyst, I was very badly burnt early in my journalistic career by technical analysts, seeing that they really, it works fine up to a point and it does help you to look at the grass and to see whether the stock that you're investing in is trading at a high point or a low point, but to base your purchases and sales on the way a graph is moving against moving averages or various of the indicators, is pure lunacy. Investing is all about finding something that is good value and buying it at a cheap price, in other words, at a margin of safety between what the intrinsic value of that thing is. Then holding until some point in time you revert to the mean, but the price of that stock is going to get to, at least in line with what your intrinsic value is..Once it gets there then you have a decision on whether something cheaper is available, but to actually buy and sell shares on technical analysis to me is lunacy. There's the Apple share price. As you can see, it's done very well, picked up nicely again since the Trump election. It was just over $100 and as you'll see from our purchases, we bought it at quite a lot more than that. We had to ride this one through most of 2015 and as you can see, in 2015, the share price was in a channel, which was falling, but now it's going the other way around. Wonderful stock, I love this share, I love the company, it's the biggest, or the most valuable listed company in the United States, it's at an all-time high. People are already getting excited about the Apple 10 phone, or rather the tenth iteration of the Apple phone. It's probably going to be called Apple X..That only comes out I think in 2018, but the anticipation is, it'll come at the right time that it will be such an upgrade that many of us who have Apple iPhone 5's or 6's would want to upgrade them to the X when it finally does come and that's already getting built into the price. I like this because of the ecosystem as a long and I mean a real long-term Apple user since the days of, when it was the Apple 2E which was in the eighties..The advantage of having a secure ecosystem where you can download happily to your phone, to your laptop, to your desktop, use iTunes etc., use their various apps and know that they're secure from hacking, well hopefully from hacking, but certainly from most viruses gives you the peace of mind as a user of computers and that's what the business is all about. It gives me a lot of confidence. I love the product and I love the stock as well and still, as I said, 14.5 PE as against the average for the market of 18, so it's not overpriced..IBM is another one that required patience. As you can see, it did not perform until early January 2016. We were going backwards, but I realised at that time that Warren Buffett had bought his shares and IBM now is one of his top five holdings. He bought in at $170 a share. Our in was at $140's, but today it's at $170, Buffet's in profit, we're in profit and it's a company that I could spend half an hour just talking about, essentially, where IBM is, is it realised that its old business of moving boxes and hardware was not a fit purpose for the future, so it then has been moving into much higher quality and much higher growth areas. Those new areas, which are growing 20% plus a year in revenues are now about a third of the business..Ginni Rometty, the Chief Executive has been a wonderful leader, just showing that the ability of a good visionary who is tough enough to follow through on some difficult decisions, can actually impact the company, even a company that had huge challenges like IBM. The big thing for IBM as well, apart from the benefits it has with Watson, the artificial intelligence and there's so much going for it, is that it has relationships with pretty much all of the 500 largest companies in the United States, it would have been calling on these people and had relationships with them for many years. So, it's much easier to sell to a business if you have a relationship already. I just love this stock and so does Buffett, by the way, so that's one that you should have in your portfolio, a long way from being too expensive..Barclays, our first UK investment, came at pretty much the wrong time, as you can see. We invested there in April and along came Brexit in June. We were looking quite good for a period of time and then down came the Barclays share price. Now, although Barclays' share price is quite a lot higher than where we bought in, we bought in with South African Rands effectively, into a Pound investment and the Rand has appreciated strongly against the Pound, so on a Rand to Pound basis, we're pretty much breaking even. Why did I like Barclays? Well, the franchise is excellent, it's a High Street franchise in the UK, and the Brits do not like change. That's why the Pound has taken such a pounding since Brexit, because for the first time change is coming through..They voted for change with Brexit and now they are absorbing the consequences. One of the reflections of how the British do not like to change is, well it is a long mature, stable democracy, and they don't change their bank accounts. The bank accounts changing is maybe 1% a year, that's the turn rate, which is in Barclays' favour because you keep making money even if you aren't that good and they are getting better, they've made some huge changes there. They're also trading at about half of the net book value and that's really a great value proposition..Back to the the US, Phillip wants to know have you considered the impact of US inheritance taxes on the portfolio, is that something that comes to mind?.No Phillip I haven't because for the most part, the investors in this portfolio are South Africans and also my view is that you should be trying to get the maximum return on your assets and then let the lawyers and the experts deal with things like inheritance taxes and the other things that come and those are highly complex areas which the specialists will be able to help you through. It's not something that I have any expertise in whatsoever, so no, long answer, no..Here is a leftfield question Alec, any thoughts on India as an investment destination?.Love India. I've been looking at it for a while now. I think it's a bit like this stock on the screen here, Facebook. It just looks expensive, but if one had bought into India when Modi was elected, you would be doing incredibly well. I tried; I looked at some individual stocks and picked up from some of the international portfolios people who had made investments in India. In fact, I was at a conference where a guy gave three or four individual Indian stocks that really looked interesting, but I just don't know how the business is run there and the Guptas are not a very good advert for that country, as anyone in South Africa will know. There is a lot of corruption in India..Buffett went there about four or five years ago. He has a great affinity for Indian people, for people from an Indian culture indeed, Ajit Jain is his often tipped successor at Berkshire Hathaway and often at a Berkshire Hathaway AGM, they will sing a song to him he's that good and Buffett just loves the culture and the way the people think, but he hates the business culture of India. He went there and ran away because of corruption. Although, Modi is doing a lot to address that, there's a realisation that you have to get the corruption out of the system before you can have a flourishing economy, and he's managing to do that, there's still a lot of work to be done. So, to my individual ending and shares, is beyond me. However, what I was keen on is an Indian ETF and I have been watching those..Now those are exchange traded funds, so it would be taking up the entire Mumbai market and then breaking up in the weightings of individual stocks and you buy an exchange rated fund, which gives you a share in those stocks. That's something to consider and the way that India is likely to go into the future, probably good to consider, but I'm a bit nervous of going for individual shares in that country..Here's Facebook, again in my industry it is a giant, it's one of those exponential businesses and they have their issues from time to time, they've recently been getting more and more fans though and you can see that from when we bought into the share, which was in October last year, it did nothing. Again, pretty much, that's a consistent theme..We tend to be buying in a little early, so don't worry if you buy into these shares with us and they do nothing for a period of time because here's one we bought it in October and that was after a three-month period. Remember the staggering of the investments and as you can see, by the end of the year it was below where we had bought in. Since then it's started to get a little bit of momentum and the shares were up quite nicely, they were up about $4 in the past month as well. That was on Instagram, which is a sparkling success. It's a subsidiary of Facebook. They've started something there, on videos, what Facebook was pushing on the video side was Facebook Live (you might have heard of it), where they were trying to attract people to post live videos..Now, the realisation has set in that only sport and breaking news is interesting when it's live. The rest of the live stuff is actually pretty boring and that's why people in television and video tend to do a lot of editing of video before they put them onto websites or television stations. They've now abandoned Facebook Live on the basis that Instagram, their subsidiary has done very well with the system that they have, when they put a live video on, it dies pretty quickly, so there's a change in the direction. Facebook is now bringing this in as well on its video side. It hasn't been able to compete yet with YouTube, but it looks like it's now starting to go that way by bringing in video from professional content producers like CNN, Home Box Office, Comedy Central, etc. So, Facebook getting fans, $140 long way to go and Tesla Motors, look at that man from Pretoria..I mean, he's just blowing everybody away in the United States with his innovative ideas. He has a new one that I'm going to write about where he's integrating artificial intelligence with the human brain. Like he hasn't got enough on his plate already with Tesla Motors, with the business that they've accumulated or absorbed into Tesla, the Rive brothers also come from Pretoria, his cousins have been running SolarCity and of course, he has SpaceX, the rocket company and he wants to go to Mars with SpaceX. Now he has another new business, but Elon Musk's stock has taken a nice little bump in the past month, as you can see there, in fact, in the past few days it's gone up really strongly and the reason for that is there's very good news out of Tesla..Musk said that his new Tesla Model 3 will be, (he's forecasting this) outselling the BMW 3 Series and the Mercedes C-Class by the end of 2018, he's talking about selling 430,000 of these Model 3's next year, at the moment they're producing about 1,000, this July they will produce about 1,000 a week. Then 2,000 by August, 4,000 by September, 6000 by the end of the year, 10,000 by the end of next year per week, that is, so he's set ambitious targets, the market loves it, the share price is up and thank you, Elon, we seem to have bought your shares at the right time..Then finally Metro Bank PLC, this is one of those sleepers. It is a Capitec lookalike. I've done a lot of research into this company. I really, really like their business. It's one of those, when you walk into a Capitec branch you will immediately know that you're in a different branch to the other retail banks and the same with Metro Bank in the UK. You have greeters who are there to try and help you, to do business for you and the most important thing here is that their fees are a fraction of their competitors. The difference between Metro Bank and Capitec is Metro Bank also has business accounts. While it is difficult to attract a business account, they are certainly making a lot of progress in that market..It is run by an American who started a bank like this in the United States, built it up from nothing into one of the greatest success stories in that country, sold it off and then got tired of being retired and so started Metro Bank in the United Kingdom. Very, very good business, I like it, I've walked into it, I've kind of kicked the tyres on this one and it continues to expand very aggressively and if they were to open a branch close to where I live, well, I might just be tempted one day to go in and swap my account. It's that kind of a bank, even though people in Britain don't change bank accounts that often, those who are changing bank accounts, a bit like Capitec in South Africa, seem to be going to Metro Bank..I have a question from Fred. He says he's just opened a Webtrader account and he tried to purchase Amazon shares, but could only find the CFD…..The CFD is the same things as a share, it's exactly the same as a stock, so don't feel that you have the wrong one. You need to talk to the Standard Bank people about how the whole process works, but if it's a CFD and it's an equity, you will get the same performance out of the stock as you get in this portfolio..Let's wrap up here. We've come to the end of an hour of power, as you can see, just to close off there, the portfolio in Rands, a particularly good month this month for Apple shares, for Tesla shares, and for Facebook. Most of the other members of the portfolio were slightly down. Alphabet was down about $10 a share, Amazon was unchanged, Berkshire down $3, IBM down about $5, Barclays unchanged, and Metro down about £1. So, not huge changes in the portfolio, but generally speaking it hasn't been the worst month for the stock market as a whole, as people start worrying that the Donald Trump dividend is not played out or the Trump 'play' as they say, is over..The Rand, however, is looking increasingly vulnerable after having had a particularly good run on emerging markets and on the fact that changes elsewhere made it relatively more attractive. However, the latest moves by Jacob Zuma bringing Pravin Gordhan back after one day of a weeklong roadshow is going to send shockwaves. Should the firing of Gordhan go through, should Zuma actually do that, the implications for the currency are significant. At the moment, traders or investors are hitting their bets a little bit, believing perhaps that sanity will prevail, but one doesn't know in this young democracy that we inhabit. It's been my pleasure as always to be with you..Can I fire one more question from Stephen?.Yes..I suppose you've been living in the UK for a year now, he wants to know if you have any other suggestions on UK shares?.I'm looking Stephen. In fact, I wanted to interview Jarrod Cahn who you might remember, those of you who followed my radio show over the years, Jarrod used to be one of our ace stock pickers in the days of the tech boom in the late nineties and Jarrod is the stock picker for Credo and he works with Deon Gouws, who is ex-Sanlam and ex-Head of Research at RMB, he's their Chief Investment Officer. In fact, I think he was CIO at RMB as well, so these are really good guys and that interview is on BizNews, so if you're interested in UK stocks you can get some ideas. Please, on all of the other recommendations that you get, please go and do your homework, read about the company. If you were going to buy yourself a house, you would know what the prices are of other houses in the street, you'd know whether the electrics is good and whether the plumbing is sound..When you're buying shares, it's the same thing. You're buying something here that you need to be acquiring at a good price, that gives you good value because you first of all have to know, it's the right business that you believe in, you understand the business model and you would like to be in this business, a shareholder or a co-owner of this business in the long-term and then you must make sure that you don't overpay when you buy in because it's all very well to be a co-owner, but if you pay a lot more than the other co-owners are paying, you won't be quite as happy as they will be when you see the growth in the long-term. Well, that's it. It's been a real privilege and a pleasure..As usual, I'm jetting back to the UK this evening. Unfortunately, the weather's not going to be anything like as beautiful as Johannesburg's always is and it's great to have touched base with our team and friends and you know, it's one of the privileges of my life, I guess, is that expanding our business into the UK global market, that's the first step. It does mean that I can still come back to South Africa fairly regularly. So, it has been good to come to you from a different environment today and we look forward to having you in our company again in a month's time..Yes, thanks Alec, always good to have you around..Cheerio.

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