For years I resisted the temptation to invest funds abroad. Capital is the oil that greases the wheel of every economy. The more of it you have, the more wealth can be created. South Africa is very much a developing country which relies heavily on foreign inflows of capital to fund economic growth. So it went against my personal grain to channel funds abroad – no matter how much financial sense it made. But I have changed my mind. It’s a bit like the way Adam Smith explained his support for the concept of free enterprise in The Wealth of Nations. Capitalism flourishes, Smith argued, when it has a moral foundation. When the greedy and self-interested subvert the system, capitalism’s consequences are less than ideal. Similarly, a Government which loses its economic way will only comes to its senses when forced to face consequences of its actions (the old Soviet Union and reformed Red China prove the point). It is senseless to go down with a financial ship whose course I strongly disagree with. So after decades of resistance, I’ve joined the “invest offshore” camp. And am delighted to introduce the Biznews Global Share portfolio. In the weeks and months ahead, I’ll be offering my thoughts on what international shares you should be considering adding to your own portfolio of global equities – the best ways to immunise your savings against an SA Government’s insistence on pursuing idealistic but misguided economic policies. – AH
Biznews.com has been supported from the get-go by the country’s top retail stockbroker, Standard Bank Online Share Trading. Brett Duncan’s team stepped up to sponsor my annual trips to Davos and Omaha – reciprocated through post-event presentations – and kicked off as headline advertisers of our Global Investing section. So when they invited me to play around with Webtrader, their international stockbroking product, it was a pleasure to accept.
Getting into Webtrader is simple enough. InΒ a few clicks I’d registered for a Demo System. After clicking on the Stocks tab on the navigation bar, the rest is pretty intuitive. It did take me a while to work out currency denomination for the shares that would be put into the Biznews portfolio. To make it easier to follow, I’ve plumped US Dollars for all the stocks. This too was easy to work out – after the obligatory share code, shares listed on US exchanges carry the abbreviation of either xnys (NYSE) or xnas (NASDAQ).
@alechogg Like portfolio save for Amazon. They can sell, but profits are poor. I don’t see any improvement for long time. Wouldn’t own it
β Syd Vianello (@Siddels1000) October 6, 2014
The investment strategy:
The Biznews portfolio kicks off with $200 000. The intention is for it to be highly focused with a long-term objective. The ideal holding period, as my hero Warren Buffett puts it, is forever. An ETF and four stocks have been selected to get us going. Around three quarters of the portfolio will be allocated to these five counters with purchases phased in over three months. The first buying orders have been placed and the purchases will be made at the opening market prices on Monday, October 6th. To spread the initial investment, the next set of buying orders will be placed in a month’s time and then again in early December. We’ll track the progress regularly and I’ll be hosting webinars to discuss the latest developments and opportunities. Should be lots of fun so watch out for them.
The portfolio structure:
The strategy is to allocate just under half the portfolio to securing beta (market return) with the lion’s share in an ETF that tracks the US market’s S&P500 Index; and the balance invested in the world’s most successful conglomerate. The other half of the Biznews portfolio will be invested into selected stocks that will be earmarked to deliver the alpha. We’re focused on the USA, with the intention to take maximum advantage of the growth in the world’s biggest economy and future Rand weakness.
The counters:
* An allocation of 30% of the portfolio, $60 000, is being made to the US Dollar-priced Vanguard Exchange Traded Fund which tracks the S&P500 index (VOO:arcx). Funds will be invested in $20 000 chunks into the Biznews portfolio over the next three months with the first buying order for 115 units placed for tomorrow.
* A total of 15% of the portfolio will be invested into Berkshire Hathaway B (BRKb:xnys) shares. Together with the Vanguard ETF, Warren Buffett’s company provides the ideal defensive component for the Biznews portfolio. The Berkshire share price trades at a significant discount to its true underlying asset value – and with Buffett’s genius thrown in, it’s an obvious cornerstone. An order has been placed for 75 shares – with a similar investment proposed in each of the next two months.
Β Β * Another 15% of the Biznews portfolio is being invested in the company which has the best business model on earth – in an industry into which I have invested my own time these the last 17 years. Google (GOOG:xnas) is richly rated and deservedly so. Like every other stock on the planet, it will be influenced by Mr Market’s machinations, but as a long-term investment, it is peerless. An order has been placed for an initial 20 Google C shares. After the full allocation has been made during the next three months, Google together with the Vanguard ETF and Berkshire Hathaway will between them account for 60% of the portfolio.
* At the Value Investor’s conference in Omaha earlier this year, Robert Viner extolled the virtues of pharmaceuticals stock Novo Nordisk (NVO:xnys) . I’ve had a close look at the business and everything supports the Swiss-based money manager’s positive assessment. Viner runs a very tightly focused portfolio, holding just 10 stocks – Novo Nordisk the most recent addition. After Google, it is the second of the stocks selected to add alpha to the Biznews portfolio. A total of 8% of the portfolio will be invested into Novo Nordisk with the investment also spread over three months. The first buy order has been placed for 100 shares.
* There are few visionary entrepreneurs whose force of character and intense focus ensure that they can shrug off their critics indefinitely. The late Steve Jobs was one. Amazon.com’s (AMZN:xnas) founder and chairman Jeff Bezos is another. Like Google, this is a company which s proving that in the Internet age, the Gorillas reap disproportionate rewards. There will be much more shared about my attraction to Amazon (and the other shares in this portfolio) in the weeks and months ahead. But as with the others the purchase is being spread over three months – an order for 20 shares has now been placed.
So there’s the first purchases in the Biznews portfolio. By early December, we’ll have invested 75% of our firepower between these five counters. Apart from the Webcasts, there will be regular updates in the portfolio’s progress and additions. Keep an eye out.