Warren Buffett says he is not smart enough to predict the “big trends” – so he focuses on finding undervalued assets that he does understand.
Because when such opportunities emerge, says Buffett, they’re pretty obvious: “You don’t have to know whether someone weighs exactly 300 pounds or 320 pounds to know they’re fat…”
This kind of “fat pitch” emerged in the third quarter of last year when Wall Street went cold on Elon Musk’s electric car pioneer Tesla.
The analysts were unhappy at a deal Musk struck between his company and SolarCity, the retail renewable energy play run by his cousins that he grew up with in Pretoria, Lyndon and Peter Rive.
We saw the opportunity and added the stock to the Biznews Global portfolio, staggering our purchases over three months to eliminate the exchange rate volatility and buy in at a price of just over $200 per Tesla share.
Our view was the money managers were making the proverbial mountain out of a molehill because the merged business was 93% Tesla and only 7% SolarCity. After the transaction was bedded down Wall Street soon came to its senses. Tesla’s share price has virtually doubled to almost $400.
I’m seeing something similar now with the Rand. For reasons best known to yield-seeking forex traders, the currency is currently ignoring disturbing fundamentals of a pedestrian economy, poor governance and political instability.
The Rand’s strength is an opportunity for South Africans who have been procrastinating on externalising their investment portfolio.
Hindsight is sure to show us that right now is a great time to use those Rands to diversity through acquiring offshore assets. And with R1m per taxpayer with no exchange control questions asked, there’s plenty of ammo available.
He (and she) who hesitates is lost. Especially in the investment world. Not taking advantage of the Rand strength today may well leave you kicking yourself tomorrow.
