In this interview, Byron Lotter of Vestact discusses why the firm remains focused on U.S. stocks despite a strong rally in South Africa. He highlights the U.S. market’s innovation, growth potential, and resilience, while also addressing Nvidia, Tesla, China’s economy, and the impact of political factors like the U.S. election. Lotter spoke to Nielsen Network CEO Bronwyn Nielsen.
Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.
Watch here
Listen here
Extended transcript of the interview ___STEADY_PAYWALL___
Bronwyn Nielsen (00:01.89):
Byron Lotter, it must be a tough call right now when you’re looking to the U.S. market for an investment thesis, while the local market is rallying with no end in sight. How do you stay confident when the tide seems to have turned?
Byron Lotter (00:23.94):
Hi, Bronwyn. Yes, thanks for having me. You’ve painted a good picture of where Vestact stands. We’re still 90% focused on offshore U.S. stock markets, and honestly, if you’re looking at a 10-year time horizon, it should probably stay that way. A lot of our clients, and likely the majority of your listeners, are South Africa-based, so they already have a lot of assets here.
Naturally, through their homes, holiday houses, businesses, and income, they have significant exposure to South Africa. In my opinion, that’s more than enough. While I am bullish and optimistic—it’s an exciting time, and we haven’t had this positive sentiment in a long while—it’s contagious, and it’s great to be part of it. But I still believe that for South Africans who work and save hard, their money is better placed in the U.S. stock market. It’s not just about safety or the South African context. We believe the innovation, excitement, and greater growth potential are in the U.S.
Bronwyn Nielsen (01:42.10):
You’re certainly not shy as Vestact about holding your positions and even increasing weightings, despite the fact that stocks have rallied hard. Let’s talk about tech stocks in the U.S., where you can’t seem to get enough. Is that still true?
Byron Lotter (02:00.96):
I think we’ve reached a point where categorizing stocks as “tech” might be a mistake. Is Amazon a tech stock? It’s a retailer. Apple is a hardware manufacturer and also a retailer. Many of these companies provide cloud services across industries. So, boxing them in as just tech stocks seems like a mistake. That said, there are good opportunities in other sectors.
Interestingly, we have a bit of an Nvidia problem at Vestact, where we almost have too much due to its incredible returns. But I still believe in the potential of artificial intelligence, data hosting, and what the tech sector will deliver in the future. So, no need to feel over-exposed to it.
Bronwyn Nielsen (03:06.16):
Are you going to sell any of your Nvidia shares anytime soon?
Byron Lotter (03:12.51):
It depends on a client-by-client basis. If it’s 40% of your portfolio, maybe it’s prudent to trim some shares and diversify. But you could sell Nvidia and top up on Microsoft, Google, or Apple. You can stay within that realm. Being overly focused on one stock can be risky.
That said, if a new client comes to us, we’re still buying Nvidia. We see continued upside. I don’t think this AI boom is anywhere near its end, and we’re excited to see what’s next.
Bronwyn Nielsen (03:56.02):
Yesterday, I spoke with Magnus Heystek, and he said he wasn’t giving up Tesla anytime soon, though Cy Jacobs from 361 Asset Management and Walter Aylett from Aylett & Co. say Tesla is way overvalued. Where do you stand?
Byron Lotter (04:13.87):
That’s what makes markets fun—smart people arriving at opposite conclusions on the same thing, especially something as polarizing as Tesla. Elon Musk hasn’t done himself any favors in terms of polarization with his political rallies, which, as a shareholder, I’d prefer he avoided.
But I’m still positive on Tesla. I don’t think it should be valued as a car company. The real upside comes from their self-driving technology. Once they crack that code—and I believe they will—they have 500,000 cars hitting the roads every quarter, gathering huge amounts of data. I don’t think anyone can compete with Tesla on self-driving technology today.
When they crack that code, they’ll likely sell the software to their existing fleet and other manufacturers, which has massive potential. Then it’s self-driving taxis and beyond. I’m excited about Tesla, but, of course, you need to be cautious and not put all your savings into one stock. But it definitely has a place in a portfolio.
Bronwyn Nielsen (05:39.14):
Do you pay attention to the news coming out of China? There’s concern about China’s slowdown and lower-than-expected GDP growth, as well as less stimulus from the government than initially anticipated. The World Bank also lowered its GDP forecasts. Does this affect your portfolio given its U.S.-centric focus?
Byron Lotter (06:08.93):
Of course. China is the second-largest economy in the world, so it’s important, both as South Africans and U.S. investors. Many of our stocks have significant exposure to China, like Tesla, Apple, and Nike, whether it’s through manufacturing or selling to Chinese consumers. So, it’s definitely something to watch.
This latest stimulus-led rally in China doesn’t seem to have strong fundamentals. A market reacting to government stimulus like this doesn’t feel sustainable. It’s rare to see that, and it just doesn’t feel like it will last. Some experts say you need Chinese exposure, but, coming from a South African perspective, where we already deal with a volatile regulatory environment, I don’t think it’s necessary to invest in a jurisdiction where regulations can change so quickly. We saw how the Chinese government reacted during COVID, heavily regulating sectors like gaming, which impacted companies like Tencent.
Many South Africans already have indirect exposure to China through Naspers and commodities, so it’s probably better to avoid direct investments in Chinese stocks.
Bronwyn Nielsen (07:53.78):
Byron, last question. You mentioned you’d prefer Elon Musk stay out of politics, but the U.S. election is fast approaching. Is there any credibility to the “Trump trade”—the idea that markets will rally if Trump wins?
Byron Lotter (08:14.78):
I don’t know. If anyone claims to know who will win or how the stock market will react, I wouldn’t trust them. At least now, both candidates are known entities. When Trump won in 2016, it was a big shock. But we’ve had a term with Trump and one with Biden. So, I don’t know how the market will react, but we invest in stocks that can weather political changes—whether it’s Trump, Democrats, or turmoil of any kind.
The good thing about the U.S. is that both parties, whether Democrat or Republican, operate in a capitalistic environment that protects businesses. That’s why we believe it’s the best place to invest, as it fosters innovation and business success.
Bronwyn Nielsen (09:32.26):
Byron Lotter, thank you so much for joining us on BizNews and sharing your insights.
Byron Lotter (09:34.88):
Thank you.
Bronwyn Nielsen (09:39.71):
Thanks, Byron. I’m just going to stop the recording there.
Read also:
