Biznews selects and manages the portfolios of two bundles of shares on the EasyEquities platform – the SA Champions portfolio and the US Exponential portfolio. Every month, Alec Hogg provides an interactive webinar on developments at the companies whose shares are held in the portfolios, and a detailed update on the portfolios themselves.
May 2018 update by Alec Hogg:
This was a cracking four weeks for the Biznews US Exponential bundle, with its value jumping from the $113 545 reported at our webinar a month ago, to the current $122 559. This represents a return of 23% (annualised 39%) in US Dollars since launch in November 2017 with initial capital $100 000. Over this period the Rand has appreciated from R14.06 to the Dollar, to the current R12.32. As a result, the Rand return of the portfolio has been a more modest 8% (14% annualised).
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The Biznews SA Champions portfolio was steady in the four weeks since the last webinar and has delivered a marginal overall return since launching in January last year. The portfolio was originally positioned as a rand hedge, with investments restricted to those JSE-listed companies which had substantial offshore interests. The strengthening of the rand after Cyril Ramaphosa’s election as ANC president on December 18 has resulted in the portfolio’s mandate being changed to include all entrepreneurially-driven JSE listings.
After a substantial restructuring of the SA Champions bundle in March, the portfolio is now well positioned to benefit from the excellent value offered by its constituents. The Exponential portfolio’s recent change has also worked out – the sale of Tesla at $327 a share (now $291) with the cash reinvested into Alibaba, which is trading a little higher than the $192.74 purchase price.
Highlights of the past month:
Naspers – The largest holding in the SA Champions bundle showed signs of returning to favour among investors who were displeased to hear that the company will not be giving shareholders the $9.8bn in cash realised from the sale of 2% of Tencent. The Naspers share price rose strongly on the news that it had decided to sell its 11% stake in Flipkart to Walmart, which has acquired 77% control of the Indian ecommerce leader. The $2.2bn in cash that Naspers will receive represents a 257% return on its $616m investment in Flipkart. This takes its cash pile to $12bn, funds which have been earmarked for investment into its online classified (OLX), fintech (UPay) and food delivery focus areas.
Amazon.com – The Walmart purchase of Flipkart also brought Amazon’s continued success back into focus. The record-priced purchase by its US rival is in direct response to Amazon’s ability to raise its share of the Indian online retail market from 10% to 27% since 2014. Walmart’s newly acquired Flipkart is still the market leader, but its share of the market has contracted from 38% to 34% in the same period. Amazon’s share price rose 10% in the month, adding $4 000 to the value of the Exponential portfolio.
Apple Inc – The company’s share price surged in the past month on two bits of good news: quarterly results which easily outpaced Wall Street’s depressed expectations, and a ringing endorsement at the Berkshire Hathaway AGM from Berkshire chairman Warren Buffett. Berkshire acquired a further 75m Apple shares in the first quarter of 2018, raising its holding to 240m shares, now worth $45bn. This is comfortably the biggest single stock in Berkshire’s share portfolio and makes Berkshire the company’s third largest individual shareholder.
Facebook – An easy-going congressional inquiry into Facebook’s scandal around client data appropriation by Cambridge Analytica helped Mark Zuckerberg’s company to rebound from the post scandal lows. A solid set of quarterly results also helped the share to surge back to near its all-time higher. While grateful for the price rebound, we remain cautious about the outlook, however, and have earmarked this name for sale when changes are contemplated at the end of the June quarter. There is never just one cockroach in the kitchen.
