LONDON — During the webinar for Premium subscribers this week, we updated the two Biznews share bundles available for co-investment through EasyEquities. It also provided me the opportunity to explain the purpose of this exercise. No, despite my bank manager’s urgings, I have not switched media for money management. Rather, the two share bundles – US Exponential and SA Champions – are a mirror of my own share investments, their selection informed through my study of Warren Buffett supplemented by knowledge from a job involving the monitoring of broad investment trends. The innovative fractional ownership facility offered by EasyEquities allows others to also invest in the bundle, either in full or in part, and in my exact proportions or not. Having a bet alongside me, if you like. My philosophy is to select the constituents with the intention of owning them forever, only changing when there is a fundamental change to the business invested in. It’s not always possible to structure things perfectly from the outset, so there were quite a few changes in these bundles during their early days. But the holdings are mostly settled, although in the latest update you’ll have noticed the sale of Alphabet and the introduction of two major US banks. But for the most part, the portfolios are a guide, one that offers the advantage of a quarterly update on what’s been happening in the underlying companies. – Alec Hogg

The Biznews US Exponential portfolio:

It was another good quarter for the bundle, helped by the strong recovery in tech stocks after the September/October meltdown. Our core holding, Amazon.com, recovered almost all the losses from that scary couple months with a predictable impact on performance. In the 16 months since the portfolio was created, that 72% surge in the Amazon share price has been the major reason or a $100,000 initial investment turning into $126,513. With the rand having fallen from R13.90 to the current R14.60, that translates into a 33% growth in the bundle’s value, or growth of 25% at an annualised rate.
___STEADY_PAYWALL___

After selling Facebook when the Cambridge Analytica scandal hit last year, we have now also offloaded Google’s parent Alphabet. There has been a fundamental change in the way the Western world views the use of personal data, a swing which threatens the core business model of Google and Facebook. We switched money from the Alphabet sale into US banks JP Morgan and Morgan Stanley. Both stocks trade at historically cheap ratings. This switch also adds ballast to a portfolio which is heavily exposed to a volatile tech sector.

The Biznews SA Champions portfolio:

The approach here is to invest in JSE-listed stocks where investors can participate in the leveraging of human ingenuity. In other words, we avoid commodity and resource shares where valuations are dependent on pricing of the underlying products, an event which is determined by a complex range of factors. As a result, we compare the performance of this bundle with the JSE’s Industrial and Financial index, rather than the All Share index which is heavily influenced by resources stocks.

Despite the healthy return generated by cornerstone holding Naspers, the portfolio continues to underperform its benchmark, with the past quarter hit by a profit wipeout at construction group WBHO.

A contract to widen and upgrade roads in Melbourne went wrong because of a misinterpretation in what was required, resulting in the WBHO subsidiary having to set aside A$50m for the losses the additional work will require.

This is a rare blemish for an Aussie business which has served WBHO very well, and which now generates over half the group’s revenues. Together with another 20% from its more recently accumulated UK assets, WBHO’s exposure to the soggy South African civils and construction sector has dropped to under 30% of its overall business. We regard the Melbourne loss as an unfortunate one-off and won’t be selling WBHO.

The SA Champions bundle has lost 8.5% of the R100 000 it started with in January 2017. That compares with a 2% reverse by the benchmark. Like those watching the South African economy as a whole, being invested in the SA Champions bundle is an exercise in patience.