Money manager Jean Pierre Verster discovered a few years ago that local is not always lekker when it comes to making money out of shares. His Protea Capital’s offshore hedge fund generated over 20% after fees in US Dollars last year. In this interview he explains the logic behind each of the five global stocks he selected in an article published in last week’s Financial Mail. Fascinating stories to each of them and with South Africans now able to invest into offshore stocks with ease, the opportunity is obvious. – Alec Hogg
After leaving the highly rated team at 36ONE, money manager Jean Pierre Verster has applied what he regards as his own secret weapon through what he calls a “quantamental” process – a tech-driven filtering process overlaid by old fashioned fundamental analysis of the most interesting options.
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The process threw up five stocks that Verster expects will perform well in the year ahead. In this podcasted interview, he discusses the story behind the appeal of these stocks – but cautions that surprises happen so a sensible strategy is to diversity your portfolio beyond a handful of shares, no matter how attractive they appear.
The five which Verster reckons will do well for investors in 2020 are Hong Kong-listed Meituan-Dianping; UK-listed Ferguson Plc; Norwegian company Salmar; Aussie-listed A2 Milk and the Toronto market’s Air Canada. Clicking on the share price graph automatically delivers the latest numbers courtesy of our partners at the Wall Street Journal.
The Hong Kong market’s third largest tech company after Alibaba and Tencent, Verster explains in the podcast that Meituan Dianping is China’s equivalent to Uber and Uber Eats, but with the distinct difference that it is completely dominant and is profitable. Tencent, in which SA’s Naspers owns 31%, holds a fifth of Meituan Dianping’s equity, providing both companies with a valuable alliance. And, as Verster points out, delivering a hidden benefit to the insights which the Naspers/Prosus group has into the food delivery sector. Naspers chairman Koos Bekker and Charles Searle, who is CEO of the group’s Internet Listed Assets, are among Tencent’s nine directors.
Ferguson is the world’s leading distributor of plumbing, air conditioning and heating components, with 95% of its revenues generated in North America. The initial appeal for Verster was based on corporate action with Ferguson planning to unbundle its UK assets and list its US operations in New York, unlocking significantly lost shareholder value. Also part of the story, however, is how climate change is altering weather patterns, introducing the need for air conditioning and heating in geographies where they were previously no required.
SalMar is a Norwegian-listed salmon farming business which is cashing in on the global trend towards healthier food. Among its attractions, Verster says in the podcast, is being among the pioneers of farming the fish in open oceans which opens up supply that is constrained by the physical limitation of Norway’s fjords where the farming is hitting capacity.
A2 Milk is a business created by a New Zealand scientist and a dairy farmer who intend addressing an opportunity presented by half of the world’s population being lactose intolerant – specifically Asians and Africans. Verster explains that a2 Milk is also a major beneficiary of the way Chinese consumers prefer foreign brands, a legacy from their eversion for local producers who were shown to add harmful ingredients to their milk.
Rounding out Verster’s picks is an old fashioned high margin, legislatively protected airline that operates in a country which lends itself to air travel. Air Canada is the senior partner in a comfortable duopoly and with its Government reluctant to allow foreigners to enter the sector, this is an airline which is one of the few that deliver consistent profits at high margins.
