BizNews Investment Conference: Piet Viljoen on how to find hidden gems on the JSE

Re:CM founder, deep value investor Piet Viljoen will be delivering a keynote address at the inaugural Biznews Investment Conference on March 16 to 19. In this podcast, he provides perspective on Warren Buffett’s latest letter to shareholders – and explains how he uses his insights to uncover undiscovered gems on the JSE, including the four he will be sharing at the Conference.

On the importance of patience for investors on the JSE:

I think it’s not immediately clear what the unlock will be. In other words, it’s always hard to identify catalysts that will cause the value to be unlocked. But by and large, if you buy enough of these very cheap shares over time, most of the value will be unlocked. It’ll happen in different periods and in different ways and for different reasons, most of which is very difficult to forecast. But it will happen over time. We’ve already seen an inkling of that happening, but I think it will accelerate going forward.

On value in the ‘bombed out’ property sector:

With the proviso that they can survive because many of the property businesses have taken on large amounts of debt to satisfy their shareholders’ desire for income, so they were taking on debt, converting debt into income for their shareholders. So, to the extent you can survive and keep the banks happy and come out the other side, yes, I think there’s tremendous upside.

The importance of knowing exactly what you’re buying:

I think you need to understand what you’re buying into. As always, it’s caveat emptor, buyer beware. So you have to do your homework and understand what you’re buying into, what risks you take. Because as with any investment, you are taking risks. Doesn’t matter whether you’re buying Naspers or the smallest micro-cap on the JSE, you are taking some sort of risk and you need to understand what that risk is.

What he has to offer at the BizNews Investment Conference:

 

 I’m going to be talking about three or four very interesting situations that are currently available on the JSE that are cheap, dirt cheap. They happen to be good businesses as well. So it’s not like, as Warren Buffett would say, a ‘cigar butt’. These are actually good businesses run by good management, which are available quite cheaply on the JSE today. That’s the sweet spot… I’ll be focussing attention on those.

What drew him to Warren Buffett in Omaha 25 years ago:

At the time, I was with Investec Asset Management or NinetyOne, as they’re called now, and I was sort of figuring out what money management meant and how to manage money properly and what sort of synched with my psyche. I was reading all sorts of books and reading all sorts of biographies and about all sorts of different companies. I came across this company called Berkshire Hathaway and a person called Warren Buffett, who at that time, you might recall was starting to become very much out of favour. But his writings were fascinating. So I started reading up on this and his letters to shareholders. I decided then that I would go to Omaha to experience it for myself. That was around about ’96. It’s always a good touchstone to go back to, to get in connection with clear thinking.

On today’s market:

We are in a bull market… Asset prices are going up generally, worldwide. In a bull market, people or investors’ time horizons tend to contract. They want to get rich today or at least, tomorrow. They don’t want to wait five years or 10 years for a 5% compound annual return. They want to double their money tonight. So it’s normally a sign of the times when these sort of things happen… When retail investors buy into the market and push stocks sky high and you have all sorts of volatility going on… It’s normally a frothy sign that markets are extended to the upside, the historical top. I don’t want to go calling market tops or bottoms, but it’s a sign that things are trending towards excessive, frothy levels. And that happens every cycle.

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