The world is changing fast and to keep up you need local knowledge with global context.
Counterpoint money manager Piet Viljoen talks us through what was a busy week for local and international markets. Viljoen – rational as always – talks highly of Bernard Swanepoel, a decorated mining executive who was recently appointed to the board of debt-laden construction company Aveng. He believes Swanepoel’s in-depth mining experience will be invaluable to Aveng as the mining industry is one of its primary drivers of revenue. The global energy crunch is also discussed, with Viljoen bullish on counters within the sector owing to constrained supply as a result of underinvestment in the industry. The different investment styles, such as growth vs value investing, is also touched on, with Viljoen outlining that there is more than one way to skin a cat when managing money. – Justin Rowe-Roberts
Piet Viljoen on Bernard Swanepoel’s appointment to the board of Aveng:
Experience in any industry generally and specifically in the mining industry is invaluable, so I think he’ll bring a lot of experience to the board of Aveng. Given that a large part of the business is providing service to the mining industry, that will be invaluable to the business. And on top of all that experience, Bernard (Swanepoel) is also quite a level-headed guy, and he’ll bring that to the table as well.
On the RMH board rejecting the Brightbridge and Fledge ‘cheeky’ offers:
It does seem cheeky, but that is roughly the price at which the market is valuing those properties if you look at RMH’s share price and you work it through to the underlying properties. The market is valuing those properties at quite a big discount. So, I reckon the potential buyers looked at what the market was saying and said we’ll go along with that. We’ll offer that sort of price for these properties. I think the price they offered was quite low. They know these properties very well. Some of the related parties there sold those properties to RMH in the first place, so they know those properties quite well. They knew what they were getting and they were trying to get a bargain, as one would do in the market. And you know, it’s fine, that’s how the market works. The fact that the board of RMH has turned down the offer, speaks highly of RMH that they want to try and maximise the value. They are probably ignoring what the market is saying about their share price and looking at the underlying fundamental value, which is more important.
On whether there’s a happy medium between growth and value investing:
With the benefit of hindsight, there is always something you can do. But with foresight, it’s very, very hard. Different styles perform differently under different market conditions, and that is something one has to live with. It’s very dangerous to change the style with which you manage money to suit what you think is the current situation. Because if you do that, then I believe you are heading for problems. There are many ways to skin the cat. There’s not any value. There’s not only momentum. There’s growth, there are all sorts of different styles. The important thing is you pick a style or a process that makes sense, which works over the medium to long term and with which you are psychologically comfortable. In other words, with which you can stick over time. Because the important thing is the consistency of the process, not necessarily what the process is, because as I said, there are many different ways to skin the cat. There’s not only one correct way.
On the oil and energy sector:
The commodity space has been quite interesting. I do think that longer term, the commodity that I would be the most bullish about is oil or energy. The energy market as a whole has been underinvested over the past five to 10 years. That means there is less and less of that commodity coming out of the ground as time goes by and the global demand for energy is not declining. If anything, over the next five to 10 years, it will definitely increase. Unfortunately, as good and beneficial as it sounds, renewables are not going to make up the gap, not over that time frame. It will take a long time for us to move from carbon-based fuels to renewable energy and it’ll cost a lot of money. I’m not sure there is the appetite from countries to spend that sort of money on retrofitting their systems to use renewable energy. So, I think we are coming into a crunch time in the next five to 10 years, where the price of carbon fuels will go up enough to incentivise the companies that produce them or extract them to invest more in additional extractive capacity so that we can produce more of them because the world will need more of those going forward, there’s no doubt.
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