The world is changing fast and to keep up you need local knowledge with global context.
Good rankings across the board in 2022’s performance tables by Fairtree and PSG illustrate once more how money managers are not all equal. In this review of the year that’s just passed, Corion’s David Bacher explains how these two houses were able to buck what for most investors was one of the worst years on record – particularly for those who piled into offshore stocks and specifically Big Tech. He also looks ahead to the challenges that lie ahead in 2023. Bacher spoke to Alec Hogg of BizNews.
- David on how bad was 2022 – 00:41
- On the Tesla and Amazon drop – 01:52
- On possible capitulation of tech shares – 03:14
- On lessons learnt from the past year – 04:54
- On the old basics coming into play – 06:23
- On Decembers winners and losers in asset classes – 07:52
- On the top 40 performers on the JSE – 11:43
- On individual returns – 13:05
- On industrials – 14:29
- On the performances of Fairtree and PSG – 16:09
- On the Allan Gray comeback – 18:41
- On the worst performing stocks – 19:52
- On prospects for 2023 – 22:14
David Bacher on how bad 2022 was relative to other years
It was not a great year. Global equities end of the year down 18% while global bonds end of the year also down significantly. So taking these two main asset classes together, you had one of the worst years in decades and I actually think that 2002 might even be worse for many retail investors who seem to get caught up in the whole fourth industrial revolution at any cost stampede. You know, the Nasdaq, for example, is down 33%. And many dinner talk favourites of 2021, such as Tesla and Bitcoin, lost about two thirds of their value. So not a great year for global investors, but fortunately for our local equities, we in South Africa actually fared significantly better than the global markets in US dollars. South African equities were down about 8%, but in Rand terms, our market was actually in the green by about 4%.
On the lessons learnt
Mr Market always teaches us lessons, but I think last year was one for the books. Lessons that come to mind? Probably lesson one: don’t lose sight of fundamentals. Investment investors put a lot of money in what we at Corion call flock stocks. Countries that have done exceptionally well over the last decade and become household names. But as I said earlier, great companies don’t necessarily mean great investments. Lesson two probably is to keep investing simple. Don’t get caught up in things you don’t understand. And the hype. Know what you’re investing in. A lot of people invest in the likes of crypto and NFTs without really understanding that these are high risk, unregulated investments, and people need to be a lot more cautious than they were. And I think that probably the last main lesson that I probably would reflect on is to remember that equities are by nature very volatile. You’ve got to take a long term view and one should only invest in equities if you can endure that volatility and have a reasonably long term horizon over ten years, 15 years or 20 years. Equities will reward you for that volatility, but you have to be patient.
On the challenges we are likely to face this year
There are always risks. There’s always inevitably a ton of reasons why not to invest, you know, in investing it’s always about weighing up the upside potential versus a downside risk. So I don’t want to come across as a raging bear given last year’s fall in most asset prices, but I think the risk that worries us the most at Corion is, you know, if earnings for the year ahead are much worse than expected, we’re coming off all time high corporate margins. And with inflation and recessionary pressures in place, earnings of companies have the potential to to really roll over. On Friday, we start to get the majority of some big names coming to market with their fourth quarter results. I think a lot of people need to watch that carefully.
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