In a turbulent month for global markets, Corion Capital’s David Bacher offers valuable insights on navigating volatility. While global equities saw slight declines, regional disparities created opportunities, with China’s undervaluation standing out. Bacher emphasises the importance of long-term strategy, cautioning against succumbing to short-term noise, especially with speculative assets like Bitcoin. He discusses the challenges facing South African markets, highlighting risks from both local politics and global uncertainty. Ultimately, Bacher encourages investors to focus on fundamentals, stay disciplined, and take advantage of volatility as a means to uncover hidden value in uncertain times.
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Edited transcript of the interview
Alec Hogg (00:08.761):
I don’t know historically whether February is supposed to be a good month or not, but the last month has been very turbulent, to say the least. David Bacher is the Chief Investment Officer at Corion Capital, and as always, he’s going to take us through what happened in investment markets in the month just past.
Alec Hogg (00:32.045):
David, I know there’s a saying: “Sell in May and go away,” and there’s also a sense that October is a bad month as well. But how does February usually perform?
David Bacher (00:46.115):
I haven’t looked at that statistically, so I’ll have to come back to you on that. But it certainly wasn’t an easy month for investors. I think the headline of a slightly negative month for global equities distorts what was actually a lot of noise and varied returns between countries and regions.
Alec Hogg (01:09.625):
It’s incredibly noisy at the moment, isn’t it?
David Bacher (01:13.399):
It is indeed. You get a headline every single day. We thought that would be the case when Trump was elected, and it’s very important not to get sucked in. You have to focus on what you think is a good investment strategy over the long term. At Corion, we base that on valuations, so we try to be disciplined, stick to our knitting, and hopefully, that works for our clients.
Alec Hogg (01:42.615):
Yeah, we’ve decided that instead of having our monthly portfolio update of our model portfolios, we’re going to do it quarterly now, because it’s so easy to get confused on a monthly basis. If you had taken a view a month ago and a view today on South Africa, based on the noise coming out of the White House, you’d probably be heading for the hills and dropping all your South African equities, even though they aren’t exactly expensive at the moment. I guess we think that maybe this will help us be a bit more disciplined—only returning to it every three months rather than doing it every month. Of course, what we do here is look at the past month. We’re not pushing this to a quarterly update, but it is a way you do this every day. This is your job. This is what puts bread on the table for the Bacher household. How do you keep yourself away from the noise?
David Bacher (02:42.415):
Well, I think sticking to our theme of the report we’re going through now, it’s always important to focus on the forest, not the falling leaves. Although there are lots of leaves falling, you’ve got to try and stick to what you believe will work over the long term. As I said earlier, it is incredibly difficult at this moment, but in times of volatility, there are also opportunities. When you see assets and prices move by 3 or 4% in a couple of days on headline news that you think is mostly noise, you have to embrace that volatility. Those are the times when people are panicking. If you believe that it will play out reasonably well over the longer term, then embrace that volatility. Buy into an asset that you think is cheap. Conversely, do the same on the other side. It’s a difficult, challenging time, but at Corion, we actually see it as an exciting time, one where we can provide value for our clients.
Alec Hogg (03:51.319):
Yeah, this is where the professionals actually make a difference—the good guys shape the market. But just to re-emphasise what you said earlier, yesterday, Nvidia’s share price was down 8.5%, Apple was down 1.5%, and Amazon down 3.5%. These are massive, massive moves. The decline in value terms is just huge. So, stay on the sidelines, just know what you’re doing. When you see a stock come down to a level where you feel that asset is now offering great value, that’s when you move. I love this illustration you gave us: seeing the forest and the falling leaves. But let’s have a look at the big markets and their performance over the past month.
David Bacher (04:45.839):
Yes, as I said earlier, it was an environment where, if you looked at the headline number—what global equities did—you’d see they were slightly down, about half a percent. You’d think it was quite a banal, uneventful month, but that hides a lot of noise. There was a massive dispersion of returns. We had China up 11%, while India—once the darling of emerging markets—was down 8%. So, you had a 20% difference in returns. For us, this represents an environment of opportunity. If you look at what we’ve been saying for some time, China’s valuations and equity market performance over the last few years have been very challenging, but they are now priced, we believe, for upside. Thankfully, we saw that last month. In contrast, India is the opposite. At some point, valuation matters, and I think that’s what we saw in February.
Alec Hogg (05:54.583):
Reversion to the mean, as you say, in your field—investment field. There’s been a lot of excitement about Bitcoin recently. We’ve got Stafford Masie speaking at the BizNews Conference next week. David, Bitcoin has arrived so quickly, and he’s going to be talking about how it might be offering great value right now after a big drawdown. Why do you guys call it a “drawdown,” by the way? Why not just say “loss” or “fall”?
David Bacher (06:26.265):
You’ll have to ask other people about that. I’ve just become accustomed to it. There’s no such thing as a “draw-up,” I suppose. It’s a good question. But on Bitcoin, if you look at what happened last month, it was down about 20%—that was until Friday. Then on Saturday, Trump comes out with some announcements about including Bitcoin in Federal Reserve policy, and it went up 10% overnight. Today, I see it’s down again, 8 to 10%. It’s a very volatile speculative asset, and you’ve got to be very careful when investing in assets like that. Yes, Bitcoin might have its play, and it has created a lot of wealth for people, but it comes with great risk, volatility, and uncertainty. We rarely encourage people to get too excited and put too much of their savings into such a volatile asset.
Alec Hogg (07:19.169):
I really like what we have in the BizNews portfolios because we started off with a very small percentage—just 2%. In fact, in one portfolio, that’s all we have there, and it’s done terribly well. So now, it’s sitting at 10%. If it goes from 10% to 8%, you don’t really mind because you know you started at 2%. But I guess if you’re jumping in at the top, it’s not so easy. Gold has had a very steady run, and you almost feel like maybe the old girl is the place to be putting it, rather than the young buck of Bitcoin.
David Bacher (07:53.701):
Yeah, I mean, gold has gone up almost two and a half times, or two times, in the last year. It’s had a great run on the back of inflationary concerns and sustained potential inflation. If you hold gold spot or even gold shares, which get more leverage, you would have done incredibly well.
Alec Hogg (08:16.013):
You’ve used a theme of bears in your presentation this month. Does that mean the Corion team says the bull’s out of the room?
David Bacher (08:30.289):
We used the bear theme for a number of reasons. There’s almost a story to be told. You’ll see in the presentation later that we highlight the bare necessities of electricity delivery, and the potential market trap we think has been forming in certain regions. So, we thought the bear analogy was fitting. It’s not just that we think there’s a potential bear market around the corner, but there are other reasons too.
Alec Hogg (09:05.845):
And clearly, what happened in the US over the past week is occupying a lot of minds. We’ve got a brilliant piece in BizNews Premium by Irina Filatova, who is Russian-South African. She studied in Russia, was a professor at Moscow University before coming to South Africa. Her whole thesis is that Putin won’t negotiate with Zelensky because Zelensky has been the face of resistance. As a consequence, that’s what Trump might be trying to do—get rid of Zelensky, then he can do a deal with Russia and stop the war.
David Bacher (09:45.947):
Correct. It’s really hard to read, and it’s actually quite sad to see in some respects. What investors don’t want is uncertainty, and Donald Trump’s approach to international affairs is, I think, perceived by many as unsettling for investors. His administration is characterised by big announcements, shifts in policy, and public statements, and that’s not a climate that favours investors who seek stable and predictable returns.
Alec Hogg (10:20.672):
David, it’s been fascinating talking to you. The noise level is just rising all the time. But one thing we’ve learned from you today is the importance of staying calm, focusing on the long-term view, and looking for value amid the turbulence. Thank you very much for your time today.
Alec Hogg
David Bacher, Chief Investment Officer at Corion Capital and I’m Alec Hogg from BizNews.com.
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