I regard Piet Viljoen as a friend, have done so for a couple decades. We met when I investigated the serial outperformers in the unit trust sector (his Investec Opportunities Fund killed the competition) and have been pals ever since. Apart from other gifts, Piet was part of the group that introduced me to Warren Buffett – something for which I'll be ever grateful. Knowing Piet, he will be thriving under the growing criticism of his investment approach. He's argue that it's only when his last supporter has left town that a contrarian should feel comfortable. Judging by the comments of another veteran fund manager, Kimon Boyiatjis, Viljoen might be waiting a while for that to happen. – AH .ALEC HOGG: Kimon Boyiatjis from Trident Capital is in our Cape Town studio. Kimon, Piet Viljoen has been in the news quite a bit lately. We had Magnus Heystek, and investment advisor or independent financial analyst giving Piet a real revving in his column on Moneyweb. Then, I see we've picked that up on Biznews this morning 'has Piet's star waned'. He's also a big investor in ArcelorMittal whose results were out today, not impressing the market at all. You've been around long enough to see the cycles. Is this just another cycle for Piet?.KIMON BOYIATJIS: I think Piet's a great manager. We are in the limelight and that's part of our job. We stick our heads up and sometimes we're shot down. Piet's not the only person that it's ever happened to. I think he's a good manager. When it comes to the view that he's had, I share some of his views in that my biggest difference was I was much more bullish on the diversified miners, as you'll recall. I've never been keen on ArcelorMittal for a number of reasons, but I think the fact that he may have gotten one share wrong – it happens to all of us. I think what's important here is how do we take this forward and where do we think the market's going. I'm still maintaining the hold on things like Anglos. I think Anglos is good value. I think BHP Billiton's where you want to be – Rio Tinto. When it comes to the resource sector, that's where I prefer to take my exposure..You know that we've been anti holding any single miners, particularly in South Africa, for a number of reasons and we've been proven right there. To call a general bullish view on the resources sector is very difficult, but at the end of the day, I think one has to be very selective within that sector. There are parts of that sector that I like and parts of that sector that I would avoid like the plague..ALEC HOGG: I'm not so sure he's going to be wrong longer-term on ArcelorMittal, but the results today were really a shock to many investors. It's not often you see a big stock like that dropping seven percent. What was it that concerned them so?.KIMON BOYIATJIS: I'm not quite sure. I've never had an opportunity to dig into the numbers. It's one of those stocks, which I see in my peripheral vision and I'll say 'well, there we go again'. I've never really understood that stock. I've never understood how to value it across all the continents and generally, I've just never felt comfortable with owning that stock, so I haven't done enough work to actually, tell you what it was. From the outside, it appears that they expected better results on the unlisted, and they were really disappointed with what they saw at the headline view..ALEC HOGG: On the other hand, you have Sibanye, which is everyone's favourite – certainly, in the gold stocks at the moment. I know you look at the bigger companies. Is this one, given that it's a turnaround opportunity (now even considering going into platinum)? We had Neal Froneman in the studio yesterday, telling us that story. Is this one that you would make an exception for?.KIMON BOYIATJIS: No. One of the other things I look for is liquidity and you're quite right. We tend to concentrate on the top 60. We may often look at stocks that fall outside of that, which may show some kind of promise. However, what we'll often do – if we do like it, which hasn't happened for a while – if we like a smaller stock, what we may do is have a small percentage in the portfolios, but they're never going to have a significant weighting..ALEC HOGG: This is one you should have had a little bit in, Kimon – 200 percent in the last year..KIMON BOYIATJIS: Yes, I've made other mistakes, for example, I never owned Capitec, and so we do make our mistakes..ALEC HOGG: Okay, now on a broader scale: Sun International had the old Carousel Casino. It wanted to go into Pretoria. Sun International's likely opponent or objector was Tsogo Sun. And Sun International and Tsogo did a deal just a couple of weeks ago, on GrandWest. Surprise, surprise, Sun International applied to go in to build a new casino in Pretoria and Tsogo did not object. Things happen in boardrooms, don't they?.KIMON BOYIATJIS: Absolutely. It's also about divvying up the pie correctly. Then, you also have the possibility of the Competition Board. Therefore, rational decisions have to be made across that space. The gaming industry is very lucrative and I think what they have done, is sensible. It makes a lot of sense. You divvy up your regions. You do it in a congenial way and there's enough space for all of those players to grow, so I think it's a logical outcome and a welcome one. That way, there's no animosity. They carry on, going about their business..ALEC HOGG: It's interesting that you say that because in a chat I had yesterday with Hassen Adams, he said he's moved out of casinos. As you know, he sold his stake in GrandWest (this is Grand Parade Investments) as well as the stake in the KZN casino. He said his move out was shaped by his view on the horseracing industry and his experience there, where you had these huge grandstands that were no longer being filled, because people were either betting online or they were betting on the telephone. Isn't that something that should be bothering those who are investing in companies like Sun International that's making a R3bn investment into a bricks and mortar casino in Pretoria?.KIMON BOYIATJIS: Absolutely. That's been a significant factor for the gaming industry for the past couple of years. We've seen parts of the world that's trying to control the online gaming scene. I think it's difficult to control. I think it's going to grow. It's certainly going to eat into the profits of the bricks and mortar establishments and that's actually why places like GrandWest and other casinos are really trying to increase or diversify their revenue base a little bit away from the pure gambling aspect of it, although that is significant. That's why they have these shows – the entertainments and the restaurants etcetera. They try to make the casinos a destination point, and not purely for the gamblers. I'd be interested to know what kind of numbers of feet walking through these establishments, are there without gambling..I've often been to GrandWest to watch a rock show or a music festival, without ever going near the tables. I wonder how many other people are out there (like me), but nonetheless, you do actually contribute in some way or another, to the revenues of those establishments..ALEC HOGG: I'm like you. I love the shows. I'm not really – certainly, not anymore – interested in playing Blackjack when you know it is for the mathematically impaired, because the house has the advantage. Just to close off with, you like diversified miners. We heard the news today that Glencore has offloaded one of its assets for $7bn. Yesterday, Rio offloaded one of its assets (that it paid $3.7bn dollars for) and it $50m back – the coal operation in Mozambique, which had miscalculated on horribly. That I guess is something that must keep you concerned about that diversified miner, in particular, Rio Tinto..KIMON BOYIATJIS: That's why earlier, I mentioned that I preferred BHP and Anglos and I think it does offer opportunities for those on the periphery. The purchaser who paid the $50m might be making a wonderful investment. I often think, in the frenzy of a bull market that many big companies overpay for assets, but I think now is an opportunity for what Glencore did. I think it's great. They're deleveraging. They got a decent price. I think we're going to see a bit more of this activity now. Something important that happened this week, that's going to keep pressure on the equity markets to the downside is – and I don't know if too many people noticed – the liquidity change from Fed, where they have lowered their purchases from 35-billion to round about 20. That's significant – their repurchases of bonds – and I think that might have slipped under the radar. Yes, we have the problems with Argentina..We have geopolitical risk in the Middle East. However, I think one thing that is really significant and that is going to continue to affect the market is the stand of the Fed, in terms of their liquidity. They're tightening, whichever way you look at it, and that tightening effect is going to filter through to many aspects of the market. I think we're going to see a lot more pressure to the downside for the next couple of months for equities, and in that, I think you're going to see a lot of deals with the diversified miners. I think they're going to clean up their books, so you'll see a bit more activity. Yes, it can make you a nervous holder of those stocks, but I anticipate some housecleaning over the next couple of months..ALEC HOGG: Kimon Boyiatjis is with Trident Capital and with regard to quantitative easing, he's dead right. The continued tapering is growing apace, down from 35-billion per week to 20-billion that the Federal Reserve is putting into the system. They're still putting money into the system, but it is certainly turning around rapidly.
