Welcome to 2013!

Happy New Year, and welcome to 2013.

JSE portfolio returns for 2012

2012 was an excellent year for Vestact and its clients. The Vestact model portfolio in Johannesburg, inclusive of all costs, rose 32.4% for the year. This was sharply better than our benchmark, the JSE All Share Index Top40, which only managed an increase of 22.2%.

This was also much better than in 2011, where the market was basically flat for the year, and we were slightly down.

Our first role is to seek out the best investment opportunities. Vestact's winning investment formula is to take very long-term stakes in great companies, which operate in high-growth sectors of the economy. Accordingly, our investing performance needs to be measured over longer time periods. Pleasingly, we are up 58.2% over three years and up 62.5% over five years, also walloping the Top40 index.

Our second job is to ensure that our clients ride out the market storms and avoid being distracted by negative news headlines. Research shows that many investors miss out on market gains in the aftermath of financial crises, as they withdraw to the sidelines. We have navigated our way through two nasty, destructive market sell-offs in 2001-2003 and 2008-2009, keeping most of you fully invested.

We are about to reach a ten-year history of portfolio returns, having started tracking our model portfolio when Vestact opened its doors in March of 2003. So far, we have achieved an annualised compound return of 23.2%, compared to the JSE Alsi40, which has an annualised compound return of 18.4% over the same period.

In case you don't know, this kind of consistent market beating investment performance is most uncommon! Almost all of our competitors charge much higher fees and deliver much worse, index-lagging performance.

New York portfolio performance

As most of you know by now, we also manage money in New York, almost exclusively for South African-based based clients who have sent funds there from here.

In New York, our model portfolio increased in value by 19.4% for 2012, far exceeding our benchmark the S&P500, which climbed only 13.4%. Our three year returns of 39.0% and five year returns of 8.9% are also well ahead of the benchmark. We now have a track record of managing portfolios in the US market for almost eight years, and we have delivered index-beating returns from the same focused, low-volatility, direct equity approach.

Standout company performances

Of course, we really have to thank the companies in which we invest for the profits they made that drove their share prices higher on the stock market. A few noteworthy performances in the last twelve months are worth mentioning.

Aspen had a stellar year, up 74.8% for the year on the back of spectacular earnings growth from its new business acquisition in Australia.

Richemont hit all-time highs as its sales in China continued to impress. It registered gains of 63.1% for the twelve months.

Naspers continued to rise in value, despite the flopped Facebook listing, clocking up a gain of 53.8%.

Our largest holding in New York portfolios, Apple ended the year up 'only' 31.4%, having traded at above $700 (up over 100%) at one point. We are still fully invested there, and anticipate excellent sales of iPhones, iPads and iPods in 2013.

Visa also had a great year, zooming up by 47.0% for the year, thanks to the ongoing move away from cash banknotes for retail purchases around the world.

Of course, not all of our preferred holdings did well.

Sasol lagged the market this year, down 5.9%, but we are very pleased with their plans to build a massive gas-to-liquids petroleum refinery in Lake Charles, Louisiana.

In New York, Teva Pharmaceutical turned in a disappointing -8.5% for the year, and we advise switching that holding into more Johnson & Johnson, our core global healthcare holding.

Housekeeping news

On the business front, all is stable for the year ahead. Sasha, Byron and I are ready to go, still located in our offices in Melrose Arch, Johannesburg.

Sasha's daily blog (with a regular contribution from Byron) will continue to be the best market report, and is packed with observations about our world view and stock selection process. Sometimes people ask us why we give these ideas away for free, to all comers. The reason is that we like openness and accountability, and because the feedback makes us smarter.

Our administrative service provider for JSE portfolios, Barnard Jacobs Mellet (BJM) is changing its name to FNB Securities (it was acquired by the Firstrand Group a few years back). Our partner in New York, Seaport Securities is planning to change its settlement agent soon from Apex Clearing to JP Morgan. Neither of these changes will have any impact on clients.

Look out for Vestact in the media. Our policy is to be on TV more often than Spongebob Squarepants.

I am on CNBC Africa each weekday evening at 8pm co-anchoring a show called Hot Stoxx. This show is also repeated at 8am every weekday morning. I am also on Radio 702 and CapeTalk 567 on Friday evenings with Bruce Whitfield on the Money Show, doing a weekly Business Blunders comedy feature.

Sasha is the regular Monday guest on CNBC Africa Powerlunch. He also appears regularly on eTV and eNCA.

Byron is a standing guest once a week on CNBC Africa Closing Bell. He also appears frequently on the One o'Clock News on SABC 3 and on Radio Lotus.

Get more invested

As explained above, our advice is exceptional. In addition, our fees are very low by industry standards, and our service levels are (I think) quite high. So, you should really fire your other financial service providers, and send us more of your money.

Our outlook for markets in 2013 is positive, as usual.

Best wishes

Paul Theron


011 022 5440