Research archive for GENERAL

Dear Vestact clients This is my 16th annual client message, as Vestact was established in 2003. We are really hoping that 2019 will be a good year, because 2018 was not.

An interesting new research paper suggests that professional investors typically underperform their benchmarks because they buy stocks well, but sell them very badly.

Dear client This is my 14th annual New Year letter. Since time is short and people don't seem to like to read long things these days, I'm doing this in point form!

1. There used to be six full time employees at Vestact. They are Mavis Bande (reception and tea), Howard Mashego (documentation and driving), Michael Treherne, Byron Lotter, Sasha Naryshkine and Paul Theron (all portfolio managers). The latest addition to the portfolio management team (he started late last year) is Bright Khumalo. He is a recent UCT BComm graduate, and a real student of the markets.

Why save? Vestact helps people save money. We are here to help the rich get richer. We want you to be one of Mr Piketty's top 1% of wealthy humans. There, we said it.

Everyone is back at work now, so lets take a look at how our investments performed in 2014, and ponder what might lie ahead for us in 2015. We will touch on both our Johannesburg and New York portfolios.

Two articles that I found very interesting, were relating to company valuations and the stock price vertigo that most people are currently experiencing. Personally I think that if people could only see the stock price today and not the movement of the last 5 years they would be less worried. Is human nature to say what goes up must come down at some point?

Yesterday the question was put to me twice; "is it not worth holding a small part of your portfolio in gold for the times when the market drops?"

Our new website has gone live We have launched our freshly re-designed website. The last version was from 2002, so it was long overdue! Go and take a look at http://www.vestact.com. The site requires a secure log in to see your own portfolio. Let us know if you need a password reminder!

Platinum miners woes I think the stirring of the pot needs to be understood at all levels, I think that the ex president of the youth league (Berets. You wear it like this guy -> President Chavez) has political agendas here. But I also think that the miners concerns are valid. But economically speaking, the mines cannot afford it. The most difficult and bitter pill in all of this to swallow is actually that there is not a shortage of labour, there are many in the labour force who would work for that amount of money in a flash. There are brutal economic realities. Every business and indeed the country itself has limitations. I worked out that over the last four financial years that the big three platinum producers (Amplats, Implats and Lonmin) paid around 21 billion Rands worth of taxes. Lonmin actually contributed only half a billion Rands to the national fiscus. Capex spend by these three, that was trickier, but I found it.

Here at Vestact, we are slow to change our minds. Our investment strategy is to identify durable economic themes for the forthcoming decades, and then to seek out well-positioned companies to benefit from them.

This is the most eye popping graph you will see today, and it came to me via one of my favourite bloggers, Prof. Mark J Perry on his blogsite Carpe Diem, borrowing the phrase from everyone from Robin Williams in Dead Poets Society. First the picture:

By far and away the biggest news yesterday (outside of the Facebook IPO, that was huge) was the imminent announcement that Xstrata and Glencore would merge. So? Who cares you ask? Well, listen in here for a bit, just concentrate. First, Glencore owns 34 percent of Xstrata. Both of these companies are listed in London. Both stock prices went up, because this would be seen as a positive merger for both sets of shareholders. But many tongues started wagging that the combined entity, of around 80 billion Dollars or so, could set in motion another wave of resource company consolidation. And of course Anglo American was once a target in the merger of equals advance from Xstrata back in June 2009.

It has nothing to do with us. At least not in the short term. I said to Byron, darn, the selloff in the Rand coincided with the parliamentary vote (see below, I guess you know already) but in actual fact the currency all fall down had probably very little to do with that event. Like I said above, another look at Q3 US GDP fell short of expectations, at almost the same time. So how do I know that the selloff in the Rand has nothing to do with what we get up to here? Simple, I shall present two exhibits, first via Joe Weisenthal, I mean the @TheStalwart is where you can find him on Twitter.

That lovable old man was interviewed by Becky Quick (who has just returned from maternity leave) on CNBC yesterday, there is a whole host of videos that you can watch (if you want) to see the whole interview. And there is also the transcript, not the best in the world, but obviously the software is working on it. Check out the summary, where Becky gives a little insight into the interview with the Oracle of Omaha and Buffett's Bet on Big Blue. The Big Blue being IBM, he revealed the significant size of the purchase on CNBC for the first time yesterday.