Vestact: Refining our Preferred Investment Themes

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.


We want earnings growth through the cycle and regular, rising dividends. We look for larger companies which are not likely to declare bankruptcy! We look for management teams who are not idiots. We accumulate stakes in these winners, at current prices. We want huge capital gains, thank you.


Despite headlines to the contrary, humankind continues to become more prosperous each year. Progress is mixed, of course, but people outside of the developed nations are eating better and living longer each year. Some of them are even getting loans, and using the internet on their mobile phones. Hah!


Trust me, one day soon, the US economy will expand at a rate higher than 3 percent per annum. Also, Eurozone member countries will once again have economies that surprise positively. The Euro is a fine currency. Remember, you heard it here.


Whilst we are sometimes accused of being too optimistic, it should be noted that there are many parts of the global economy which we do not feel positive about as they seem to be challenged, or maybe even in terminal decline. Those, we avoid. The gold industry, paper, investment banking, tobacco and liquor industries come to mind.


So how have we changed our minds? Well, we have narrowed our favoured investment themes to just four, from five.


Top of our list is the consumer sector. We look for companies with exposure to rising income levels in emerging markets. We like Massmart, African Bank, Tiger Brands, Famous Brands, Mr Price, Woolworths, Cashbuild, Nike, McDonalds, Coca Cola, Starbucks, Amazon.com and Richemont.


Also right up there are technology stocks, especially those which are involved with the mobile phones and the internet. Our favourites are Apple, MTN, Naspers, Visa, Cisco and Google.


We are also still bullish on commodity stocks. Many think that China is done growing, but we don't. Our holdings in this area are BHP Billiton, Sasol and Caterpillar.


We like the healthcare sector, as people spend more to prolong their lives, even in poorer countries. Our top holdings are Johnson & Johnson, Aspen, Zimmer and Teva.


So what did we kick out? We got tired of the infrastructure, building and property stocks. From 2003 to 2008 this sector looked great, but since then, has returned to its evil ways - good spells followed by very bad ones. Accordingly, we are advising clients to get out of PPC in SA portfolios, and Cemex in New York. No rush, when you are ready. There are better opportunities out there, with less risk.


From time to time, we also recommend opportunities for a long-term value unlocking or business transformation 'trade'. The time taken for the investment to mature could be 10 years, or more. At the moment we recommend General Electric, Waste Management, Bidvest and City Lodge on this basis.


Best wishes


Paul Theron



011 022 5440