Vestact in 2016

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. Our aim is to manage your investments and try to achieve above average returns, without assuming undue risk. In 2016, we did not realise that goal. After two consecutive years of strong outperformance in 2014 and 2015, we trailed our benchmarks.

2. The Vestact Johannesburg model portfolio fell 11.5% while the All Share Top 40 index only declined by 4.1%.

3. The Vestact New York model portfolio rose only 1.1% while the S&P 500 rose 9.6%.

4. Remember that Vestact's investment strategy is to put you into stock-specific and sector-specific concentrated portfolios, so we expect such outcomes from time to time.

5. Be patient. Investment success takes time. To realise great gains, you have to be able to live through periods of losses. Even severe ones, as we experienced in 2008.

6. Over longer periods Vestact has beaten those benchmarks handily. Over 12 years we are 4.3% per annum (compounded) ahead in Johannesburg and 3.5% per annum (compounded) ahead in New York.

7. It was a tough year for healthcare stocks, where we maintain a strong focus. We are convinced that both public and private sector spending on health and wellness will rise sharply in years to come.

8. Our worst performing US stock was Nike, down 18.7%. Its results lagged on rising endorsement expenses and intense competition. We still love Nike! As Sasha tells you in almost every daily message, you own companies, not share prices. It's cheaper now, so you should buy some more.

9. The signature Vestact move of 2016 was sticking with MTN. Its problems in Nigeria are receding from view. Its share price has picked up nicely in recent weeks. Remember, it still has over 230 million (mostly happy) customers.

What should you expect from the year ahead?

1. Trump's presidency could be a dog show, but it seems likely to be good for multinational corporations.

2. Brexit could hammer the UK economy and destabilise Europe, but for now lets wait and see what happens. Those are strong economies full of resourceful people.

3. This year could bring more changes in SA politics. Things are more fluid now than before. This is good.

4. Interest rates are rising modestly in the USA. That's also fine.

5. China seems to be transitioning fairly smoothly to a more consumption based economy.

6. Commodity prices will probably go sideways. No point owning those mining companies, in our view.

7. Support your investments. Shop at Woolies, run in Nike shoes, etcetera.

8. Save more. This is more important than returns in determining how much money you have when you retire. Send your free cash to Vestact.

All the very best for 2017. Stay optimistic!

Paul Theron