Portfolio watch: What top managers have been buying and selling

SIM Top Choice Equity Fund, Momentum Top 25 Fund and Investec Equity Fund.

This article was first published in The Investor. Read the full magazine here.

CAPE TOWN – The South African equity market is in an interesting state. With the FTSE/JSE All Share Index currently trading at a price-to-earnings multiple of over 19 times, local asset managers are hard-pressed to find good opportunities.

Many of the quality companies on the bourse have already run hard and some analysts argue that a lot of future earnings have already been priced in to their shares. The danger is therefore overpaying for growth.

Over the last three years, the SIM Top Choice Equity Fund, Momentum Top 25 Fund and Investec Equity Fund are all within the top ten performers. They have managed to capture the good returns the market has offered, with all of them showing annualised growth of around 19% for the period.

The question now is how are they positioning their portfolios as the market appears to be moving into a new phase?

The below tables show which counters these funds bought into, and which they sold out of over the 12 months to the end of September 2015. The share must have had a weighting of more than 1% to be considered.

The tables also show any substantial changes to positions within the funds. To be reflected, the change must be more than a 1% shift in the weighting of the holding which is not just due to price movement.

 

SIM Top Choice Equity Fund

In

Out

AECI

Anglo American Platinum

Delta Property Fund

BHP Billiton

Northam Platinum

Grindrod

 

New Europe Property Investments

Up

Down

Mondi

Anglo American Plc

Barclays Africa

MTN

British American Tobacco

Tsogo Sun

Old Mutual

 

Bidvest

 

Naspers

 

Source: ProfileData

Unsurprisingly, miners have been out of favour in the SIM fund. It has significantly reduced its exposure to Anglo American, while also selling out of BHP Billiton and Anglo American Platinum.

It has however bought into Northam Platinum. Despite the counter being down nearly 50% over the last six months, many analysts see it as a bright spot in the local platinum industry.

SIM has also sold out of Grindrod after a three year period in which the share surged by over 100% and then just as quickly gave up all of those gains. The uneasy state of the global economy continues to create uncertainty about the company’s prospects.

In contrast, the fund stocked up on more of a few companies that have delivered great returns for investors over the last few years such as Mondi, Naspers, British American Tobacco and Old Mutual. Together, these four stocks account for more than a third of the entire portfolio.

Interestingly SIM also increased its exposure to Barlcays Africa, which is also one of its largest holdings. This is despite the counter effectively trading flat since the start of 2013.

Perhaps the most notable move in the fund is the inclusion of the high-yielding Delta Property Fund. The property counter, which specialises in leasing to government, is showing an historical yield of over 11%, but the share price has traded sideways for five years.

 

Momentum Top 25 Fund

In

Out

Growthpoint

Impala Platinum

Tiger Brands

 

Vodacom

 

Woolworths

 

Up

Down

 

Aspen

 

BHP Billiton

 

Richemont

 

MTN

Source: ProfileData

Momentum has also shown a lack of enthusiasm for mining stocks, selling out of Impala Platinum and reducing its exposure to BHP Billiton. Although not reflected on the above table, it has however kept faith in Anglo American.

It is notable that it has bought into South Africa’s premier property stock, Growthpoint. While it undoubtedly holds quality assets, the company’s share price is effectively flat over the last three years. With little prospect of buying sizeable properties locally there are questions around where further growth might come from.

The fund has also added the high-flying Woolworths to its portfolio, despite the counter trading at what many would see as a rather demanding price-to-earnings ratio of 28 times. The retailer has however been an incredibly consistent performer over the last five years and with its prospects in Australia looking positive, some would argue that its cash flows justify the price.

 

Investec Equity Fund

In

Out

AngloGold Ashanti

Discovery

Capitec

Glencore

Imperial

Omnia

KAP International

Sanlam

New Europe Property Investments

 

Telkom

 

Tongaat Hulett

 

Truworths

 

Vodacom

 

Up

Down

British American Tobacco

FirstRand

Capital & Counties

Liberty

Richemont

Nampak

Investec

RMB Holdings

Mondi

Sappi

Naspers

Sasol

Source: ProfileData

Investec has been far more active than the other two funds. It also has a much larger portfolio, with over 40 stocks in its fund, as opposed to the other two, which only hold between 20 and 25.

As with SIM and Momentum, there has been a move away from diversified miners, with Glencore sold out of the portfolio. The company was one of Investec’s top ten holdings at the end of September last year, so this is a significant shift.

Interestingly however, is that the fund has bought into AngloGold Ashanti. With the counter having lost nearly three quarters of its value in the last four years and with some analysts suggesting that there is reason to be bullish on gold from its current levels, perhaps Investec sees some value here.

Another out-of-favour company that the fund has bought into is Imperial. The stock is down over 25% from its highs in May 2013, and has failed to inspire investors in an environment where domestic car sales are depressed. It is however now trading at a forward price-to-earnings multiple in single digits.

Telkom is an interesting addition, given that it is 25% off the highs it reached after the two year rally that saw it gain 550% between April 2013 and May 2015. Investec has also joined Momentum in buying Vodacom shares.

The fund also continues to show a preference for some of the counters that have been the darlings of the market over the last few years. It has increased its exposure to Naspers, British American Tobacco, Richemont and Mondi.

It has however reduced its exposure to another recent favourite, FirstRand. Through its direct holding and the indirect interest through RMB Holdings, FirstRand was the fund’s single biggest position at the end of September last year. It now carries less than a third of the weighting it enjoyed.

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