Ninety One: Quality shares are at their cheapest level in over a decade

Portfolio manager Duane Cable believes that the rotation away from quality to value and cyclical shares may have mostly run its course.
Ninety One’s Duane Cable. Image: Supplied

Ninety One’s Duane Cable is finding more value in quality shares than he has for more than a decade.

Cable, who is Ninety One’s head of South African quality, expressed this view during the BCI Global Investment Conference. Cable co-manages the R17 billion Ninety One Cautious Managed fund together with Sumesh Chetty.

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‘Certainly, for those that have had a quality investment philosophy like ourselves, the last year has been incredibly tough because there has been a rotation in the market away from quality to value and cyclical shares. However, we think a lot of that has run, and we are finding more value in the quality shares we invest in.’

Global equities 

Source: Ninety One.

Over the next five years, Ninety One expects global equity to be the top-performing asset class, with annualised returns starting from 10%.

‘Global equities have been the winning asset class. However, the consensus view is that global equities have run too hard, valuations are full. As a result, the view is that there is no value in global. Whereas, in our view, through bottom-up analysis, we find value in high-quality global equities,’ Cable said.

‘When we look at the concentration of high-quality global equities that have significantly underperformed over the last year, given the rotation to value, we certainly see tremendous value in quality. So in rand terms, we expect to deliver healthy returns from global equity markets,’ he added.

Avoid too much risk 

Cable cautioned investors against taking too much risk in pursuit of achieving targeted returns.

‘South African cash is likely to underperform other assets over the next 12 months, forcing investors further up the risk curve. Cash returns have been quite good, and well ahead of inflation. But with the 300-basis-point cut that we have seen in interest rates, investors can no longer hide in cash,’ he said.

Cable said that South African equities offered selective upside, with specific counters and sectors looking attractive.

‘We are finding South African equities offer value, but that comes with more risk. Certain market sectors are hot, where the valuations are quite expensive, and the downside is quite significant. In certain pockets of the market, we are finding good value. Investors need to be quite selective with their domestic equity allocations.’

Local bonds 

On local bonds, Cable said: ‘Certainly [we prefer] bonds relative to cash, despite all the negativity around the fiscus, and where we are going as an economy. Bonds have delivered good returns for investors. Our view is that bonds provide investors with a good proportion of income in the future. But it is not without risk, and bonds need to be part of a balanced portfolio.’

Over five years, Ninety One remained ‘constructive’ about the outlook for South African government bonds. The fund manager preferred nominal bonds over inflation-linked bonds, especially for longer maturities.

Turning to the rand, Cable said that the local unit gave investors a good entry point into offshore markets.

‘The rand is only one consideration, and investors need to be selective in their approach given the valuation risks.’

Domestic property 

Ninety is ‘quite bearish’ about the domestic property asset class, Cable added.

‘Unless you have a very bullish long-term view for South Africa and about how some of the property stocks deal with the fundamental structural challenges and how they cure their balance sheets, ultimately, it is too risky for our portfolios. So we have a very small allocation to domestic property.’

This article was first published on Citywire South Africa here, and republished with permission.


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Wait for the correction then you can pick them up at a better strike price.

Many people have lost significant wealth by waiting for the next correction! ‘Why’ a correction or one just for the sake of it is of more interest to me?


And people have never been poorer, coincidence?
I think not.

I love how disconnect people can get from reality

Interesting analysis… Thanks.

Basically from what they’re saying here is “buy overseas” while the rand is at better values.

Nothings happened to my investments with them ?
Lots of hot air but little real movement at all…..

Let me understand correctly, you invested with 91 and immediately expected your investment to go zooming up? Surely your expectations are umrealistic.

Their CEO sees excellent value in local stocks. Strange why they don’t like the property stocks.

What is strange about having a different view on equity versus property?

End of comments.





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