NAV on 2019/01/18
|NAV on 2019/01/17
|52 week high on 2018/01/25
|52 week low on 2018/12/18
|Total Expense Ratio on 2018/09/30
|Total Expense Ratio (performance fee) on 2018/09/30
Sanlam Collective Investments
South African--Multi Asset--Flexible
ASISA SA Multi Asset Flexible Category average
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Capricorn Fund Managers (Pty) Ltd.
Sanlam Select Flexible Equity comment - Sep 18
The FTSE/JSE All Share Index sold off a further 4.5% in September while encountering another heavy weight falling more than 30% in the month. Aspen’s share price fell aggressively post its earnings miss, while Naspers continued to track backwards due to a delay in the monetisation of Tencent’s recent game launches. South Africa finds itself in the midst of an unprecedented emerging market sell-off combined with a nervous market which aggressively sells off stocks that underperform or encounter any ESG concerns. Commodity prices remained strong, with our view of this being maintained into the Chinese winter shutdowns.
Performance Summary Capricorn’s higher weighting in commodities performed well in September. Unfortunately our exposure to Aspen detracted from performance as it sold off aggressively in the month. Small caps continued to sell off and remain out of favour as the prospects for SA Inc. remain uncertain with growth appearing lacklustre.
Overall we are holding high cash balances to deploy into opportunities. We believe SA industrials are at cheap levels while quality companies like Bidvest continue to grow in a tough market. Self-help stories and resilience to grow in tough markets are qualities we looking for in companies, and we believe these attributes will result in premium ratings through this cycle.
The largest equity contributors to performance in September were: Mining stocks - Mining stocks performed well in September as China heads into its winter shutdown. Glencore and Anglo American were key gainers as China introduced a $200bn stimulus package. We believe commodity fundamentals remain strong with supply/demand balances moving into a deficit ahead, which is constructive for pricing. The companies are generating significant free cash at spot prices; we continue to see dividends and cash buybacks further improving.
Echo Polska (EPP) - EPP posted 12% half-year distribution growth at its recent first half earnings. The macro environment for Polish property players continues to favour expansion in a robustly growing economy ahead of its European peers.
Capitec (CPI) - Capitec performed well as it stood out in tough times. The bank continued with robust transactional volume growth and customer gains. The rollout of its credit card has performed well, although the bank remains cautious on its lending criteria while economic growth remains subdued.
Capitec is launching new lower-risk products in funeral cover with pricing significantly lower than its peers, and looks to capture market share as a result. The largest equity detractors from performance in
September were: Aspen - Aspen disappointingly missed its earnings forecasts and also sold its infant milk business below expectations of $1bn. Aspen aggressively sold off after earnings, we reduced our positons shortly after although it still detracted from our performance.
Naspers (NPN) - Naspers continued to trade backwards in line with Tencent, which has fallen from a peak of HKD475 to trade at HKD300 currently. This is partly due to the trade war, emerging market (EM) outflows and Tencent’s inability to monetise its recent game launches. We believe Naspers continues to focus on unwinding its discount to Tencent, which will likely realise shareholder value ahead.
SA Small caps - The effects of EM outflows have negatively affected small caps significantly. A miss in earnings was harshly dealt with by the market with Blue Label Telecoms (low quality result), Libstar (earnings miss) and Balwin Properties trading backwards in Q3. We have reduced our positions in Libstar and Blue Label Telecoms to appropriate sizing in our portfolio.
The appointment of Tito Mboweni was timely due to mounting pressure on Nhlanhla Nene, and Cyril Rampahosa’s need to maintain his perseverance for good governance. The appointment of a credible candidate in Mr Mboweni was essential given his decade long tenure as the SA Reserve Bank Governor, seeing South Africa through the global financial crisis. South Africa has a busy fourth quarter ahead, which includes a Moody’s rating review, the Mid-term budget and the 'Expropriation Without Compensation' (EWC) bill being submitted to Government.
We believe Cyril Ramaphosa’s economic stimulus plans will start producing some green shoots, which will be positive for local listed companies and potentially the Rand. We believe a convincing win with above 60% majority and no coalition government may create a second round Ramaphoria effect for our local stock market.