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PSG Angles and Perspectives: Q3 2019

29 October 2019

PSG Angles and Perspectives: Q3 2019

The quarterly newsletter from PSG Asset Management.

In this edition, we consider the negative narratives characterising unpopular parts of global markets and South Africa in particular. While investing in these markets is uncomfortable, it’s where value investors like ourselves find our best opportunities: high-quality securities with prices driven down due to poor sentiment. We explain the impact that holding such securities can have on our portfolios, why maintaining objectivity is critical (especially when it’s difficult to do) and highlight that this applies to individual prospects within a broader opportunity set as well.

Introduction

Things are seldom as good or as bad as they seem
It’s easy to get caught up in the hype: when optimism abounds and excitement runs high, it’s catching – and pleasantly so. When the opposite is true and the outlook is gloomy, all we seem to see are signs of hopelessness. This is natural. As humans, we tend to base our expectations of the future on recent history, with the belief that current trends are set to continue. However, investing requires objective assessments. ... Read more

Why a long-term focus is critical to successful value investing

It’s been a tough year for value investors globally
Investors have shown a marked preference for growth stocks in recent years, mostly gravitating towards large-cap companies with predictable earnings. The US market in general – and US technology companies in particular – have been especially popular. Momentum investing (which seeks to capitalise on market trends by buying recent good performers and selling poor performers) has become the favoured investment style. Passive products have also continued to grow. In contrast, markets tainted by pessimism have fallen further out of favour – and their prices have followed suit. ... Read more

South Africa: a balanced review of the economy reveals many challenges, very poor sentiment, and opportunity

Emotions in South Africa are running high amid extreme negativity
Pessimism shrouds the South African economic outlook, as evidenced by continued weak consumer confidence and business confidence that is at its lowest in 20 years. The reasons behind this are well documented. The disappointment that followed ‘Ramaphoria’ turning to ‘Ramareality' has heightened emotions, while recent commentary has focused on fears that South Africa may need an International Monetary Fund bailout. Consequently, many asset prices are reflecting poor outcomes. ... Read more

Local fixed income is looking attractive – but it’s not an equal playing field

Parts of local fixed income markets are reflecting investor fears, providing potential opportunities
Sentiment about South Africa continues to worsen, as negative news headlines shape dominant market narratives. We believe that the high real yields currently available in local fixed income markets have factored in many prevailing fears, while our research indicates that these are not foregone conclusions. This is presenting attractive opportunities for investors seeking exposure to fixed income markets. ... Read more

Portfolio Holdings as at 30 September 2019

  • Click here to view the portfolio holdings of the funds as at 30 September 2019

Performance to 30 September 2019

  • Click here to view the performance of the funds to 30 September 2019

Unit trust summary

  • Click here to view the unit trust summary of the funds as at 30 September 2019

PSG Angles and Perspectives: Q3 2019 (pdf)

  • Click here to view the full document in PDF

Archive of previous editions

  • Click here to view previous editions

Recommended Articles

Introduction Q3 2019

Why a long-term focus is critical to successful value investing

South Africa: A balanced review of the economy

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