Introduction

Introduction

True to the label
Markets are cyclical by nature. This means no single sector, stock or geography remains in the lead indefinitely. There are also many different approaches to investment and endless debates about the ‘best’ approach. Market cycles often overlap and intersect, and this can present pitfalls to unwary investors if they lock in losses by switching between strategies at the wrong time.

Part of our commitment to investors, is that we remain 'true to the label' of differentiated investing, with a focus on balancing value and quality. We seek to find great companies that are underappreciated by the market. This enables us to buy companies with robust value propositions and bright future prospects at a discount, enhancing our chances of selling them later at a profit or enjoying the compounding benefits of being long-term holders.

This process might seem simple, but it requires a high degree of commitment to non-emotional decision-making and a fixation on in-depth research. It is our commitment to our proven 3M philosophy that enables us to continue finding great investments, regardless of where the market finds itself. There is no single sector or stock that is always in favour. There is always an opportunity to find mispriced value. This has never been more true than at the current time.

While aggregate index levels may indicate markets are overpriced, we find wide divergences in the markets and ample opportunities to buy quality at deep discounts. We are excited by current conditions, because – despite the many challenges – we understand the immense potential that is hidden beneath the surface, especially for patient, long-term investors.

In the first article, Fund Manager Justin Floor argues that The best years of our investment value proposition lie ahead. As we are differentiated managers, our performance can be out of step with that of the market at times. The most recent drawdown, which culminated in early 2020, lasted longer and was deeper than we would have liked. Looking ahead, however, we remain convinced of the value our approach can add to client portfolios. We are encouraged by the differentiated and attractive positioning our portfolios offer clients and believe this unique outlook will become increasingly valuable to investors looking to navigate markets going forward.

In the second article, Fund Manager Shaun le Roux explains Why our funds remain offensively positioned when equity markets are high. Clients will be familiar with our tendency to hold high levels of cash when markets are expensive and risk appetite is high – a case of being fearful when others are greedy. Yet cash levels in our funds are currently low and our funds remain offensively positioned. Shaun argues this is entirely in keeping with the consistent application of our investment process, which continues to identify very compelling investment prospects.

In our final article, Fund Manager Dirk Jooste explores our portfolio construction process in Blending our best ideas: Lifting the lid on the asset allocation of our multi-asset portfolios. Dirk explains why our asset allocation process always starts by considering the risk-adjusted returns above what can be earned on cash. He then sets out how we aim to allocate capital to our best ideas, balancing risk and potential reward, in line with the client and mandate needs.

We trust that you will find these articles insightful, and their guidance valuable, in these turbulent times.