Introduction - Angles & Perspectives Q2 2021

Introduction

Looking beyond the surface
Our value proposition to investors is to seek out great companies that are underappreciated by the market. We believe that if we buy such companies at a discount to their intrinsic value, they are likely to appreciate significantly in value in the long run. But markets, economies and companies are not static: conditions evolve on a daily basis, and what seems like a simple endeavour in theory, becomes a complex one in practice. Moreover, conditions do not only evolve in one direction: markets are noisy and produce contrary signals all the time. Maintaining the force of your conviction can be challenging at times, especially when the markets move against you for extended periods of time. Complete certainty can only be gained in hindsight, but we must look forward to exploit opportunities for our clients.

We have found, however, things often appear more uncertain than they really are. Short-term noise, market movements and the associated emotional responses often cast everything into doubt. When we focus on the longer-term picture, these short-term uncertainties are often revealed to be less material than they seem to be in the heat of the moment. The challenge is to maintain this ability to look beyond the immediate noise, no matter how loud the market din and turmoil become. As professional investment managers, we rely on our tried and tested investment philosophy to help us do so consistently and in a repeatable manner, so that we can deliver on our stated value proposition.

So, in this edition we share our thoughts on looking beyond the surface, and how we use these insights to craft portfolios that help our clients build their long-term wealth.

In the first article, a panel of our fund managers addresses some key issues around our macro views and how they feed into our portfolio construction process. Our CIO Greg Hopkins addresses the extreme market conditions and the perceived riskiness of our funds, Fund Manager Shaun le Roux explains why our cash holdings are low despite markets being at all-time highs, and Fund Manager Philipp Wörz delves into the global landscape and the resurgence of value as an investment style.

In the second article, Fund Manager John Gilchrist, Assistant Fund Manager Mikhail Motala and Analyst Gavin Rabbolini weigh up the investment case for commodities given current market conditions. Commodity companies are prone to boom-and-bust cycles, and there is currently much debate around the sustainability of the current run-up in commodity prices. The team weighs in on how factors like decarbonisation, the environmental, social and governance (ESG) investing phenomenon and a renewed focus on capital discipline are impacting the commodity cycle.

In our final article, Fund Managers Shaun le Roux and Justin Floor argue that while many investment managers are coming around to our long-held view on the potential of the local market, we are in a unique position to exploit opportunities around SA Inc. shares. They unpack our approach to ensuring broader exposure to SA Inc. shares.

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