The quarterly newsletter from PSG Asset Management.
In this edition, we focus on the role of investment cycles and their impact on investors. Markets are inherently cyclical, and navigating market tops and bottoms is critical to investment success. However, the cycles are more often than not impossible to predict. We therefore choose to focus on what we can know for certain, namely the fundamentals of an investment. We also explain why instead of identifying catalysts for outperformance, we focus on stock picking, and why we believe successfully navigating market cycles is essential for all investors.
Markets are cyclical, which means periods of underperformance are a given
Financial markets have always experienced cycles. Numerous dynamic factors affect the nature and scope of these cycles – company-specific developments, political news, and economic policies. In addition, investors who buy and sell on the market are subject to human emotional and behavioural biases, which also come into play. When combined, these variables create periods of gains and periods of losses that are impossible to predict. ... Read more
Value-turned-growth stocks – understanding the value cycle
While value stocks are underperforming, the value cycle indicates a promising outcome
Different investment styles also display cycles, which is why a long-term approach and a combination of different styles in a client’s investment strategy is essential. There is no single approach that works consistently over several investment cycles. For the past decade, growth stocks (companies that are growing their sales and earnings the fastest) have consistently outperformed value stocks (those stocks that are the cheapest when measured by traditional valuation metrics). ... Read more
Retirement funding risks and the crucial role advisers play
Successfully navigating market cycles is key to achieving desired retirement outcomes
Financial markets have always experienced cycles. This means that the short-term returns of risk assets such as equities and property can at times show significant losses. Successfully navigating the extremes of the market cycle is an important element of investment management. Here, the role of the adviser has become crucial, especially in the context of retirement planning. In this complex era, investors have the benefit of transparency and a wide range of funds to choose from on the one hand, but run the risk of running out of retirement savings on the other hand. ...
Why we focus on stock picking instead of predicting catalysts for outperformance
Clients often ask us what the catalysts for outperformance will be
Sometimes this refers to outperformance of our funds, and other times to the South African economy as a whole. The dictionary definition for a catalyst is ‘something that precipitates or induces an event or change’, which is why investors often look for external signals to act as a catalyst for a desired outcome. This then tends to prompt them to take action – often to increase or decrease exposure to different assets. As the catalyst, event or newsflow confirms their view, investors perceive their risk to be lower. ... Read more
Portfolio Holdings as at 31 December 2019
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Performance to 31 December 2019
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Unit trust summary
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PSG Angles and Perspectives: Q4 2019 (pdf)
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Archive of previous editions
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