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Introduction Q1 2020

11 May 2020

Introduction Q1 2020

There are always opportunities for patient investors
2020 will undoubtedly be remembered as a watershed year in the history books. The COVID-19 pandemic has derailed markets across the board. Moreover, the pandemic itself is raising questions about the viability of many industries and business models which have in the past been part of our everyday lives. The mayhem has left investors with precious few places to hide, and the impact on investor portfolios has been severe. How do we chart a path forward, if we cannot be sure what the future will look like?

More than ever, following a trusted process matters
Investor capitulation remains our biggest concern. Switching to sectors or stocks that are perceived to be doing better (even at these low levels) comes at the risk of crystallising paper losses. We acknowledge that COVID-19 has had, and will continue to have, profound impacts on many businesses and industries. Some sectors will be more affected than others, and some management teams will fare better than others. We cannot predict when and how the market will reward specific shares or sectors. But we know that in the long run, well-managed companies will continue to do business and grow over time, rewarding their shareholders, whatever the short-run challenges.

Our challenge as investment professionals and stewards of our clients’ capital, is to sift through the available choices, and identify those companies best poised to reward their investors handsomely at acceptable levels of risk. Our commitment to this objective has never changed, and we remain as focused as ever on unlocking future opportunities.

PSG Asset Management has always been committed to open engagement with the advisers and clients who support us. As a value manager, we understand that there will be times when the market does not reward our approach. In the long run, however, we remain confident that the key to long-term returns lies in buying low and selling high. In our lead article, Chief Investment Officer Greg Hopkins and Fund Manager Shaun le Roux address some of our investors’ most pressing questions.

In the second article in this edition, our Head of Research Kevin Cousins outlines the opportunities we are seeing in the midst of the COVID-19 gloom. We have revisited our estimates of intrinsic value given the implications of COVID-19, and have made changes to our portfolios where we believed our clients’ capital could be better employed elsewhere. Nonetheless, we have found many instances where intrinsic values have only been impacted slightly, while share prices have declined sharply. We aim to use these opportunities with care and to our clients’ advantage.

Finally, Fund Manager Lyle Sankar offers his insights into Navigating the storm in fixed income markets. The bond market has also suffered from the COVID-19 fallout, with investors withdrawing large amounts from emerging market countries. Our portfolios were negatively impacted during March, as our preferred asset holding, sovereign bonds, came under pressure. Despite the negativity around South African government bonds, we believe the sell-off to date has been mostly technical in nature, and that this asset class will continue to offer investors equity-like returns in the near term.

We trust that you will find these articles insightful, and that they offer you some guidance in these turbulent times.

Click here to download the article.

Click here to read the next article: COVID-19: Answering our clients’ questions in the world of elevated uncertainty and poor returns by Greg Hopkins and Shaun le Roux

Recommended Articles

PSG Angles and Perspectives: Q2 2020

Introduction Q2 2020

Looking beyond the corona crisis


Anet Ahern


At PSG Asset Management
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