NEWSLETTER. Veiligheid van gebalanseerde fondse lê in hul beweeglikheid

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1 NEWSLETTER October 2013 Issue Content: Veiligheid van gebalanseerde fondse lê in hul beweeglikheid 1 Market Overview October "The stock market is filled with individuals who know the price of everything, but the value of nothing." - Phillip Fisher Veiligheid van gebalanseerde fondse lê in hul beweeglikheid Panda Poop Power 4 n Besliste voordeel van n By Stanlib glo ons dat ons en kapitaalgroei te behaal Editor s letter 5 belegging in n goeie multibatefonds is dat langtermynwaarde kan toevoeg deur middel van ons deur beleggings in n vasteinkomstesekuriteite op tydsberekening nie n uitstekende navorsing en n dieselfde manier as oorheersende faktor is nie, streng beleggingsproses, aftreeskemas. omdat die portefeuljebestuurder die batetoekennings kan aanpas om voordeel te trek uit die stygings en dalings van die markte en veral aantreklike langtermyn geleenthede kan identifiseer. met spesifieke fokus op batewaardasie, sê hy. Ons soek aktief na bates wat op vlakke benede hul intrinsieke waarde verhandel. Ons probeer nie ons multibatefondse van een jaar na die volgende te posisioneer Aan die einde van Junie vanjaar was die fonds se grootste blootstelling aan binnelandse aandele, met 47,7%, gevolg deur buitelandse aandele (20,6%), plaaslike effekte (10,6%) en binnelandse kontant (18,2%). Editor: Aneka Kruger Dit is Herman van Velze se siening. Hy is n professionele mynbouingenieur van beroep met meer as 20 jaar van beleggingservaring op sy kerfstok en hoof van Stanlib se groot multibateportefeuljes. Hy het die beleggingsmaatskappy se goudfonds in 1995 gestig en die hulpfonds in 1998 voordat hy in 2000 oorgeskuif het na algemene fondsbestuur. nie ons posisioneer hulle asof hulle n organiese onderneming is wat swakhede in die mark uitbuit. Daar is baie taktiese toewysings. Stanlib se Balanced-fonds te waarde van R3,7 miljard wat deur Van Velze en Paul Swanson bestuur word, het byvoorbeeld oor die afgelope vyf jaar n opbrengs van 59,9% voortgebring. Hul doelstelling is om n redelike vlak van lopende inkomste Plaaslik is daar tans n redelike tekort aan goeie aandele, sê Van Velze. Maar ons hou wel van uitgesoekte maatskappye in finansiële dienste, telekommunikasie, kleinhandel en die nuwerheidsektor. Ons dink nie dit is die regte tyd om in hulpbronne in te gaan nie, en ons besit n hele tyd lank al geen genoteerde eiendom nie. Finweek 19 September 2013

2 Newsletter Page 2 of 5 Market Overview October 2013 Economic and Investment Survey It is currently widely strong growth. In addition to supplying unsecured debt cautioned that the stock that, the US is becoming less and the Rand being for the market s price earnings ratio dependent on oil imports as most part strong enough to is too high, or rather too the country s underground make imports of consumer expensive, and that a gas resources are being products and oil more correction might be further developed. affordable. The Rand has The recovery of the global economy, together with a weak Rand will in all probability result in a recovery of our exports imminent. At the same time, it is also true that the market in the short-term is currently seen as overbought, giving a further push to the possibility of a decline. On top of that, an ideal excuse is developing to which such a decline can be connected the USA s budget limitations that need to be lifted; and in South Africa, AMCU threatening to enforce a closure of a mine such as Amplats which will result in the country being back in a A fragile recovery is also developing in Europe with Germany being the trendsetter. Unemployment in Germany is currently at very low levels, although the same can unfortunately not be said about the rest of Europe. In fact, the German economy is currently the engine for growth in Europe. China s mini-stimulus of its economy delivered quick results, with the economy suddenly growing at much however been declining sharply for the past 18 months due to a combination of factors. This brought about a sharp increase in the petrol price. In addition, Eskom received astronomical rate increases. Government finances are now under pressure and government officials cannot rely on massive increases anymore, while granting unsecured loans to consumers already in debt have also declined sharply. Unemployment also negative light. better levels than previously, increased, while companies But, how bad is it really? In the USA, macro-economic news appears weekly indicating a further recovery which in turn supports commodity prices. The weak Yen in Japan assisted a recovery in exports. selling durable and semidurable goods are also buckling under the weight. There is however light at the of that fragile economy. The South Africa is however far end of the tunnel. The US ISM-figure of 55.7 is behind, with the consumer recovery of the global firmly above the level of 50, facing headwinds. Strong economy, as mentioned while unemployment figures consumer spending the past above, together with a weak are starting to look better, four years was the basis for a Rand will in all probability consumer confidence is at its relative good economy result in a recovery of our highest since the economic performance. This was made exports. This can result in an crisis of 2008, property prices possible by good government export-led recovery that are still increasing and the salary increases, banks and would be the best recovery manufacturing sector shows other credit providers freely which we can hope for.

3 Page 3 of 5 Newsletter If that happens, capacity in the economy would need to be absorbed and investment will have to happen to create additional capacity. Ultimately, this would lead to job creation and confidence in the economy, which is a vital ingredient for a sustained recovery of the economy. danger is that if one only looks at high historical dividend yields, you can bump into an African Bank scenario that, just before their profit warning, stood at a very attractive dividend yield of 7.2%. If you had not included this measure and didn t look ahead, you could have injured your the earnings of companies are about to start growing again at a decent pace, resulting in the PE of the market coming down. However, share prices will continue to rise, albeit at a slower pace than that of the recovery in the earnings of the market. I believe that we have reached this point in the cycle. Why are looking at this if fund managers are saying they are not bothered with the economy and do not consider economists views in their research? The answer for this lies perhaps in the investment style that is followed. If you are a full-fledged value manager, you will perhaps only look at figures such as low price-to-book and high historical dividend yields. You might, at the same time, look at the company s management and at least would want to be pretty sure that the company is involved in an industry with high barriers to entry and that there is a certain degree of portfolio, as was the case with Satrix Divi. You must also look ahead. To do this, one must know where one finds oneself in an economic cycle. This will help to form an opinion about where a company, or the price earnings of the market, should be, given the state of the cycle. Take the economies of the USA and SA as examples, both at the beginning of an economic recovery cycle. At the end of a recession or a slowdown in the economy, a point that just recently preceded the stage of the economic cycle that we have now entered into, the PE of the market and thus share prices, would rise strongly. Value fund During this phase, share prices can steadily increase with relatively little volatility. In the final phase of the economic growth cycle and just before the economic cycle starts on a downward trend again, it often happens that valuations of stock rises again to exorbitant levels where speculation is rife. This is also usually accompanied by a large number of listings. This is when the danger lights should start flashing. Therefore, I believe that if there is a degree of profit taking in the stock market, it must be seen as a buying opportunity. Even if the valuation does not seem attractive at first. if there is a degree of profit taking in the stock market, it must be seen as a buying opportunity. safety built into the managers would then call the company s valuation. These are all very good aspects to look at, but I think one must market expensive. However, if you were to take the economic cycle into account, you should Dawie Klopper 02 October 2013 also look beyond that. The be able to deduct from that, that

4 Newsletter Page 4 of 5 Panda Poop Power Microbes in pandas guts can help in biofuel production Giant pandas are well known for being rather different from other bears. Having a diet composed almost entirely of bamboo is one of the things that sets them apart. It is also what attracted the interest of Ashli Brown of Mississippi State University, in a search for more efficient ways to make biofuel. Most of the nutrients found in bamboo are locked away in tough substances known as cellulose and lignin. Liberating those nutrients is an energyintensive process that involves high temperatures and extreme pressures when carried out in a laboratory or by an industrial process. Indeed, it is the cost of doing so that makes producing biofuel out of cellulose- and lignin-rich materials, like discarded corn (maize) cobs and husks, less financially viable than generating biofuel directly from more readily digestible corn kernels. The kernels, however, can be used to feed people whereas the cobs and husks cannot. So a process that is able efficiently to turn what is a waste product into fuel could have great potential. Given their diet, Dr Brown knew that giant pandas had to have legions of microbes in their gut that were strong enough to break cellulose and lignin down. If it was possible to identify those microbes and find the enzymes within them they might be used to improve biofuel production. So, Dr Brown and her colleges got to work analyzing piles of panda faeces for the presence of RNA strands belonging to the microbes. The team then searched through microbial databases to identify the genre that these microbes belonged to and determine which known species they were most closely related to. This identification process allowed Dr Brown to run a comparative analysis that teased out minor differences between the microbes to reveal which ones carried the traits that made them particularly adept at breaking down the bamboo material. This produced 17 microbes with the ability to digest cellulose and six that looked like good candidates for digesting lignin. The microbes were then tested in the laboratory. They were found to be capable of breaking down 65.4% of the tough materials they were given and transforming much of them into sorts of energy-rich sugars that are readily fermented into bioethanol or biodiesel, Dr Brown told a national meeting of the American Chemical Society in Indiana. Considering that most cellulose- and lignin-based materials end up as compost, or worse, in landfills, the ability to convert such a large percentage of them into potential biofuel products is encouraging. Dr Brown, though, is quick to point out that optimizing the performance of the enzymes employed by the microbes so that they can be used commercially is going to be a long and hard job. But thanks to the giant panda being saved from extinction, it is one that could be well worth the effort. The Economist September 14 th 20 th 2013

5 Page 5 of 5 Newsletter Editor s Letter I am very excited to share our very first edition of the newsletter with all of our PHONE: (087) FAX: (051) Wiehan.vanstaden@psg.co.za readers/investors. The newsletter will mostly comprise out of three sections. The first section will have an article about investments, giving insight on the current climate and views of the industry and where it s headed. The second section will give a market overview and the final section will be sort of a did you know article for my readers to enjoy. Just take note that all the articles in this newsletter, were published in well-known magazines, and are not written by any of us It s important to me and the team that this newsletter will be of value for everyone. So we welcome any suggestions and ideas you might have. Greetings Aneka Kruger The Team Junior Financial Advisors Wiehan van Staden Nici Macdonald Johan du Plessis Jacques du Toit Estate Admin Wills and trusts We re on the Web! See us at: nstaden Estate Planning Short-term Insurance Shares Medical Aid Estate Planning Employee Benefits Medical Aid