On Monday I attended the annual Allan Gray Investment Summit. I thought it was rather big of them to invite me as a member of the media, considering the somewhat unfavourable article on my Allan Gray RA (https://www.wealthwoke.com/is-my-allan-gray-ra-still-all-that/) I wrote a few months ago.
While it’s called the Allan Gray Investment Summit, it actually features a host of investment experts from a bunch of local and international asset managers.
It’s been over 10 years since I last attended this type of event as a journalist and something just felt different. A decade ago, I remember clearly feeling a sense of awe and reverence for the well-clad, smooth-talking gurus of the financial markets.
Not so much this time. Perhaps the confidence I have in some of the peacocks has been dented by the glaring fact that many of them have failed to outperform the market on a sustainable basis.
Nevertheless, there was value to be had and I thought it would be useful for me to distill some of the more memorable points for you.
Stanlib economist Kevin Lings painted a bleak picture of the SA economy. He believes it’s unrealistic to think that Cyril and his team can properly fix it within 10 years. “If growth gets to 3% during this period, I will be thrilled.”
However, he reckons there are pockets of value to be found, even in a 1% growth economy, if investors are prepared to put in the work. He says the food and beverage sector is one such pocket.
He also advises South Africans to include new asset classes in their portfolio construction, particularly those that are appropriate for the country’s low growth environment. “The circumstances we find ourselves in are screaming out for us to embrace other asset classes, such as government and corporate bonds. If you can get a 9% nominal return from a bond fund, relative to an inflation of say 5%, that’s a decent real return with significantly less risk.”
Neil Robson of Columbia Threadneedle says that the rise of Artificial Intelligence will in some way affect every stock in your portfolio over the coming years. The three stocks in this space he likes the most are:
– Illumina – a gene sequencing company that enhances the treatment of cancer, which he believes is cheap on a 5-year horizon.
– Keyence – which produces sensors and is doubling revenue every year. He reckons that while its currently on a 30x PE, over the medium-term earnings, its cheap
– Nvidia – a company that pioneered a supercharged form of computing.
Nick Ndritu of Allan Gray says that with expectations about the African economy currently at pretty low levels, there are opportunities for investors who are positive about the continent.
He says that the 35% plus annual Dollar returns earned by investors in companies like Safaricom (Kenya), Eastern Tobacco (Egypt) and Stanlib Nigeria over the last few years show what can be achieved for investors who have the stomach for it.
Ashley Lynn of Orbis makes a strong investment case for traditional oil and gas companies. She reckons the belief that the world will come to rely on alternative forms of energy, such as solar, wind and nuclear are unrealistic. The fact is that global demand for wood, coal, crude oil and natural gas is still increasing. Companies that produce these forms of energy or provide services to them, may not be popular, but they are cheap. “To get ahead of the heard, you may need to turn around and go back.”
Nicholas Kirrage of Schroders says global banks, materials and energy are some of the best value stocks to own today. He believes healthcare, IT and industrials are overvalued. Geographically, he is overweight UK, Italy, Russia and Italy; and underweight the US.
Here are a list of other investment opportunities punted at the summit (it should be noted though that for every one asset manager who punted these opportunities, there were others who shot them down.)
– GAM Investments – a European fixed interest asset manager
So, is any of this useful and would I act on it? For the most part, no. Despite all their fancy charts and numbers, I remain unconvinced that they actually know something that others haven’t already acted on. There are just too many “smart” investment professionals out there, each spending huge amounts of time and effort sniffing out and exploiting these artbitrage opportunities. The market is basically efficient, which means that trying to find any mis-pricings is for the most part, a losers game.
Nevertheless, I found it worthwhile to see which sectors or geographical regions are in favour and cross referencing these with my current portfolio. Where there are noticeable gaps, I will look at potential ways to plug them over time.