<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
SIMON BROWN: I\u2019m chatting with John Biccard. You will find him at Ninety One. He runs the Value Equity Strategy Portfolio. John, appreciate the time. Earlier in the month, you were in South Africa, winning the News24 FundHub Industry Performance Awards for your value investing.<\/p>\n
I want to get a bit around value investing but, before we do that, almost the psychology of it. I know as an investor there\u2019s often comfort from the wisdom of the crowd \u2013 even if that crowd is wrong. But you go and position yourself almost anti-crowd as a value investor.<\/p>\n
JOHN BICCARD: Yes, I think the first point is you really want to be buying when others are selling, and selling when others are buying. It makes sense if you think. If everyone\u2019s buying something, the price is going up, the valuation will be going up, and it doesn\u2019t make sense. All the data shows and the performance of funds like the value funds show that everything depends on the price you pay. Not in the short term. In the short term, when everyone\u2019s buying, it\u2019s going up. You can make money on a three-month or one-year, maybe even a three-year basis.<\/p>\n
But on a longer-term basis it certainly makes sense to be buying when everyone else is selling, because you\u2019re going to get a better price.<\/p>\n
Obviously, you need to go and do the work and make sure that you know that you\u2019re not buying a buggy-whip company in 1900, and you want to do the work and make sure that the company you\u2019re buying has the balance sheet to survive the tough times that it is going through at the time, which is causing the price to be low. So you have to do that work.<\/p>\n
But once you\u2019ve done that work, you need to stick to it and buy through those dips.<\/p>\n
Read\/listen:
Gold, stock markets plunge as war in the Middle East escalates
The Fog of War makes investment decisions tough
Top South Africa fund manager sees 2026 non-resource stock rally<\/p>\n
This is a longer-term process and sometimes, over the 25 years I\u2019ve been running the fund, the quickest turnaround because generally we buy whole groups of shares or countries or industries that are cheap. The best case is kind of a three-month turnaround \u2013 that two, three months to a year. You wait three months.<\/p>\n
The worst case was when we bought platinum ten years ago; we waited for four years. So you\u2019ve got to have the courage to wait for that.<\/p>\n
SIMON BROWN: Again, it\u2019s the proper classic long-term investor. I\u2019m thinking back to the likes of Benjamin Graham and The Intelligent Investor, whereas the world has moved to holding periods that are shorter and shorter. Value investing rewards that old school \u2018hold for longer\u2019.<\/p>\n
JOHN BICCARD: Yes. Obviously, there are cycles in the whole thing and there are definitely value and growth cycles. But that\u2019s maybe more relevant in the US market where it\u2019s been in a massive growth cycle for 20 years now. That\u2019s more function of tech than value versus growth, whereas in South Africa up to about five years ago we were in a 10-year growth cycle, which was the glory years for Myspace.<\/p>\n
But in the last five years it\u2019s been a much more even market in South Africa between value and growth. That\u2019s firstly because we only had one big-tech stock, which was Naspers.<\/p>\n
Secondly, in South Africa in the last five years the whole market got so cheap that it really was Naspers and one or two other stocks and everything else was veg. So it was a much more even playing field.<\/p>\n
Read:
Koos Bekker nets R2.5bn from further Naspers, Prosus share sales
Naspers shares to split 5 to 1<\/p>\n
SIMON BROWN: Value needn\u2019t be the beaten-down Sasol at R50. Yes, Sasol \u00a0is up fourfold in a year, but it can be just healthcare stocks that are cheap, not necessarily completely beaten down and gutted.<\/p>\n
JOHN BICCARD: 100%. Actually, those are the stocks we prefer to buy, to be honest. We made a lot of money out of platinum 10 years ago. But it\u2019s a little that sort of Sasol or platinum; it\u2019s a little more scary. The better ones are really Pick\u00a0n\u00a0Pay. At the moment in the fund we\u2019ve got Pick\u00a0n\u00a0Pay and the two hospital stocks. But it\u2019s not a case of them being average value and safe.<\/p>\n
They\u2019ve got to be also beaten down. And if you look at Netcare\u2019s share price the last 15 years or Pick n Pay in the last 30 years, they fit the bill; they are as beaten down. The truth is that Sasol was at R70, so they\u2019ve still got to be beaten down.<\/p>\n
But in a way those stocks I prefer because they have an inherent franchise. And always with commodities it\u2019s naturally more volatile and there\u2019s more chance of you being permanently wrong, whereas if it\u2019s Pick n Pay or it\u2019s a hospital there\u2019s less chance because there is an inherent franchise in the business.<\/p>\n
Read:
Sasol has nearly doubled in 12 months, but is it still cheap?
Shock as Pick n Pay turnaround falters; shares slump
What shone, and what could still shine on the JSE<\/p>\n
SIMON BROWN: A last question. You mentioned a moment ago the value growth and how the market would at a point swing towards one or the other. If we\u2019re in the growth world there is still, I imagine, a lot of value in that market. You might just not be getting rewarded for it because the Fomo [Fear of Missing Out] trade is to chase the growth stocks which are giving, as you say, short-term appreciation.<\/p>\n
JOHN BICCARD: Yes. So our view is very simple in that we say the future is totally uncertain and we\u2019re not trying to predict the next growth industry or what growth companies will earn in three years\u2019 time. Everything is kind of 50-50. My experience with the market is you can\u2019t really forecast earnings in five years, so all we go for is stocks or sectors where the market is 100% certain that it\u2019s not going to recover. So Pick n Pay \u00a0is a good example right now; the market pays you to take away the Pick n Pay business; you buy a Boxer.<\/p>\n
The market is saying Pick\u00a0n\u00a0Pay will not turn around, no one will ever buy it, and that Sean Summers won\u2019t get that business right. I actually don\u2019t know. The truth is all I know is that if the bet is 100% that he\u2019s not going to do it that just seems too severe, and I\u2019m prepared to bet against that \u2013 people who say it\u2019s 100% certain that it\u2019s not going to happen.<\/p>\n
Really a lot of investing is we don\u2019t know the future. You just want to be invested with the odds more on your side.<\/p>\n
SIMON BROWN: I think that\u2019s it. We\u2019re fine where the odds are on your side because the future will reveal itself, but we don\u2019t know. We\u2019ll leave \u00a0it there. Ninety One\u2019s Value Equity Strategy portfolio manager John Bicccard, I appreciate the time.<\/p>\n
Listen to the full MoneywebNOW podcast every weekday morning here.<\/p>\n
#Buying #undervalued #shares #pessimistic<\/p>\n","protected":false},"excerpt":{"rendered":"
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