In today’s newsletter we use the investor issue of offshore investing to illustrate some investment principles. Given that we live in a rather investing-challenged world how do we need to look at it differently and what can it show us about how we need to approach all our investments.
On Saturday, 4 February, World Cancer Day is recognized. Cancer is a more prevalent disease, and more treatable, but no less devastating - and financially expensive. Appropriate cover can go some way to providing a measure of financial security.
Is offshore cheap and does it matter?
Offshore versus local investing has again reared its head. Is this a good opportunity or not?
Absa Asset Management Private Client’s Chris Gilmour said yesterday that he can see no compelling reason to be overweight offshore – unless you have a good manager with a good track record. Gilmour’s argument – valuations are not as cheap as we may think and corporate earnings may not be as high in the future.
Gilmour looked at the relationship of the S&P500 and the JSE and found that the JSE is looking cheaper. “So I get a little confused when I hear fund managers saying foreign markets are cheap – certain stocks are cheap but as a whole it is not especially cheap.”
ALSI vs S&P 500
In addition the US has seen strong corporate earnings growth over the last few years and Gilmour says a lot of this is cost driven – jobless growth - and there is a limit to how much more growth this can generate – we may have seen the benefits already.
US corporates now need fundamental basic economic growth and from the US consumer this may not be as profitable as cost cutting has been.
Also keep in mind Gilmour noted – that even though the S&P500 is looking cheap today compared to ten years ago – there are distortions courtesy of a few bubbles and extraordinary events. He contends that the S&P500 PEs are more representative today – but not necessarily cheap.
However, there are many fund managers who are finding value in some offshore stocks and sectors.
Keep it simple
At today’s PSG Asset Management outlook presentation Greg Hopkins, head of global equities at PSG Asset Management stressed how important it is to go back to the basics and keep it simple in a world of uncertainty.
Hopkins said that as an asset manager they don’t like to be pigeon holed as one particular style – ie value or growth, instead they look for value and a good investment at the right price. They also don’t limit their universe – ie SA only. “Looking offshore,” he said, “helps us get a better understanding of local business.”
“We are ambivalent whether we look at offshore companies or local companies.”
As investors we often polarize our views into A or B or A compared to B – we need to constantly check these comparisons and invest where the best opportunities are.
Be smart about your investments
Hopkins, interestingly, does not share the view that we are now in exceptional uncertain times – “in investing that is always the case.” At the start of each year, we don’t know where currencies are going, what corporate profits and cash flows are going to do, he commented.
According to Hopkins every year is uncertain and if one has a simple, disciplined and rigorous investment process, wealth creation and preservation are possible.
Hopkins shared five key points they consider when deciding and evaluating an investment and they are equally relevant for every investor:
1. Be value managers – and this means buy companies with a discount to intrinsic value and make sure there is a large margin of safety because things will go wrong.
2. Be contrarian – in essence the hardest to implement as it involves buying when there is selling and selling when there is buying.
3. Understand what you are investing in. Hopkins said one of the things they look for is to describe the business starting with the phrase The beautiful thing about this business is... If they can’t get the business model into a few sentences that may not be the business to invest in or it may be a business that they will invest in with a higher margin of safety.
4. Have an open mind and keep challenging your thesis.
5. Learn from the past – we all make mistakes consistently, but if we acknowledge and learn from them they can turn into strengths.
Appropriate cover can ensure some financial security
Cancer remains one of the leading causes of disabilities and death worldwide, with more than 12 million people diagnosed with cancer and 7.6 million dying of the disease each year, according to figures released by the International Agency for Research on Cancer (IARC). However, while developed countries are seeing a decline in mortality rates, in emerging countries this is not the case.
According to Evodia Mosime, case manager at Liberty Corporate, there has been a marked increase in the prevalence of cancer cases in the past 6 years. “We are seeing more cancer claims for critical illness benefits which amount to an average of 41% of our critical illness book, looking at the period 1 January 2002 to 31 December 2011. The most common of these cancers are cervical and breast for females and prostate and malignant melanomas in males. It is for this reason that we urge our clients to visit their wellness centres, consult with their company doctors or private practitioners annually for routine examinations. Early detection of this condition can have a huge impact to the lives of our clients and South Africans at large.
Commenting on the issue ahead of World Cancer Day on Saturday, February 4, Evodia says that having the appropriate cover in place can ensure some financial security when the disease strikes.
As we salute, honor and celebrate the lives of many of our community members, friends and relatives who have lost their lives or are survivors of this disease, on Saturday, we should all remember that cancer is a very aggressive disease usually termed “the silent killer”. Symptoms usually only prevail with the progression of the disease.
We therefore encourage our South African public to do their annual checkups, mammograms, pap smears, prostate evaluations etc, as with early detection and the right risk benefits in place, more people can beat this disease and regain their lives.
Cancer remains one of the leading causes of disabilities and death worldwide, with more than 12 million people diagnosed with cancer and 7.6 million dying of the disease each year, according to figures released by the International Agency for Research on Cancer (IARC). However, while developed countries are seeing a decline in mortality rates, in emerging countries this is not the case.
According to Evodia Mosime, case manager at Liberty Corporate, there has been a marked increase in the prevalence of cancer cases in the past 6 years. “We are seeing more cancer claims for critical illness benefits which amount to an average of 41% of our critical illness book, looking at the period 1 January 2002 to 31 December 2011. The most common of these cancers are cervical and breast for females and prostate and malignant melanomas in males. It is for this reason that we urge our clients to visit their wellness centres, consult with their company doctors or private practitioners annually for routine examinations. Early detection of this condition can have a huge impact to the lives of our clients and South Africans at large.
Commenting on the issue ahead of World Cancer Day on Saturday, February 4, Evodia says that having the appropriate cover in place can ensure some financial security when the disease strikes.
As we salute, honor and celebrate the lives of many of our community members, friends and relatives who have lost their lives or are survivors of this disease, on Saturday, we should all remember that cancer is a very aggressive disease usually termed “the silent killer”. Symptoms usually only prevail with the progression of the disease.
We therefore encourage our South African public to do their annual checkups, mammograms, pap smears, prostate evaluations etc, as with early detection and the right risk benefits in place, more people can beat this disease and regain their lives.
The opinion and comment in this newsletter is opinion and comment only and does not in any way constitute financial advice – please consult a professional financial planner for all investment and financial decisions.
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