The impact of the current crisis on managing a local equity portfolio
11 May 2020
Please click below to listen to a web-based meeting we held at the end of April 2020 on the impact of the current crisis on managing a local equity fund, specifically our Denker SCI Equity Fund. A summary of the main points is listed below.
Investment opportunities in the global financial sector
30 April 2020
On 28 April 2020 we hosted a web-based meeting on the current investment opportunities in the global financial sector. Please click below to listen to our thoughts, including some company specific examples. A summary of the main points is listed below.
The benefits of staying the course during a crisis: a lesson from Brazil
22 April 2020
Brazil’s economic history is characterised by extreme volatility, and the 2015 crisis was particularly severe. The country has contended with many challenges over the decades – hyperinflation, political turbulence, military dictatorship, staggering inequality, and aggressive commodity boom and bust cycles, to name a few.
1. The world will not stop operating – companies will still produce goods and consumers will still consume. Despite all the unknowns we are facing what we do know is that we still need to eat, we still need healthcare (more so now), we still shop online, and we still phone our friends. In fact,Continue reading
Our thoughts on the current issues facing South Africa
15 April 2020
If you would like to hear our thoughts on the current issues facing South Africa, amidst the Covid-19 pandemic, please click below to listen to a web-based meeting we hosted yesterday (14 April 2020). A summary of the main points is also listed below.
Denker Global Financial Fund: finding opportunities amidst the fears
19 March 2020
The financial sector has declined significantly, presenting very attractive investment opportunities. Last week, European financials were trading at new lows following the 1987 Black Monday lows, recording a decline of 28% in just two weeks.
As portfolio managers, we focus on what we know instead of relying on uncertain media and economic news. We rely on our in-depth research on company fundamentals, which informs our assessment of a company’s intrinsic value.
Meet Karena Naidu, the newest addition to our SA equity team
27 February 2020
We are committed to proactively investing in young talent to grow our team and to develop the next generation of leading investment professionals. The latest addition to our team is Karena Naidu, who joined us at the start of 2020 as a trainee equity analyst on the South African equityContinue reading
While it’s difficult to pinpoint the reason for India’s slowdown, the country cannot escape its harsh reality. Over the past few years, India has experienced several major political and economic developments.
Finding your investment edge is key to outperformance
3 December 2019
Outperforming the market starts with understanding the potential sources of returns. At Denker Capital, to generate market-beating returns for our investors, we continuously look at how we can improve our edge by gaining a better understanding of past sources of alpha.
Constructing our balanced fund – how we improve the likelihood of success
31 October 2019
No matter how skilled the climber, climbing without support or protective gear is risky. Free solo rock climbers like Alex Honnold only rely on their physical strength, climbing ability, and psychological fortitude.
Globally, consumers respond to companies that meet their need for convenient services. They vote with their feet. Those companies that don’t evolve are left behind and inevitably must retrench staff. Banks are no different and risk losing clients to their faster-moving competitors or new fintech start-ups (examples in South Africa are Discovery Bank, TymeBank andContinue reading
The Naspers unbundling: our preferred option on behalf of our investors
2 September 2019
Naspers management first unbundled its shareholding in MultiChoice before creating Prosus. Prosus will incorporate all the global internet assets that Naspers currently holds (including its shareholding in Tencent) but will exclude its South African assets.
While macro events do not dictate our investment decisions, we do consider the bigger picture. At Denker Capital, we follow a bottom-up investment philosophy. This means we look for quality companies, and we invest in these companies when they are attractively priced relative to their long-term return potential.
For this year’s Mandela Day we provided food to a local farm school. In honour of the tradition of Mandela Day, we spent 67 minutes making over 200 sandwiches for children at a local farm school in Durbanville in the Western Cape.
Small caps tend to catch pneumonia when markets sneeze When I started out in the asset management industry in April 1998, little did I know that I was about to witness more bloodshed than in the last season of Game of Thrones. As shown in Figure 1 below, during theContinue reading
Insights from Berkshire Hathaway’s latest Annual Shareholder Meeting
30 May 2019
What did Warren Buffett and Charlie Munger make me reflect on this year? This was my 20th shareholder meeting and each meeting brings new learnings. But I also keep building on the foundations of the previous years.
Central banks are under threat across the globe – why it matters for investors
26 April 2019
In late 1971 and early 1972, a series of conversations took place between Richard Nixon and his chosen Chairman of the Federal Reserve (Fed), Arthur Burns. Nixon was terrified that his chances for re-election in November of 1972 could be dashed by unwelcome Fed interest rate tightening. The aim ofContinue reading
‘If there is difficulty or doubt the security should be declined.’ Benjamin Graham Risk management is essential to mitigate the consequences of being wrong about an investment. If there is one important lesson that time in the market will teach you, it’s that being wrong is part of the process.Continue reading
The Denker SCI Stable Fund: Good relative performance despite weak markets
27 March 2019
Retired investors face a tough balancing act – they must preserve their capital while ensuring they can draw a sustainable income by carefully managing their risk. To meet these objectives require earning a certain level of returns, but what if weak markets undermine the required returns? The outperformance of theContinue reading
Negative market sentiment makes global financials attractive
27 March 2019
Global financials have consistently grown shareholder value over the past decade and are well placed to continue to do so. Yet, the market remains sceptical about this sector, focusing on the troubles of the past rather than the adjustments and corrections that have already been made. This has led toContinue reading
Moneyweb explains our approach and why we have competitive advantage.
24 February 2019
Your choice of investment manager affects your outcome We believe that investors need to take the time to understand their chosen investment manager’s philosophy and approach so that their thinking is aligned. This can help prevent you from making rash, short-term decisions based on the latest news in the market,Continue reading
While shareholder activism has been on the rise in the US, in South Africa the bar has been set very low. Most shareholder activism has targeted directors’ remuneration, has been directed at larger companies, and has tended to take place behind closed doors. The question is: does shareholder activism addContinue reading
Rational investors can benefit from emotional Mr Market
29 November 2018
The current market sell-off has all the hallmarks of the cycle of irrational panic that grips emotional investors. I recently came across an article in a local newspaper titled JSE nears worst monthly performance in 10 years.
What made you become an equity analyst – what was the attraction to financial markets? The wide spectrum of things that are relevant to the role of an equity analyst provides job satisfaction for my curious mind.
Our balanced fund combines ideas to offset risk and provide more consistent returns for investors
26 June 2018
The Denker Sanlam Collective Investments (SCI) Balanced Fund is appropriate for investors saving for the long term who wish to have their savings invested in many independent ideas that aim to deliver superior risk-adjusted returns at lower levels of volatility. To achieve this, we deliberately give investors exposure to aContinue reading
Every year thousands of people head to Omaha in Nebraska in the United States to attend Berkshire Hathaway’s annual shareholders’ meeting (AGM) – mainly to draw on the investment experience and expertise of 94-year-old Charlie Munger and 87-year-old Warren Buffett. Forty of the approximate 40,000 people who attended this year’sContinue reading
Good economic news doesn’t always mean better returns
24 May 2018
So much about the future is unknown, and share prices reflect the market’s assessment of the future. This article expands on the theme of an article we wrote in January, ‘The danger of making short-term decisions when investing for the long term’.
Finding exceptional opportunities for the Sanlam Global Best Ideas Fund
23 April 2018
It’s hard to believe that markets priced by imperfect humans can be perfectly efficient. Picture this: You are an energetic, inspired investor eager to begin the hunt for the next opportunity – the overlooked jewel, or the mispriced business with a bright future. But no matter how long you burn the midnight oil, or howContinue reading
In my August 2014 article I said the Moody’s downgrade was unwarranted and dangerous. ‘Dangerous from a behavioural point of view in that after investors’ African Bank experience, the downgrade could easily trigger a stampede of both equity holders and retail depositors into selling shares and withdrawing deposits.
Italtile has strong fundamentals at an attractive price
24 January 2018
At Denker, we have a checklist of what we look for in potential investments. In October 1935, Boeing’s new bomber Model 299 crashed during a test flight, killing both pilots. An investigation followed, which found that the reason for the crash was a very simple thing – the control lock had been left in place.
The danger of making short-term decisions when investing for the long term
24 January 2018
US research shows that investors underperform the funds they invest in over time. The reason for this underperformance is called the behavioural penalty. Investors tend to lose out because they chop and change their investments in response to the latest news rather than remaining invested.
We invested in Steinhoff based on consistently improving margins, supported by strong divisional management. We first invested in Steinhoff in 2010. Over the years, our investment case in Steinhoff was built on improving margins in the European furniture business.
The global financials Bull Run has just started. Kokkie Kooyman, portfolio manager of the Denker Sanlam Collective Investments Global Financial Feeder Fund, believes that the global financials Bull Run has just started and that the fund is well-positioned to benefit from future growth and mispricings (more detail).
Oracle Corporation – why we believe its valuation is attractive
10 October 2017
Four decades since its launch, Oracle has a solid grip on its market. Oracle is a market leader in relational database management software. Lawrence Ellison co-founded the company in 1977 to develop database software that could compete with IBM’s leading database software.
Pepkor has returned to the JSE as Steinhoff Africa Retail (Star). Pepkor has a colourful history. As shown in Figure 1, it was a listed entity from 1972 to 2004 and then formed part of listed entities Brait and then Steinhoff since 2011. On 20 September 2017, the business came full circle
The impact of Brexit on the SIM Global Equity Income Fund
10 October 2017
UK-listed shares have contributed to the SIM Global Equity Income Fund’s exceptional performance over the years. The objective of the SIM Global Equity Income Fund is to provide a targeted and growing stream of income derived from dividends, in addition to real capital growth.
We can’t forecast the future, but we can prepare for it
10 October 2017
Promoting economic growth and wealth creation is only one of many policy options for South Africa. If South Africa engages in pro-market reforms – as put forward by Professor Brian Kantor in his book, Get South Africa Growing – it is very likely that economic growth would accelerate. Much of the population would benefit fromContinue reading
How we prepare for a global equity market correction. Over the last quarter, global equity markets have advanced another 5%. Over the last 12 months, the return from global equities was 18%, while the last five years (a more meaningful investment period) has produced a remarkable bull run return of some 70%.
Economic growth is essential to break the cycle of poverty in South Africa
26 September 2017
South Africa’s economic growth is stagnating South Africa’s economy is expected to grow by less than 1% in 2017, and growth is projected to improve only marginally in 2018. The cause of this slowing growth is two-fold:
We have entered into a co-branding agreement with Sanlam Collective Investments (SCI), which has been approved by the Financial Services Board. As such, the names of the funds below have changed to be Denker Capital funds and the minimum disclosure documents for September will reflect this change.
Our investment in Naspers’ core assets – why we believe there’s value to be unlocked
31 August 2017
The market is currently applying a significant discount to the total asset value of Naspers In 2012, Naspers traded at a premium to the value of its holding in Tencent, a leading provider of online value-added services in China. The company’s subsidiaries provide media, entertainment, payment, smartphone and online mobile phone value-added services and systems,Continue reading
The South African equity market has outperformed US assets over the last 20 years The local equity market has delivered an annualised return of almost 15% since the introduction of the FTSE/JSE All Share Index in June 1995.
Why the global financials bull run will likely continue
18 July 2017
A lot has changed over the past 12 months in terms of sentiment towards financials By June 2016, Russia had invaded Ukraine, the oil price had fallen from $110 to a multi-year low of $25 (US dollars per barrel), and US banks had been sold down on fears of large oil industry exposures.
Two of our global funds continue to outperform their peers
12 July 2017
Two of our four global funds are once again in the top spots in their categories since inception The Sanlam Global Financial Fund, launched in 2004, and the SIM Global Emerging Markets Fund, launched in 2015, have both consistently outperformed their peers since inception.
Economic and political uncertainty continues to dominate global markets. Although the ride will definitely be bumpy over the short term, we are still finding promising long-term opportunities. Read the transcript of this video below Global markets Looking at the US and UK When surveying the state of global markets, weContinue reading
Although the latest political events trigger serious concerns about the local economic outlook, our portfolios are well diversified and well positioned for macro uncertainty. Read the transcript of this video below South African markets The markets in review We have had another déjà vu moment similar to December 2015 –Continue reading
Opposition against Trump reforms creates uncertainty – but is it all doom and gloom?
5 April 2017
Since Donald Trump’s unexpected election as US president in November 2016, US equity markets have been betting on the Trump reflation trade. The thesis was that he would engineer higher growth, resulting in higher inflation and as a result, higher interest rates. This would help the US (and the world)Continue reading
Sparebanken NN – proof of why you need small caps in a portfolio
5 April 2017
The shares that have generated the highest returns since the launch of the Sanlam Global Financial Fund in 1999 were all smaller companies. In fact, small, quality companies offer many advantages. This includes often being mispriced due to the initial small market cap and perceived business risk. Sparebanken NN inContinue reading
Combined Motor Holdings – an undervalued business with star qualities
5 April 2017
One of the most rewarding aspects of our job is finding a great investment opportunity. Combined Motor Holdings (CMH) is one such gem that remains largely undiscovered, most likely due to its relatively small size. The company has shown exceptional growth in both earnings per share and dividends over theContinue reading
Newsletter Q4 2016: Under the lens: the SIM Global Equity Income Fund
3 February 2017
The SIM Global Equity Income Fund (now four years old) is a unique unit trust in South Africa. The fund aims to deliver an attractive and growing dividend income stream in US dollars as well as capital gains over time, by investing in international shares. While the fund’s strategy andContinue reading
Newsletter Q4 2016: Using implied growth rates to avoid overpaying for a stock
3 February 2017
Paying too much for a stock – even a high-quality stock – significantly increases the risk of permanent capital loss. This is because there is no guarantee that the growth in value will be sufficient to compensate investors over the long term. To establish whether a share is overvalued, investorsContinue reading
Donald Trump’s statement that his approach to his tax affairs makes him ‘smart’ outraged many. However, there is a lot to be said for structuring your assets in a tax-efficient way. This is especially true for retirees, most of whom will not be able to replenish their income or assets during their retirement. Avoiding suboptimal returns caused by unnecessary tax through smart tax planning can help enhance retirees’ outcomes.
Brexit and Trump’s election as US President in 2016 once again proved that we cannot predict macroeconomic events. With earnings growth at a low, we will continue to look for mispriced bargains. Read the transcript of this video below Global markets The world in 2016 2016 was certainly one ofContinue reading
Newsletter Q4 2016: Overview of South African Markets
3 February 2017
Are Despite a year of volatility and surprises, our portfolios had a very good run in 2016. We will continue to focus on bottom-up stock picking to manage the impact of macro events. Read the transcript for the video below South African markets The markets in review The fourth quarterContinue reading
Learn from the past, pick good shares and focus on value President Zuma’s 8 January speech and Value Investing By most accounts president Zuma’s speech was disappointing (surely that’s not possible when everybody had low expectations?). The most disappointing aspect however was the message that in 2017 the ANC wantContinue reading
Are Trump’s policies the right ones to make the USA great again? Will he be able to push them through? Many have been saying: “Trump’s policies won’t work, he is a dead duck” or “It’s in the price in any case”.
Brexit was bad, but US elections won’t have the same effect
14 December 2016
Political events often seem to have a significant impact on currencies and markets, making the compulsion to act after an event strong. Investors fear the longer-term effect which normally is overstated and difficult to predict.
Platinum supply and demand dynamics are increasingly making headlines. The debate mostly revolves around a sustainable level of primary demand, growth in demand, uncertainty about above-ground stockpiles, and growth in recycling. Nevertheless, we maintain a positive outlook for platinum over the medium term. Specifically, we believe Northam is well positionedContinue reading
Get ready for take-off – why we believe Wesco Aircraft offers promising long-term returns
14 December 2016
Industrial distribution is not the most glamorous industry. However, companies in this sector that have a strong competitive advantage and that are available at an attractive price can offer promising long-term investment opportunities. We believe Wesco Aircraft is one of these businesses. And it has the added benefit of operatingContinue reading
With the upcoming presidential elections spreading uncertainty in the US and a web of bureaucracy and political uncertainty dominating Europe, we are seeing a large inflow into emerging markets. Read the transcript of this video below. Global markets The US Markets When we talk about markets at the momentContinue reading
It is standard practice to report performance on the assumption that dividends and interest earned are reinvested. The objective is to make it easier for investors to compare performance to help inform their investment decisions. However, not reinvesting dividends and interest and drawing an income can have a significant impactContinue reading
Despite ongoing volatility and low growth, our funds have outperformed the market on the back of a recovery in the value cycle. We maintain a diversified positioning amidst the uncertainty. Read the transcript of this video below. South African markets Events that affected the markets There has been aContinue reading
US financials … unloved and growing shareholder value despite challenges
14 December 2016
Well managed US banks have managed to grow shareholder value over the past 10 years at a compound 12%+ despite the terrible 2008 to 2012 years (the average of the universe we cover is about 9%). Can the next 10 years be as bad as the past 11 (Dec 2004Continue reading
SIM Global Equity Income Fund … a growing stream of income
30 March 2016
The SIM Global Equity Income Fund was launched in September 2012 to offer investors the opportunity to invest in a fund that strives to deliver an attractive and growing stream of annual income derived from dividends, while at the same time generating real growth in investment capital on a rolling three-year horizon, by investing in shares globally
Download printer friendly version here The replacing of finance minister Nene is a tragedy. A few days ago former SA Reserve Bank governor Mr Mboweni warned (at a WITS University graduation ceremony) that it is of utmost importance for South Africa to avoid a downgrade to junk status. Many international pensionContinue reading
November was a particular difficult month for Emerging Market Equities, but especially for those Emerging Markets that have greater exposure to resources, like South Africa. The FTSE/JSE ALSI ended the month down 3.9%, with the Resource Sector shedding more than 20%. The rand-hedge sectors on the other hand, continued toContinue reading
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. – Warren Buffett
Commodity prices continue their downward spiral sending former diamonds like ArcelorMittal, Glencore and Lonmin to record low valuations. Humans find it difficult to allow for the possibility of a positive outcome in a negative environment, and vice versa. Fear has set in: Is this the time to be greedy?