Part III: Global financials – Looking forward to 2021 and 2022
7 September 2020
Our global financials team recently presented their views on the sector outlook for 2021 and 2022. Listen to a recording of the discussion where they share their insights about: • The outcomes of past economic cycles and recessions. • Interest rate and inflation outlooks. • The extent to which banks have provided for bad debt.
Ricco Friedrich on intelligent investing in South Africa and beyond
31 July 2020
Ricco Friedrich, an executive director and portfolio manager at Denker Capital, was recently interviewed by MOI Global, a global investor community. In the interview, Ricco talks about his own investment journey.
Part II: Global financials still offer great opportunities
22 June 2020
In a follow-up to the 28 April 2020 web-based meeting on the investment opportunities in the global financial sector, Kokkie Kooyman, executive director and portfolio manager, and equity analysts, Barry de Kock, Ben Kooyman and Craig Metherell explain what they are seeing in the global financial sector.
Investing in small caps in the current crisis – steer clear or lock down long-term rewards?
17 June 2020
Small caps normally underperform in the initial stages of a bear market, as investors attempt to minimise their risk exposure. The lower levels of liquidity and tradability of small caps tend to magnify the impact on the prices of these shares even further.
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.
Part I: 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.
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.
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.
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
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