This week, David Shapiro, Portfolio Manager at Sasfin Securities tells MoneyWeek where he would put his money.
What I would invest in now
It’s not going to be an easy year, that’s for sure. Two weeks ago, the long-awaited sell off hit the market and in just three days, all the gains markets made since last November were reversed! While this was expected, it shows just how murky the current investment environment really is. And it makes forecasting what we’ll see a year down the line a very difficult task.
12 months ago, the world was a very different place. All we wanted was to survive. If we put money away where it was safe, we were happy. But now, the tide’s turning. Investors know that despite the slight correction of the last few weeks market momentum will continue. But the truth is, most of them aren’t confident enough to take the risk of getting burnt just yet. You see, it all hinges on whether the global economy will be able to sustain its growth or not. And, as usual, markets will take their queue from what’s happening in America. Right now, for example, the big focus is on jobs. In his budget speech on Monday, Obama came out guns blazing on the topic of job creation. Spelling out his priorities, President Barack Obama urged the USCongress to approve a huge new shot of spending for recession relief and job creation as part of a record $3.8 trillion budget to boost the economy. This move will not onlylift investor confidence, it’ll also improve consumer spending and investors’ appetite for risk.
Another strong concern remains the China story. The 2009 recovery was, for the large part, fuelled by China’s very effective stimulus programme. This saw commodity prices surge rapidly higher and improved both imports and exports into this Asian giant. But as we enter 2010, we see China reigning in a little. This move has made many nervous. The question we now have to ask is whether China’s growth can sustain its rapid pace? And if it can’t, will any other country be able to pick up the slack?
While none of us know the answers to these questions yet, it’s clear that until the global economy is once again a self-sustainable entity, it’ll need every ounce of government help it can get.
Since it’s so hard to take a long-term view on where to put your money with things still up in the air right now, I believe the best move you can make is to put your money in those you trust. With this in mind, my top picks do exactly that. All of them are blessed with management that can sail through just about any sea. Not only have they faced the toughest economic situation in years, they’ve come out stronger on the other side.
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My first pick, therefore, is none other than legendary businessman, Johann Ruperts’ luxury enterprise Richemont (JSE:CFR). True, the group may be on the expensive side at present, but strong sales performance in mainland China and Hong Kong cushioned the impact of sluggish global demand for luxuries last year. This, in turn, enabled Richemont to report a 2% annual increase in sales for the three months to December. Not bad for a group who doesn’t produce essential goods. Even better, the group’s reported sales of €1.6 billion (R17bn) for the period exceeded analyst forecasts.
Next up, we find Jacko Maree’s group Standard Bank (JSE:SBK). And I’m not the only who’s confident in Maree’s ability to deliver the goods. Just last week, the Financial Times voted Maree one of the top 50 emerging market business leaders who helped shape the economic performance in their respective region. In its article, the Financial Times had this to say: “Standard Bank has a long history of investment in Africa, but under the stewardship of Jacko Maree, a South African who is its 54-year-old chief executive, the group has become an emerging markets leader”.
And any talk about good management would be remiss without mentioning firm favourites British American Tobacco (JSE:BTI), BHPBilliton (JSE:BIL) and SAB-Miller (JSE:SAB). All of them produced good results during a very tough economic climate and have management that has proven it can perform against all odds.
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