MARC HASENFUSS: Choose investment strategy carefully
The simplicity of a company’s business model was consistently emphasised as a prudent concern in selecting an investment strategy
The fallout from the Steinhoff debacle continues to frazzle the nerves of investors. The market buzz is horribly cynical — but let it be said that some of the illogical panic selling in unrelated shares has created certain attractive festive-season buying opportunities.
Like most punters, I can’t predict what will transpire at Steinhoff — or when, for that matter. To date nitty-gritty details are frustratingly scant, and if I were a Steinhoff shareholder (fortunately I’m not) I would be in a terrible huff.
In light of developments unfolding at Steinhoff, conversation at a recent lunch with a couple of my investment-minded pals revolved mainly around the most prudent investment strategy for 2018. Understandably, the thematic thread was the importance of investing in companies in which there is an easy-to-understand business model, steady demand and trusted management.
These are, of course, standard considerations when weighing up an investment. But the simplicity of the business model was consistently emphasised, reflecting just how convoluted the operational structure and reporting lines are at the gargantuan Steinhoff.
When it came to nominating companies that we would back if forced to invest our life savings in a JSE share, we collectively only settled on a handful of counters: poultry business Astral Foods, packaging conglomerate Transpaco, property specialist Stor-Age and building materials supplier Afrimat.
My wife has a small position in Stor-Age, but I don’t hold any of these shares. In fact, when I reviewed my portfolio I could, at a stretch, claim that industrial conglomerate Deneb Investments and appliance specialist Nu-World Holdings might be regarded as dependable, value-laden and conservatively managed firms.
I can understand why counters such as Astral, Afrimat, Stor-Age and Transpaco might be regarded as sturdy bastions. Though these firms are dependent largely on economic activity, their management teams have run the core businesses leanly and made damned sure that acquisitions add meaningful value without dangerously stretching the balance sheet. In addition, these companies produce financial statements that allow investors to easily glean the underlying value and evaluate prospects.
I must confess that my two best investments this year were alternative energy group Montauk and wannabe lithium miner Tawana Resources. Both these shares provided fun by the barrelful — but I don’t think I could summarise the "story" on the back of a cigarette box (to use old-style presentation parlance). That’s probably something for me to mull over during the year-end merriment.
A man of means
There has been a lot of intrigue around the damage done to investment tycoon Christo Wiese’s wealth by the value-pulverising events at Steinhoff International. No doubt Wiese has taken a serious bath at Steinhoff, but he still has plenty stored away in supermarket giant Shoprite and even in the much-deflated investment house Brait. Wiese is also a survivor — having emerged from Pepkor’s ill-timed offshore loan catastrophe in the mid-1980s and from the black hole that sucked in the broader BoE/Boland Bank constellation about 16 years ago.
I suspect Wiese will struggle through the Steinhoff setback — perhaps thanks to the fact that he has built such an extensive investment portfolio.
When I scanned the shareholder register to take stock of Wiese’s shareholdings, I was rather surprised to see that one of his biggest investments is a "small" stake in technology giant
Naspers. As of November 24 Wiese held — through his Titan nominee companies — 445,000 shares in Naspers, worth a princely R1.45bn at the time of going to press.
Interestingly Wiese, who is well known for "sideline" investments in Invicta, Trans Hex, Tradehold, Pallinghurst Resources and Stellar, also holds meaningful stakes in Sibanye-Stillwater, Montauk, Adcock Ingram and Aspen — collectively worth close to R380m.