Old Mutual Investors Fund Focus - Oct 05 - Fund Manager Comment18 Nov 2005
The equity bull market was stopped in its tracks in October, with the All Share Index declining by 2.4%. The main reasons behind the swing in investor sentiment were the debate around the impact of higher oil prices on inflation and a possibly more aggressive interest rate reaction by central banks. This uncertainty caused a mini sell off in emerging market equities in general. Biggest losers were Forestry & Paper (down 13%) and Oil & Gas (off 12.7%). Smaller companies continued to surprise, outperforming large caps.
Volatility in local markets increased as market players repositioned their portfolios in the face of growing uncertainty. The natural question now being asked is whether we have come to the end of the bull market, especially after the strong appreciation enjoyed to date.
Although the market is no longer cheap, we still believe that, given expected earnings growth, the market is offering reasonable value. The economic environment is supportive of company earnings and, on a relative basis, we believe the local equity market will continue to give investors an attractive real return.
Old Mutual Investors comment - Sep 05 - Fund Manager Comment25 Oct 2005
The equity bull market continues, with the All Share Index appreciating by 20% over the quarter. Most sectors of the market put in good performances, with oil and gas, pharmaceuticals and diversified industrials doing particularly well.
Emerging markets remained in favour, with global investor interest in the South African market and strong earnings growth from local companies the main drivers behind the positive sentiment.
We continued to manage the portfolio close to fully invested, reflecting our positive view on local equities. We purchased Liberty Life and Metropolitan Life because of their attractive valuations relative to their embedded values, and also added to Altron and Barlows as a result of our positive view on fixed investment spending. We switched our Liberty International exposure into Richemont on relative growth expectations.
The natural question after such strong equity market performance is: Where to from here? Although the market is no longer cheap we still believe that, given expected earnings growth, the market is offering reasonable value. The economic environment is supportive of company earnings and on a relative basis we believe the local equity market will remain the best performing asset class over the next 12 months.
Old Mutual Investors comment - Jun 05 - Fund Manager Comment11 Aug 2005
The All Share Index delivered a sterling 7.2% return during the second quarter. Performance was strong across the board, with the resources and rand hedges performing particularly well. This was driven to a large extent by the weakening of the rand from R6.22/$ to R6.65/$. Sentiment towards the other sectors also improved following the surprise interest rate cut in April.
During the period we made some minor adjustments to the portfolio. We switched Sappi into Sasol, as well as AVI into Tiger Brands on the back of better relative growth prospects. We trimmed our retail clothing exposure by selling some Foschini and Truworths shares following strong price action. We also reduced the liquidity in the portfolio by adding further to our Telkom and MTN holdings where we remain optimistic on the growth prospects.
Looking forward, the prospects for the South African economy, and in particular the local consumer, continue to look good, hence our continued exposure to retailers and banks.
In the rand hedge universe, China's ongoing boom is still resulting in high commodity prices, so our view is that the prospects for the diversified miners are better than for other rand hedges such as Richemont and Liberty International. For that reason, we are overweight in diversified miners.
Old Mutual Investors comment - Mar 05 - Fund Manager Comment19 May 2005
The All Share Index ended the quarter 6% higher. This performance was driven, to a large extent, by the strength of the resources sector, which delivered a 17% return. The financial and industrial sectors ended the quarter pretty much where they started it. The fund's current overweight position in local financial and industrial companies and underweight position in resources cost the fund in terms of performance relative to the market.
During the period, we made some adjustments to the portfolio on the back of relative valuations. Major buys included Anglos, Billiton, Ellerines, Imperial, JD Group and MTN. Sales included Imperial, Didata, Massmart, Netcare and Richemont.
Looking forward, we remain optimistic on the prospects for the South African economy and, in particular, the local consumer - hence our continued heavy exposure to retailers and banks. Within our choice of rand-hedge stocks, the ongoing boom in China is resulting in very high commodity prices. Our view is that the prospects for the diversified miners are better than for a company such as Richemont, hence our overweight position in diversified miners.
Old Mutual Investors comment - Dec 04 - Fund Manager Comment17 Feb 2005
During the quarter the Investors' Fund achieved two milestones: the unit price broke through the R100 per unit level and the fund's total value grew to R5bn. These achievements were the result of a very buoyant equity market, with exceptionally high business and consumer confidence, an ongoing consumer spending boom, soaring house prices and strong foreign buying driving prices. As a consequence of all the foreign buying, the rand firmed even more against a weak US dollar and remained at strong levels against other important currencies.
During the quarter, we were net sellers of around R100m in order to satisfy some outflows. We sold off the last of the holding in the life assurance sector and reduced our holding in Sasol due to the falling rand oil price. The strong rand was also a factor in our decision to sell all of our remaining gold shares and to lighten our platinum exposure. On the industrial side, we reduced our holding in Murray & Roberts. We also switched some Anglos into Billiton.
The buying list for the quarter consisted of companies whose fortunes are linked more closely to the strong domestic spending cycle currently under way, with Bidvest, Edcon, Imperial, Spar and Truworths being the most notable of these.
Looking forward to 2005, we are confident that the favourable investor climate will continue. As such, we maintain a fully invested position with very little cash in the fund.