Old Mutual Investors comment - Sep 08 - Fund Manager Comment28 Oct 2008
The FTSE/JSE All Share Index delivered a negative return of 20.6% during the third quarter of 2008. This negative performance was on the back of resources shares, which delivered negative returns of 38.3%. Financial and industrial shares managed a marginal positive return over this period.
Sentiment on resources remained negative as signs emerged that the global economic slowdown is more severe than expected and commodity prices remained under pressure. Simultaneously, in the local market the sentiment became more positive on interest rate-sensitive shares as investors see the top of the interest rate cycle.
The fund's broad positioning relative to the general equity sector average remains overweight large cap and underweight small cap shares. The portfolio is currently defensively positioned, yet we are taking advantage of switching opportunities as valuations converge.
No doubt, the recent developments in global financial markets are of concern to investors in the local equity market. As far as South Africa is concerned, the key transmission mechanisms of the crisis into the local economy are via lower commodity prices, the risk of capital flight and likely weaker exports as global growth slows.
So, while we will not be immune to the fall-out of the global crisis, we remain of the opinion that the economy is not heading for a full-blown recession. Government's accelerating infrastructure investment programme will continue to lend support, while the prospect of lower inflation and interest rates will stimulate consumer demand in 2009.
As your equity managers, we are taking a cautious approach in the management of your equity portfolios at this time. Experience has shown that these times of uncertainty also provide opportunities to take stakes in selected companies at very cheap prices, delivering attractive returns over the longer term.
Old Mutual Investors comment - Jun 08 - Fund Manager Comment15 Aug 2008
The FTSE/JSE All Share Index delivered a positive return of 3.4% over the second quarter of 2008. Our market was once again characterised by the continued outperformance by resources versus the underperformance of financial and industrial stocks. The good fortunes for resources continued with generally favourable commodity prices and a slightly weaker rand. On the other hand, the environment for financials and industrials deteriorated further, with another hike in local short term interest rates. Globally, more signs of rising inflation and slowing growth have also contributed to weaker investor sentiment and general stock prices.
The best performing local sub-sectors were fixed line telecoms (+8.1%), general mining (+3.4%) and gold mining (+1.4%), while the worst were household goods (-18.8%), mobile telecoms (-18.1%) and automobiles & parts (-17%).
The Investors' Fund had a reasonable quarter and outperformed its peer group. The main reason for the good relative performance was the overweight position in resources as well as the underweight positions in retail, healthcare and gold. The fund's broad positioning relative to the general equity average remains overweight to large capitalisation and underweight to small capitalisation shares. The portfolio is currently defensively positioned, yet we are taking advantage of switching opportunities as valuations converge.
On a weighted basis, the price:earnings ratio of the fund (using rolling earnings) is currently 11.0 times, and the dividend yield is 3.5%.
Old Mutual Investors comment - Mar 08 - Fund Manager Comment25 Apr 2008
The equity market delivered a positive 2.9% return over the first quarter. This return was, however, characterised by enormous volatility related to investor fears concerning the crisis in the US sub-prime market, as well as the state of the US economy and its potentially negative effect on prospects for global growth. This positive return was largely resource-driven as this sector rose by 17.6%, and was achieved against a background of declining developed and emerging markets.
During the period, rising commodity prices and a weaker local currency took centre stage, driving some resources shares to record levels. Most other sectors delivered a negative return for the quarter. The best performing local sectors were industrial metals (+44.3%), platinum mining (+29.0%) and general mining (+16.8%), while the worst were healthcare & services (-21.6%), travel & leisure (-20.1%) and life assurance (-19.5%). Large caps (+5.1%) continued to outperform mid-caps (-10.8%) and small caps (-10.2%).
The Investors' Fund outperformed its peer group over the quarter, mainly due to overweight positions in Anglo American, Impala Platinum and Sasol. The fund's broad positioning relative to the general equity average remains overweight in large capitalisation and underweight in small capitalisation shares. We maintained our overweight position in resources against the background of continued strong demand and problems on the supply side. The portfolio is currently defensively positioned, yet we are taking advantage of switching opportunities as valuations converge.
On a weighted basis, the price:earnings ratio of the fund - using rolling earnings - is currently 11.9 times, and the dividend yield is currently 3.2%. The weighted earnings growth is forecast to be 19.7% for the next 12 months.
Old Mutual Investors comment - Dec 07 - Fund Manager Comment14 Mar 2008
The equity market delivered a weak performance during the fourth quarter, with a total return of -3.0%. This return was, however, characterised by enormous volatility related to investor fears about the crisis in the US subprime market, as well as the state of the US economy and its potentially negative effect on prospects for global growth. Locally, sentiment was negatively influenced by higher than expected inflation leading to further interest rate increases, as well as political uncertainty around the ANC conference. Notwithstanding the weak last quarter, the All Share Index delivered a total return of 19.2% for 2007.
The best performing local sectors over the quarter were mobile telecommunications (+22.3%), oil & gas (+16.7%) and food & drug retailing (+15.6%), while the worst performing sectors were leisure goods (-20.7%), fixed line telecommunications (-20.5%) and diamond mining (-16.5%).
We did not make major changes to the portfolio during the quarter, but started adding to undervalued shares, i.e. Mondi and Old Mutual. We also further trimmed the interest rate sensitive part of the portfolio against a background of rising inflation and further rises in interest rates. The fund is still positioned to benefit from a strong local economy by having an overweight position in local industrial companies as well as local banks. Exposure to resources was kept neutral, with small companies being underweight.
On a weighted basis the price:earnings ratio of the fund (using rolling earnings) is currently 12.5 times and the dividend yield is currently 3.1%. The weighted earnings growth is forecast at 15.6% for the next 12 months.