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June 2020 – Update from Marriott

Local Bonds, Offshore Equities

On Tuesday last week, Louwrens Coetzee and Duggan Matthews of Marriott Asset Managers presented their outlook for local and offshore investments.

Louwrens opened the presentation with the implications of the recent interest rate cuts and what this will mean for local investors who are seeking an income from their investments. Investors will need to be aware that yields have declined and this will lead to a reduction in the level of income they are receiving. The Marriott Core Income Fund has continued to provide investors with a reliable, predictable and above inflation level of income over the past 5 years.

Image supplied by Marriott

In the second part of the presentation, Duggan provided insights into where Marriott is continuing to find excellent investment opportunities offshore.

Duggan explained how Marriott’s investment philosophy of selecting companies that are able to grow and increase their dividends will become even more relevant now, as we face up to the uncertainties of the post-COVID-19 world.

Image supplied by Marriott

Duggan also shared their annual return expectations for the Marriott International Investment Portfolio (IIP) for the next five years.

It is Marriott’s belief that the best investment opportunities continue to remain offshore and investors looking for long term capital appreciation should consider investing in quality companies that will emerge from the current crisis in a stronger position than many of their peers.

Image supplied by Marriott

For those investors who missed out on the presentation and would like a copy of the slides, please contact the office directly for a copy to be sent to you.

April 2020 – Where to next and Interest rate cut

What next?

Entering into week 3 of 5, it is becoming more evident with every day that the social and economic impact of the Covid-19 virus will be felt far longer by South Africans than the virus itself. In the attached newsletter, Chief Investment Officer of Coronation, Karl Leinberger, provides investors with an interesting insight into how the pandemic is likely to play out as well as offering up Coronation’s thoughts regarding the virus and their fund positioning going forward.

Market Update

On the 23rd March the JSE All Share Index (JSE ALSI) was down 33.64% since the start of the year. Over the last few weeks the stock market has recovered +/- 50% of the losses and the JSE ALSI is now -16.92% for the year. So there has been a steady but gradual improvement. Of course we have no idea of what is going to happen but it would seem that the markets will remain volatile.

At the moment we are all living the experience of the Coronavirus and being constantly bombarded by bad news! It is understandable, that at times like these, investors are feeling negative and despondent. We are currently living through an unprecedented time and it is impossible to know how the future will play out. One of the most important investment decisions is to remain rational rather than being guided by fear and the constant refrain of bad news!

We are encouraging investors to remain invested.

  • We have always advocated that buying high and selling low is an irrational strategy.
  • Do not rush into making sudden rash judgements!
  • Investors who sell at the sell levels are crystalizing losses.
  • “Only when you combine sound intellect with emotional discipline do you get rational behaviour” (Warren Buffet)
  • The fund managers within your portfolios are making rational investment decisions
  • The funds within our client portfolios are managed by excellent fund managers who constantly seek out outstanding investment opportunities and at the same time strive to limit the risk within investments.
  • The fund managers are attempting to create long term wealth and buying shares at levels that are some 30% cheaper than at the beginning of the year. This bode well for medium to long term success!

There is a significant quote from the article by Karl Leinberger, the Chief Investment Officer of Coronation Fund Managers:

“A long time horizon has been the cornerstone of Coronation’s success of many decades. Every crisis we have lived through (and the list is getting long!) has presented an outstanding opportunity for those investors prepared to take the long view. We currently find ourselves swimming in stunningly cheap assets! We have been astounded by some of the long-term opportunities that have been on offer in the last few weeks. The list of stocks, in both domestic and global markets, that our analysts believe offer more than 100% upside (to their underlying intrinsic value) is a long one.” 

Investors who stay invested will undoubtedly reap the long term benefits presented by the current opportunities.

It is at times like these that it is important to remember that although a decline may have been experienced, this is temporary. Although no one can accurately predict how the next few months will play out investors should not forget that their Fund Managers remain committed to delivering on their specified investment mandates. Whilst there may another decline in the value of the JSE All Share index, there will most certainly also be a recovery. The important point is for investors to remain invested to enjoy the benefits arising from the opportunities presented today.

Interest rate cut by 1%, current yields

This morning the South African Reserve Bank announced a further 1% decrease in interest rates. We have been in constant communication with some of the Fund Managers who manage our income portfolios for clients. Their guidance is that the funds will continue to provide investors with a yield in excess of 8%. This is a real return of 3% after inflation. The downgrading of South Africa to junk status forced foreign investors to sell their positions in South Africa, this has provided opportunities for Fund Managers to lock in returns for the next 18 – 24 months at very attractive rates.

We would like to remind everyone that we continue to work remotely from home and are available to help assist in any way we can. Stay safe and God bless!