A lot has changed in the markets since the last publication “How Chelsea coach Jose Mourinho can help you pick a winning portfolio”.
Like football, a lot changes during a season of trading and it’s time for a transfer window.
In reviewing my team, there are some under-performers who need to be replaced as well as some future stars that will remain the nucleus of the team. In fact, in the case of SAB and MTN, I already made forced changes due to the Anheuser-Busch deal and the potentially huge Nigeria fine respectively.
A head coach also needs to tap into all the resources available to him to enable him to make the best decisions for the benefit of the team. To this end I have consulted with our asset manager to achieve a good overall balance in my squad. For this purpose, I have taken into account some of the stocks he holds in our Accelerated Growth portfolio.
So it’s time to bring out the cheque book and sign some new players and renew the contracts of the ones who performed.
Here’s what the team used to look like…
My goal keeper stock- the shot stopper
My goal keeper (First Rand) retains his place for this season. After turbulence of September and the Finance ministry “reshuffle” in December, the stock has found some form and I expect the stock to be reliable going into the rest of the season.
In my last article “How Chelsea coach Jose Mourinho can help you pick a winning portfolio” my reasoning was “Since 2013 this stock has maintained a beautiful upward trend and the one or dips in between have been perfect buying opportunities.” I still believe in the “most innovative bank in South Africa”
After the recent sell off our market has experienced, I have decided to stick with the goal keeper I know.
My Defenders – the wall
Defensive stocks are the stocks that give you some protection against Rand weakness. So when the major currencies (the opposition) are on the charge, you’ll need the best defence to keep them at bay, and protect your portfolio (the rest of the team).
Defensive stocks are stocks that earn revenue in foreign currency and trade on overseas exchanges as well as locally.
My back four were SABMiller, Richemont, Mondi and Steinhoff.
SAB was ramped up massively after Anheuser-Busch offered to buy them out. We profited handsomely on the corporate action and after the price was agreed between the two, I replaced SAB with the ANB counter. So it’s SAB out and ANB in.
Richemont (CFR) my Swiss defender, has not performed as I expected. Struggling to develop further as a player in the squad the overall performance has been disappointing. I have therefor decided to drop this counter from my portfolio.
To replace CFR, I have signed an American. The DB x-tracker US (DBXUS). This counter gives me the diversification of all of the stocks that currently make up the S&P 500. So by adding a bit of dollar protection to my defence, I will achieve the balance that any solid defence needs.
So at the back it’s CFR out and DBXUS in.
Steinhoff completed their listing on the Frankfurt exchange. They have been a star performer recently and deserve to retain their spot in the centre of my defence.
Mondi retains its place in the squad. The only fundamental change since its inclusion in the back line is that has been shifted to our local resource index but looking ahead I still expect the stock to deliver consistent performance.
My midfield- the team engine room
For my squad portfolio I still need a mix of some risk as well as conservative plays.
Aspen, MTN, Discovery and Bidvest were the original midfield.
As I expected, Aspen has started to show some resilience recently. I added this counter when nobody else would sign this player. The recent form and renewed interest of buyers in this stock has helped for APN to retain its place in the portfolio.
MTN has been the most disappointing player in the portfolio thus far. They are in a huge amount of regulatory trouble in Nigeria and also recently received a fine in Cameroon.
No coach can keep a player in his squad that is this unpredictable or unreliable and keeping it in the portfolio will be detrimental to the squad.
I decided to bring in Brait SE (BAT) to replace MTN. I expect BAT to be a solid performer which will offers us Pound protection too. Brait is also quite active in terms of corporate actions and expect some action in the next twelve months or so and it is for this reason I think BAT will become one of my star players.
Discovery is my insurance play to back up the defence. With small business interests in China and consistency in returns locally. This could still turn out to be my most valuable player. Also a victim of the recent rout in local financials, I think DSY will bounce back hard and as such, I have decided to give it another season.
Bidvest has been a consistent performer in the portfolio. They recently announced their unbundling and we will probably see the separate listing of the food services business in the upcoming months. BVT remains a versatile player that has performed well in volatile conditions.
BVT retains its place in my squad.
My strikers- attack
My attackers JSE and Naspers remain unchanged.
Naspers is our only indirect exposure to the “tech” space that is lacking in our market and still expect loads of goals from the counter.
Recently making new all-time highs, as well as delivering excellent results, their original inclusion into the portfolio was justified.
Let’s have a team meeting
In football, everybody has different opinions, formations, goals and strategy. Constructing a portfolio is the same. Weather your strategy is long term or short term, you need to pick the right team for the job.
There is quite a nice overlap between this squad and our Accelerated Growth portfolio so it’s good to know that looking ahead, I am on the same page as our asset management team.
I am happy to have a team selection meeting with you to help you achieve your goals.
If you like the team I have selected, drop me a mail and let’s finish tops together.
Here’s to profitable trading,
Robby P | Vunani Private Clients