As mentioned by PIMCO, Stein thinks that volume of credit issuance is a more reliable indicator of exuberance than credit spreads.
Wednesday, February 27, 2013
Tuesday, February 26, 2013
On the oddness of this bull run
Markets near all-time highs, but consumer confidence at recessionary levels.
While corporate profits are at all time highs.
But as this Bernstein research piece notes, the bulk of this high earnings level is a result of (1) low interest payments due to the Fed keeping rates near zero and (2) low depreciation due to low capital investment.
While corporate profits are at all time highs.
But as this Bernstein research piece notes, the bulk of this high earnings level is a result of (1) low interest payments due to the Fed keeping rates near zero and (2) low depreciation due to low capital investment.
Investec Value Fund 2012
As stated in a prior post about Value Investing, too rigid an approach can sometimes lead to problems in performance. Lets look at Investec Value Fund's performance in 2012 to understand how and why things go wrong. The fund had a negative 24% alpha versus the JSE All Share Index in 2012 (2.0% vs 26.7%). The top 10 holdings at the end of 2012 were:
1) Steinhoff Int'l Hldgs Ltd [+12%]
2) Gold Fields [-15%]
3) Anglo American Platinum Ltd [-20%]
4) Anglogold Ashanti Ltd [-30%]
5) Sappi Ltd [+24%]
6) Sasol Ltd [0%]
7) Kap Industrial Holdings Ltd [+13%]
8) Absa Group Ltd [+17%]
9) Sun International Ltd [+13%]
10) JD Group Ltd/south Africa [-7%]
Note that the entire fund is not fully invested in the South African stock market. Domestic Equities make up 68.2%, International Equities 25.4% and Domestic Money Market 6.4%. Part of the funds negative alpha may have materialized from the allocation to International Equities. The S&P 500 returned (1277 >1426 = 11.66%) and MSCI World (1186 >1338.50 = 12.85%). Given that the rand only depreciated by 5% against the dollar in 2012 we can see how having exposure to offshore equities affected performance.
Let's look at the year end portfolio against the top 10 shares in the Top 40:
1) BHP Billiton [+17%]
2) SAB Miller [+50%]
3) Anglo American PLC [-17%]
4) Richemont [+69%]
5) MTN [+38%]
6) Sasol [0%]
7) Naspers [+48%]
8) Standard Bank [+16%]
9) Firstrand [+50%]
10) Old Mutual [+55%]
Comparing the Investec fund to the Top40, we notice a few things:
1) Preference for foreign, rand weakness. SA Value investors perennial 'short' bias to SA - get hurt in periods of SA outperformance
2) Preference for rule-based cheapness (low PEs) rather than quality. This could lead to value traps.
3) Crisis exposure (gold, in two large holdings).
4) Preference for Book Value based cheapness over near-term earnings (platinum holdings).
References:
http://www.investecassetmanagement.com/south-africa/upload/pdf/SA_Fact_Sheet_Value_Fund.pdf
http://www.investecassetmanagement.com/namibia/upload/pdf/SA_Inv_Comm_Value_Fund.pdf
1) Steinhoff Int'l Hldgs Ltd [+12%]
2) Gold Fields [-15%]
3) Anglo American Platinum Ltd [-20%]
4) Anglogold Ashanti Ltd [-30%]
5) Sappi Ltd [+24%]
6) Sasol Ltd [0%]
7) Kap Industrial Holdings Ltd [+13%]
8) Absa Group Ltd [+17%]
9) Sun International Ltd [+13%]
10) JD Group Ltd/south Africa [-7%]
Note that the entire fund is not fully invested in the South African stock market. Domestic Equities make up 68.2%, International Equities 25.4% and Domestic Money Market 6.4%. Part of the funds negative alpha may have materialized from the allocation to International Equities. The S&P 500 returned (1277 >1426 = 11.66%) and MSCI World (1186 >1338.50 = 12.85%). Given that the rand only depreciated by 5% against the dollar in 2012 we can see how having exposure to offshore equities affected performance.
Let's look at the year end portfolio against the top 10 shares in the Top 40:
1) BHP Billiton [+17%]
2) SAB Miller [+50%]
3) Anglo American PLC [-17%]
4) Richemont [+69%]
5) MTN [+38%]
6) Sasol [0%]
7) Naspers [+48%]
8) Standard Bank [+16%]
9) Firstrand [+50%]
10) Old Mutual [+55%]
Comparing the Investec fund to the Top40, we notice a few things:
1) Preference for foreign, rand weakness. SA Value investors perennial 'short' bias to SA - get hurt in periods of SA outperformance
2) Preference for rule-based cheapness (low PEs) rather than quality. This could lead to value traps.
3) Crisis exposure (gold, in two large holdings).
4) Preference for Book Value based cheapness over near-term earnings (platinum holdings).
References:
http://www.investecassetmanagement.com/south-africa/upload/pdf/SA_Fact_Sheet_Value_Fund.pdf
http://www.investecassetmanagement.com/namibia/upload/pdf/SA_Inv_Comm_Value_Fund.pdf
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