Allan Gray: Market expensive

Johannesburg - Allan Gray investment managers believe the market is expensive and the group has already begun to reduce its equity exposure in balanced and stable funds.

Allan Gray's focus falls on large, cash-generating companies like SABMiller, which is its top choice in the General Equity Fund.

Allan Gray also favours shares in the Rupert stable - such as Remgro, Richemont and BAT - but is wary of shares that have recently risen sharply, such as Old Mutual and Naspers 'N'.

Other Allan Gray favourites are Sasol, gold shares - such as AngloGold Ashanti and Harmony - and Sanlam and Mondi. The asset manager has a positive outlook on foreign investments, a view that is shared by Stanlib Asset Management.

Paul Hansen, investment adviser at Stanlib Asset Management, says the JSE could struggle to grow strongly in 2010, especially in the resources sector.

On the other hand, technical analyses show foreign shares are at 1999 levels in dollar terms and 2000 levels in rand terms.

In anticipation of next year, asset manager Imara SP Reid has made a couple of interesting moves in its portfolio. Despite the resources run in the second half of 2009, its core equity portfolio still has a strong 38% exposure to the sector.

The view is that industrial shares could take off in 2010, but that retailer shares have largely already priced in growth. Whereas industrial shares' weighting in the all-share basket on the JSE is only 6.3%, Imara's exposure is 20%. But while consumer goods comprise 12.8% of the basket, Imara's exposure is only 4.9%.

Exposure to shares like SABMiller has been reduced in favour of resources stocks like Assore, Exxaro and Pallinghurst.

What asset managers do agree on is that there are fewer investment opportunities in undervalued sectors. Matt Brenzel, portfolio manager at Cadiz Asset Management, points out that the IT sector fell 41% in 2008. However, this year it is 67% up.

- Sake24.com

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