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Readers by now know how strongly I feel about holding investments in Rupert family-controlled companies (even if I do vacillate a bit on Reinet Investments). I still maintain Remgro [JSE:REM] is the share every South African should own and should be considered before mulling the surfeit of unit trust vehicles (and exchange-traded funds) that are on show. Richemont is pure class, while Reinet might best be described as an option on Johann Rupert’s moving and shaking.
But when I recently perused my family’s portfolio holdings, I realised our (modest) numbers reflect a new favourite investment. Last year I was able to convince my wife – who doesn’t trust my investment judgment (since the “Monex’ incident) further than she could hurl my golf clubs – to part with a good chunk of her notice deposit savings. She somewhat reluctantly bought into the debentures. However, two generous distribution declarations later I think my reputation is on the mend.
The current collective sum of our Remgro, Richemont and Reinet shares is less than half of the value of our holding in Foord Compass Debentures. While I maintain Remgro is a great starting point for a novice investor, due consideration should also be given to Foord Compass as a platform to support a methodical launch for novice investors into the equity market.
Here are a few reasons why:
* While Foord Compass [JSE:FCPD] may defy easy categorisation, I’d describe the debenture as a combination of a hedge fund and a flexible fund. The fund can mix it up in all asset classes in its bid to deliver a return of inflation +6% by harnessing steady capital growth and a decent yield.
* Its track record has, to date, been steady. The portfolio returned 6,8% for the six months to end-June 2011, bringing the rolling one-year return to 21,6%. Although the annualised return over five years (22,6% since the start of 2002) is below its benchmark, it has still comfortably outperformed the benchmark on a since-inception basis (not to mention both the South African and world equity markets).
* Participants in Foord Compass are buying into a formidable brains trust – headed by highly regarded asset manager Dave Foord. Although it’s never easy to find shares that offer growth attractions and a meaningful yield growth, it would seem Foord has more often than not picked prudently (even if the portfolio components are only disclosed at its financial year-end).
* There’s a compelling offshore element to Foord Compass, going beyond a simple default holding in the Foord International Trust unit trust. Interestingly, Foord Compass’s recent performance has largely been driven by its offshore component.
* Personally, the biggest selling point about Foord Compass is its distributions (30c/debenture for the half-year to end-June) – which, don’t forget, are subject to tax. Reinvesting isn’t a bad idea and the interim declaration offers a scrip option. But the payouts offer up a dollop of cash I often use to build positions in promising small caps. Maybe this time I’ll have a fling with Chemspec or Consolidated Infrastructure Group. My wife, a remedial teacher, only has eyes for Curro.
There’s one drawback: unfortunately, Foord Compass – unlike Remgro or other larger investment trusts – can’t be bought at a large discount to its underlying holdings. In fact, it’s not uncommon for Foord to trade at a premium to NAV. As at end-June this year Foord carried a cum dividend NAV of 778c/debenture, with the debenture trading last week between 770c and 780c.
But the exemplary track record of capital growth plus dependable yield probably warrants a premium (and it’s still cheaper than a unit trust).
But when I recently perused my family’s portfolio holdings, I realised our (modest) numbers reflect a new favourite investment. Last year I was able to convince my wife – who doesn’t trust my investment judgment (since the “Monex’ incident) further than she could hurl my golf clubs – to part with a good chunk of her notice deposit savings. She somewhat reluctantly bought into the debentures. However, two generous distribution declarations later I think my reputation is on the mend.
The current collective sum of our Remgro, Richemont and Reinet shares is less than half of the value of our holding in Foord Compass Debentures. While I maintain Remgro is a great starting point for a novice investor, due consideration should also be given to Foord Compass as a platform to support a methodical launch for novice investors into the equity market.
Here are a few reasons why:
* While Foord Compass [JSE:FCPD] may defy easy categorisation, I’d describe the debenture as a combination of a hedge fund and a flexible fund. The fund can mix it up in all asset classes in its bid to deliver a return of inflation +6% by harnessing steady capital growth and a decent yield.
* Its track record has, to date, been steady. The portfolio returned 6,8% for the six months to end-June 2011, bringing the rolling one-year return to 21,6%. Although the annualised return over five years (22,6% since the start of 2002) is below its benchmark, it has still comfortably outperformed the benchmark on a since-inception basis (not to mention both the South African and world equity markets).
* Participants in Foord Compass are buying into a formidable brains trust – headed by highly regarded asset manager Dave Foord. Although it’s never easy to find shares that offer growth attractions and a meaningful yield growth, it would seem Foord has more often than not picked prudently (even if the portfolio components are only disclosed at its financial year-end).
* There’s a compelling offshore element to Foord Compass, going beyond a simple default holding in the Foord International Trust unit trust. Interestingly, Foord Compass’s recent performance has largely been driven by its offshore component.
* Personally, the biggest selling point about Foord Compass is its distributions (30c/debenture for the half-year to end-June) – which, don’t forget, are subject to tax. Reinvesting isn’t a bad idea and the interim declaration offers a scrip option. But the payouts offer up a dollop of cash I often use to build positions in promising small caps. Maybe this time I’ll have a fling with Chemspec or Consolidated Infrastructure Group. My wife, a remedial teacher, only has eyes for Curro.
There’s one drawback: unfortunately, Foord Compass – unlike Remgro or other larger investment trusts – can’t be bought at a large discount to its underlying holdings. In fact, it’s not uncommon for Foord to trade at a premium to NAV. As at end-June this year Foord carried a cum dividend NAV of 778c/debenture, with the debenture trading last week between 770c and 780c.
But the exemplary track record of capital growth plus dependable yield probably warrants a premium (and it’s still cheaper than a unit trust).
