Johannesburg – With investors shaking off the excesses of Christmas 2010, they now face the daunting decision of whether to put more money into global equity markets.
A look at recent full-year results out from JSE Foord Compass Debentures tells an interesting story which is relevant to investors trying to position their portfolios going into 2011.
Widely acknowledged as having some of South Africa's most consistent investment managers, the listed Foord Compass [JSE:FCPD] investment vehicle finished the year off with 95% exposure to equities - indicating a pretty bullish stance coming into the new year.
The Foord Compass debenture has delivered a total return of 13.4% per annum (over the past year), 11.9% (three years) and 13.2% (five years). Its target is to deliver a return of consumer price index + 10% over a rolling five-year period.
A look at its top five JSE-listed shareholdings makes for interesting reading. Resource heavyweight Anglo American [JSE:AGL]
leads the pack, followed by property plays Redefine and Capital Shopping Centres, retailer Foschini [JSE:FOS]
and furniture conglomerate Steinhoff International Holdings [JSE:SHF]
Redefine and Anglo American are probably no surprises, but the other three are interesting stock picks considering the state of the global consumer.
Steinhoff in particular looks like a bold pick. The share has risen from around R17.30 in July 2010 to touch a high of R24.50 in December. This is not far off the levels it was trading at in February 2007, when the bull market was in full swing.
The question on the mind of all investors is whether equity markets are over-cooked and what kind of strategies to adopt in the current climate. Perhaps this is best answered by the commentary coming out of the Foord team.
“Interest rates are likely to remain low to assist those developed countries where debt levels are excessively high and problematic. These factors, together with strong corporate balance sheets and cash flows, should allow profits to continue growing, which should lead to higher dividends, hence our high allocation to equities.”
Given Foord’s track record, this could help set set your mind at ease as you map out your investment strategy in 2011.