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Johannesburg - A strong run in the gold price has attracted the attention of many institutional investors but, as an asset manager noted, tomato sauce outperformed the glitter of the yellow metal.
A look at the make-up of some of the biggest funds shows a strong preference for the metal.
Exchange-Traded Fund (ETF) NewGold makes up almost 6% of the Investec Value Fund, while another 4.4% is invested in AngloGold Ashanti [JSE:ANG].
However, the preference for AngloGold Ashanti is not shared by Adrian de Fay, who manages the Investec Commodity Fund.
"Gold Fields [JSE:GFI] offers maximum leverage to the gold price as it is 100% unhedged, unlike AngloGold," De Fay said. "On aggregate, Gold Fields mines at similar margins [to those of AngloGold Ashanti] with far greater reserve upside. Yet, at a nine times forward price earnings ratio (PE), [Gold Fields] trades at a substantial discount to AngloGold's 15 times."
Gold is also being tipped by stockbrokerage Imara SP Reid. The firm has been bullish on gold shares in the last few months, tipping Gold One as a "buy". They have, however, recommended that bullish clients consider switching out of AngloGold Ashanti into Harmony.
"We believe the gold price will most likely consolidate at current levels rather than improve," the firm said. "It could be an opportunity to take profits and reinvest in the juniors, whose share prices have not followed that of bullion."
Anwaar Wagenaar, who manages the Old Mutual Mining and Resources Fund, is taking a more cautious view. He sees similarities between the first half of 2010 and events in 2008, when commodity and share prices got ahead of themselves and dropped sharply as the global financial crisis took hold.
"While the very strong rand has dampened the short-term outlook for some shares and the performance of the fund, it is also an ideal time to increase our offshore exposure," he advised clients in his quarterly fund commentary.
One person not buying into the gold fever is Neville Chester of Coronation Fund Managers [JSE:CML]. He said the only gold he would be buying is Tiger Brands [JSE:TBS] All Gold tomato sauce.
"The dollar price of gold did do well as many investors fled equities and bonds to the yellow metal's safe haven, resulting in the price of gold rising by 22% [in dollars] over that period," said Chester.
"As a South African investor, however, the strength of the rand meant investors lost 6%. That was a compelling investment compared to the investors in gold mines, which over the same period returned between -11% (Goldfields) and -31% for Harmony."
Tiger Brands delivered 38% growth.
- Fin24.com
A look at the make-up of some of the biggest funds shows a strong preference for the metal.
Exchange-Traded Fund (ETF) NewGold makes up almost 6% of the Investec Value Fund, while another 4.4% is invested in AngloGold Ashanti [JSE:ANG].
However, the preference for AngloGold Ashanti is not shared by Adrian de Fay, who manages the Investec Commodity Fund.
"Gold Fields [JSE:GFI] offers maximum leverage to the gold price as it is 100% unhedged, unlike AngloGold," De Fay said. "On aggregate, Gold Fields mines at similar margins [to those of AngloGold Ashanti] with far greater reserve upside. Yet, at a nine times forward price earnings ratio (PE), [Gold Fields] trades at a substantial discount to AngloGold's 15 times."
Gold is also being tipped by stockbrokerage Imara SP Reid. The firm has been bullish on gold shares in the last few months, tipping Gold One as a "buy". They have, however, recommended that bullish clients consider switching out of AngloGold Ashanti into Harmony.
"We believe the gold price will most likely consolidate at current levels rather than improve," the firm said. "It could be an opportunity to take profits and reinvest in the juniors, whose share prices have not followed that of bullion."
Anwaar Wagenaar, who manages the Old Mutual Mining and Resources Fund, is taking a more cautious view. He sees similarities between the first half of 2010 and events in 2008, when commodity and share prices got ahead of themselves and dropped sharply as the global financial crisis took hold.
"While the very strong rand has dampened the short-term outlook for some shares and the performance of the fund, it is also an ideal time to increase our offshore exposure," he advised clients in his quarterly fund commentary.
One person not buying into the gold fever is Neville Chester of Coronation Fund Managers [JSE:CML]. He said the only gold he would be buying is Tiger Brands [JSE:TBS] All Gold tomato sauce.
"The dollar price of gold did do well as many investors fled equities and bonds to the yellow metal's safe haven, resulting in the price of gold rising by 22% [in dollars] over that period," said Chester.
"As a South African investor, however, the strength of the rand meant investors lost 6%. That was a compelling investment compared to the investors in gold mines, which over the same period returned between -11% (Goldfields) and -31% for Harmony."
Tiger Brands delivered 38% growth.
- Fin24.com
