A penchant for growth stocks | Fin24
 
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A penchant for growth stocks

Jun 12 2018 14:57
Niel Joubert

Fund manager insights:

In terms of their investment philosophy, Abax Investments, the fund manager, believes in bottom-up, fundamental research, stock picking and a focus on earnings growth as the primary driver of share price appreciation. 

It aims to construct diversified portfolios that can generate performance in a range of market conditions. 

According to fund manager Anthony Sedgwick, some specific considerations for a small- to mid-cap mandate include liquidity (the ability to sell out of a position as quickly as it was purchased), competent and trustworthy management, and a bias to quality rather than speculative investments in low-quality businesses that appear to offer substantial value.

The Nedgroup Investments Entrepreneur Fund’s second-largest holding is in Naspers*, which Sedgwick says is a long-held position. 

Naspers is “probably the most entrepreneurial company on the JSE and gives investors exposure to a unique asset by buying a portfolio of global technology businesses, many still in the early phases of their evolution,” he says.

The manager may not purchase an equity security currently listed within the FTSE/JSE Large Cap Index, but is permitted to hold up to 20% of the portfolio in large-cap stocks if they were purchased when they were outside the Large Cap Index and subsequently migrated to that index, as is the case with Naspers, Sedgwick explains.

According to him, Abax seeks out businesses with an enduring competitive advantage resulting in a portfolio of predominantly ‘growth’ stocks.

Due to the nature and concentrated focus of these portfolios, they may be more volatile than portfolios that are diversified across the broader market, says Sedgwick.

He believes the fund is well positioned to take advantage of a recovery to some economic growth under a Cyril Ramaphosa-led administration.

 

“In addition, our view on the rand is always crucial. A stable or relatively strong rand favours the fund, while in the case of a very weak rand, the fund is likely to underperform the overall market and the general equity space, where the rand-hedge proportion of those funds is a lot higher,” says Sedgwick.


Why finweek would consider adding it:

Since inception and over the latest three-, five-, seven- and 10-year periods, the fund has outperformed its benchmark, with less volatility than the JSE’s All Share Index (Alsi).

The fund was also the top South African fund to 31 December 2017 on straight performance in the mid- and small-cap equity fund category at this year’s Raging Bull Awards.

This article originally appeared in the 7 June edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.

investment  |  portfolio  |  funds
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