Stellenbosch - Invest for the long term, have patience and discipline and look for companies that have good management, a sustainable business model and where the price of the company is trading at an attractive margin of safety, says Jan Mouton, manager of the PSG Flexible Fund.
Also look for those companies in which their management have significant equity holdings themselves.
That is a strong indicator of an appropriate alignment of interests in the long-term success of the company.
Commenting in PSG Asset Management’s Angles & Perspectives for the second quarter of 2014, he says that the fund is not out there to make a quick buck.
“Just as we take a long-term view on all our investments, so too should investors take a long-term (three to five years) view when investing in it," he said.
“We are required to stick to our investment process in a disciplined way and to have the patience to allow the companies in which we have invested to produce the returns we expect from them. Investors should also follow a patient and disciplined approach to their fund selections."
When the markets are falling and company valuations are becoming cheaper, PSG tends to buy these companies, allocating cash to them and not pulling investments from them.
"Disciplined and patient investors should ensure that, if markets are falling, they do not disinvest for cash," said Mouton.
"They should realise that these corrections are the times when future returns will be acquired and they should remain resolute and invested."
Ten lessons he has learned:
- Develop an investment philosophy;
- Maintain a flexible approach to asset allocation – wait for the right opportunities;
- Stick with the investment philosophy, even when it is not working;
- Follow a bottom-up approach: Focus on companies, not the economy;
- Invest in companies where management are large shareholders;
- Reduce risk through global diversification in undervalued shares;
- Focus on shares with a low price-earnings ratio;
- Focus on shares with a low price-to-book ratio;
- Avoid large losses'
- Invest for the long-term.
- Fin24
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