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Climbing a wall of worry 
SJ du Preez, Credo 
November 2014 Credo Capital Plc is an Authorised Financial Services provider (FSP No:9757)
…and the information comes from? 
- bearing in mind that 6 of the top 10 world “populations” are websites now 
2
CREDO CAPITAL PLC 
Background to Credo 
 An independent private client wealth management group established in 1998 
 An international business with offices in London, Geneva & South Africa and associations in Australia & 
Luxembourg 
 80% of the group owned by senior management 
 Manages & administers assets in excess of £1.3bn and employs 65 skilled staff 
 Member of the London Stock Exchange (authorised & regulated by the FCA) 
 Custodial services supplied by Pershing Securities Limited (wholly owned subsidiary of Bank of New York) 
 Operates in partnership with a variety of institutions & IFA businesses 
Credo Capital Plc is an Authorised Financial Services provider (FSP No:9757) 
3
CREDO CAPITAL PLC 
Investment Philosophy 
 Wealth preserved & created by following long term, low turnover strategy 
4 
 Value-based approach 
 Unconstrained, high conviction strategy (balanced by sufficient diversification) 
 Yield: key when selecting securities 
 Importance of transaction costs (low-turnover; consider transaction size) 
 Strategic focus (not obsessed with daily news-flow) 
 Risk defined as potential to lose money (focus on capital preservation) 
Credo Capital Plc is an Authorised Financial Services provider (FSP No:9757)
“Going back to 1957, the S&P 500’s average daily gain is 
0.0255%. Roughly speaking, that means for every $39 
you have in the stock market, you make an average of 
one penny in capital gains each trading day. 
Yet the average daily swing is about 40 cents. This means 
that you’re seeing 40 times the volatility of the value that’s 
actually being created, each day. 
That’s more than 97% noise.” 
5 
(Eddy Elfenbein, Oct. 2014) 
Seven deadly sins………GLUTTONY
GENERALLY BEST TO IGNORE THE NOISE… 
"The market is fond of making mountains out of molehills & 
exaggerating ordinary vicissitudes into major setbacks.” 
(Benjamin Graham) 
6
GENERALLY BEST TO IGNORE THE NOISE… 
EMOTIONS! 
"The market is fond of making mountains out of molehills & 
exaggerating ordinary vicissitudes into major setbacks.” 
(Benjamin Graham) 
7
Managing someone else’s EMOTIONS 
(from website: A Wealth of Common Sense; www.awealthofcommomsense.com) 
8
2014 GOT OFF TO A “ROCKY START”, FOR EXAMPLE…
10 
What is NOISE and what ISN’T NOISE 
OCTOBER!!!!!
OCTOBER 
- for those who understand Afrikaans… 
“Dit is die maand Oktober, 
die mooiste, mooiste maand, 
11 
Dan is die dag so helder, 
so groen is elke aand, 
So blou en sonder wolke 
die hemel heerlik bo, 
So blomtuin-vol van kleure 
die asvaal ou Karoo...” 
(C. Louis Leipoldt)
OCTOBER 
- a peculiarly dangerous month to invest in stocks… 
12
OCTOBER 
- a peculiarly dangerous month to invest in stocks… 
13
14 
OCTOBER 
- what’s the big deal? 
1 19 Oct. 1987 −22.6% 
2 28 Oct. 1929 −12.8% 
3 18 Dec.1899 −12.0% 
4 29 Oct. 1929 −11.7% 
5 6 Nov. 1929 −9.9% 
6 12 Aug. 1932 −8.4% 
7 14 Mar. 1907 −8.3% 
8 26 Oct. 1987 −8.0% 
9 15 Oct. 2008 −7.9% 
10 21 Jul. 1933 −7.8% 
11 18 Oct. 1937 −7.8% 
12 1 Dec. 2008 −7.7% 
13 9 Oct. 2008 −7.3% 
14 1 Feb. 1917 −7.2% 
15 27 Oct. 1997 −7.2% 
16 5 Oct. 1932 −7.1% 
(S&P 500: biggest daily declines in stock market history)
15 
OCTOBER 
- what’s the big deal? 
1 19 Oct. 1987 −22.6% 
2 28 Oct. 1929 −12.8% 
3 18 Dec.1899 −12.0% 
4 29 Oct. 1929 −11.7% 
5 6 Nov. 1929 −9.9% 
6 12 Aug. 1932 −8.4% 
7 14 Mar. 1907 −8.3% 
8 26 Oct. 1987 −8.0% 
9 15 Oct. 2008 −7.9% 
10 21 Jul. 1933 −7.8% 
11 18 Oct. 1937 −7.8% 
12 1 Dec. 2008 −7.7% 
13 9 Oct. 2008 −7.3% 
14 1 Feb. 1917 −7.2% 
15 27 Oct. 1997 −7.2% 
16 5 Oct. 1932 −7.1%
16 
OCTOBER 
- what’s the big deal? 
1 19 Oct. 1987 −22.6% 
2 28 Oct. 1929 −12.8% 
3 18 Dec.1899 −12.0% 
4 29 Oct. 1929 −11.7% 
5 6 Nov. 1929 −9.9% 
6 12 Aug. 1932 −8.4% 
7 14 Mar. 1907 −8.3% 
8 26 Oct. 1987 −8.0% 
9 15 Oct. 2008 −7.9% 
10 21 Jul. 1933 −7.8% 
11 18 Oct. 1937 −7.8% 
12 1 Dec. 2008 −7.7% 
13 9 Oct. 2008 −7.3% 
14 1 Feb. 1917 −7.2% 
15 27 Oct. 1997 −7.2% 
16 5 Oct. 1932 −7.1%
17 
OCTOBER 
- what’s the big deal? 
1 19 Oct. 1987 −22.6% 
2 28 Oct. 1929 −12.8% 
3 18 Dec.1899 −12.0% 
4 29 Oct. 1929 −11.7% 
5 6 Nov. 1929 −9.9% 
6 12 Aug. 1932 −8.4% 
7 14 Mar. 1907 −8.3% 
8 26 Oct. 1987 −8.0% 
9 15 Oct. 2008 −7.9% 
10 21 Jul. 1933 −7.8% 
11 18 Oct. 1937 −7.8% 
12 1 Dec. 2008 −7.7% 
13 9 Oct. 2008 −7.3% 
14 1 Feb. 1917 −7.2% 
15 27 Oct. 1997 −7.2% 
16 5 Oct. 1932 −7.1%
18 
OCTOBER 
- what’s the big deal? 
1 19 Oct. 1987 −22.6% 
2 28 Oct. 1929 −12.8% 
3 18 Dec.1899 −12.0% 
4 29 Oct. 1929 −11.7% 
5 6 Nov. 1929 −9.9% 
6 12 Aug. 1932 −8.4% 
7 14 Mar. 1907 −8.3% 
8 26 Oct. 1987 −8.0% 
9 15 Oct. 2008 −7.9% 
10 21 Jul. 1933 −7.8% 
11 18 Oct. 1937 −7.8% 
12 1 Dec. 2008 −7.7% 
13 9 Oct. 2008 −7.3% 
14 1 Feb. 1917 −7.2% 
15 27 Oct. 1997 −7.2% 
16 5 Oct. 1932 −7.1%
19 
GLOBAL EQUITY INDICES 
- 1 Nov. 2013 to 20 October 2014 
115 
110 
105 
100 
95 
90 
85 
01/11/2013 01/12/2013 01/01/2014 01/02/2014 01/03/2014 01/04/2014 01/05/2014 01/06/2014 01/07/2014 01/08/2014 01/09/2014 01/10/2014 
Dow Jones S&P 500 FTSE 100 Euro Stoxx 50 MSCI World ($) 
Source: Credo Group, Datastream 
Global equity indices (1Y) 
Dow Jones S&P 500 FTSE 100 Euro Stoxx 50 MSCI World ($)
20 
THE CANARY IN THE COALMINE?
21 
THE CANARY IN THE COALMINE?
OCTOBER 2014 
- "We’ve seen uglier sell-offs in 2013, 2012, 2011, 2010…” 
S&P Oct. 10 close: 1,906 (5.2% below 2,011 on Sep. 18) (Source: Sam Ro, Business Insider, 10 Oct. 2014) 
22
23 
IT’S NOT ALL NOISE THOUGH…
24 
1. Germany feeling eurozone slowdown 
2. Ebola 
3. Oil 
4. Fed turning off taps 
5. Emerging markets 
6. Europe continues to waver 
7. Middle East conflict 
A WALL OF WORRY… 
- as summarised in press reports
25 
1. Germany feeling eurozone slowdown 
- share of world exports: 8% (v. 2007: 9.1%) 
2. Ebola 
- will it follow route of previous pandemics? 
3. Oil 
- more complicated (on balance: good!) 
4. Fed turning off taps 
- the real risk: deflation in Eurozone 
5. Emerging markets 
- “new normal”: China grows +/- 7%? 
6. Europe continues to waver 
- ditto point 4 above 
7. Middle East conflict 
- what has really changed? 
A WALL OF WORRY… 
- some perspective
26 
EBOLA 
-Tweet: SkyNews; 31 October 2014
27 
EBOLA 
- another case of “misplaced” perception of risk?
28 
PANDEMICS IN THE PAST 
- quickly shrugged off by markets historically… 
2100 
1900 
1700 
1500 
1300 
1100 
900 
700 
500 
S&P 500 over the last 15 years 
1999: Y2K scare in 1999 in 
the context of a highly 
overvalued stock market 
2002/03: SARS breaks 
out in China and spreads 
across Asia in 2003 
2001: Sep 11th NYC terrorist 
attacks followed by anthrax scare 
2004/05: Avian flu 
pandemic breaks out in 
Asia and gradually 
spreads across Asia and 
rest of the world 
2009: Swine flu breaks 
out in Mexico and 
spreads across the world 
gradually 
2010/11: Protests in Tunisia 
and Algeria, setting the basis 
for the upcoming "Arab 
spring" 
2013/14: Ebola breaks out in 
Guinea and rapidly spreads 
across many West African 
countries 
2014: Russia 
seizes control of 
Crimea in Feb'14 
2014: ISIS takes control of 
Mosul, Iraq in Jun'14 
01/01/1999 
01/05/1999 
01/09/1999 
01/01/2000 
01/05/2000 
01/09/2000 
01/01/2001 
01/05/2001 
01/09/2001 
01/01/2002 
01/05/2002 
01/09/2002 
01/01/2003 
01/05/2003 
01/09/2003 
01/01/2004 
01/05/2004 
01/09/2004 
01/01/2005 
01/05/2005 
01/09/2005 
01/01/2006 
01/05/2006 
01/09/2006 
01/01/2007 
01/05/2007 
01/09/2007 
01/01/2008 
01/05/2008 
01/09/2008 
01/01/2009 
01/05/2009 
01/09/2009 
01/01/2010 
01/05/2010 
01/09/2010 
01/01/2011 
01/05/2011 
01/09/2011 
01/01/2012 
01/05/2012 
01/09/2012 
01/01/2013 
01/05/2013 
01/09/2013 
01/01/2014 
01/05/2014 
01/09/2014 
Source: Credo Group, Datastream
29 
1. Germany feeling eurozone slowdown 
- share of world exports: 8% (v. 2007: 9.1%) 
2. Ebola 
- will it follow route of previous pandemics? 
3. Oil 
- more complicated (on balance: good!) 
4. Fed turning off taps 
- the real risk: deflation in Eurozone 
5. Emerging markets 
- “new normal”: China grows +/- 7%? 
6. Europe continues to waver 
- ditto point 4 above 
7. Middle East conflict 
- what has really changed? 
A WALL OF WORRY… 
- some perspective
30 
ANNUAL INFLATION RATES (UK) 
(1265 – present)
31 
DEFLATION RISK? 
“Each success only buys an admission ticket to a 
more difficult problem…” 
(Henry Kissinger, 1979)
…or Sliding down a Slope of Hope? 
32 
CLIMBING A WALL OF WORRY…
SLIDING DOWN THE SLOPE OF HOPE? 
33
SLIDING DOWN THE SLOPE OF HOPE? 
34 
Jan ’12: 1st profit warning 
Apr ‘13: Pre-tax profits halve 
Apr ‘14: Profits fall further 7% 
May ‘14: Credo sells stake
35 
Source: 
The Motley Fool 
A POPULAR VIEW 
- May 2014, Tesco share price: 290p
SLIDING DOWN THE SLOPE OF HOPE? 
36 
Jan ’12: 1st profit warning 
Apr ‘13: Pre-tax profits halve 
Apr ‘14: Profits fall further 7% 
May ‘14: Credo sells stake 
Jul ‘14: CEO steps down 
Sep ‘14: Profit misstatement revealed
HAVE WE SEEN THE BOTTOM IN THE TESCO SHARE PRICE? 
- hope is not a strategy… 
37
PESSIMISM HAS CERTAINLY BEEN RIFE… 
38 
Share prices went 
down today on 
rumours that 
share prices were 
going down…
WE REMAIN OPTIMISTIC ABOUT THE LONG TERM 
39
WE REMAIN OPTIMISTIC ABOUT THE LONG TERM 
“Optimistic people play a disproportionate role in shaping our lives. 
Their decisions make a difference; 
They are inventors, entrepreneurs, political and military leaders – not average people. 
They got to where they are by seeking challenges and taking risks.” 
Daniel Kahneman 
40
Over the long term, the stock market news will be good. 
In the 20th century, the United States endured two 
world wars and other traumatic and expensive military 
conflicts; the Depression; a dozen or so recessions 
and financial panics; oil shocks; a flu epidemic & the 
resignation of a disgraced president. 
Yet the Dow rose from 66 to 11,497. 
41 
LOOK TO THE LONG TERM 
- quoting Warren Buffett (again)
42 
FOCUS! 
- source: www.behaviorgap.com 
Things 
that 
matter 
Things 
you can 
control 
What you should focus on
43 
CREDO BEST IDEAS PORTFOLIO 
 Launched: April 2011 
 Diversified portfolio of high conviction, global equities 
 Long term, value investing 
 Bias towards developed market, large capitalisation stocks 
 Aims to generate sustainable excess returns through careful stock selection 
 +45.4% vs. MSCI World +37.3% (14.04.2011 to 30.09.2014) 
 +41.3% vs. MSCI World +31.5% (14.04.2011 to 17.10.2014)
44 
CREDO DIVIDEND GROWTH PORTFOLIO 
 Launched: December 2012 
 Diversified portfolio of high conviction, global equities 
 Focus on companies that pay attractive, sustainable, growing dividend yields 
 Bias towards developed market, large capitalisation stocks 
 Aims to provide investors with a sustainable & growing income stream 
 +31.7% vs. MSCI World +30.6% (28.12.2012 to 30.09.2014) 
 +28.3% vs. MSCI World +25.1% (28.12.2012 to 17.10.2014)
BY ALL MEANS FOLLOW A CAUTIOUS APPROACH… 
45
BUT DO NOT TAKE ALL RISK OFF THE TABLE! 
46
BUT DO NOT TAKE ALL RISK OFF THE TABLE! 
“The best time to plant a tree was 20 years ago 
The second best time is now.” 
Ancient African Proverb 
47
#ThankYou 
48 
FINALLY…

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Credo Group

  • 1. Climbing a wall of worry SJ du Preez, Credo November 2014 Credo Capital Plc is an Authorised Financial Services provider (FSP No:9757)
  • 2. …and the information comes from? - bearing in mind that 6 of the top 10 world “populations” are websites now 2
  • 3. CREDO CAPITAL PLC Background to Credo  An independent private client wealth management group established in 1998  An international business with offices in London, Geneva & South Africa and associations in Australia & Luxembourg  80% of the group owned by senior management  Manages & administers assets in excess of £1.3bn and employs 65 skilled staff  Member of the London Stock Exchange (authorised & regulated by the FCA)  Custodial services supplied by Pershing Securities Limited (wholly owned subsidiary of Bank of New York)  Operates in partnership with a variety of institutions & IFA businesses Credo Capital Plc is an Authorised Financial Services provider (FSP No:9757) 3
  • 4. CREDO CAPITAL PLC Investment Philosophy  Wealth preserved & created by following long term, low turnover strategy 4  Value-based approach  Unconstrained, high conviction strategy (balanced by sufficient diversification)  Yield: key when selecting securities  Importance of transaction costs (low-turnover; consider transaction size)  Strategic focus (not obsessed with daily news-flow)  Risk defined as potential to lose money (focus on capital preservation) Credo Capital Plc is an Authorised Financial Services provider (FSP No:9757)
  • 5. “Going back to 1957, the S&P 500’s average daily gain is 0.0255%. Roughly speaking, that means for every $39 you have in the stock market, you make an average of one penny in capital gains each trading day. Yet the average daily swing is about 40 cents. This means that you’re seeing 40 times the volatility of the value that’s actually being created, each day. That’s more than 97% noise.” 5 (Eddy Elfenbein, Oct. 2014) Seven deadly sins………GLUTTONY
  • 6. GENERALLY BEST TO IGNORE THE NOISE… "The market is fond of making mountains out of molehills & exaggerating ordinary vicissitudes into major setbacks.” (Benjamin Graham) 6
  • 7. GENERALLY BEST TO IGNORE THE NOISE… EMOTIONS! "The market is fond of making mountains out of molehills & exaggerating ordinary vicissitudes into major setbacks.” (Benjamin Graham) 7
  • 8. Managing someone else’s EMOTIONS (from website: A Wealth of Common Sense; www.awealthofcommomsense.com) 8
  • 9. 2014 GOT OFF TO A “ROCKY START”, FOR EXAMPLE…
  • 10. 10 What is NOISE and what ISN’T NOISE OCTOBER!!!!!
  • 11. OCTOBER - for those who understand Afrikaans… “Dit is die maand Oktober, die mooiste, mooiste maand, 11 Dan is die dag so helder, so groen is elke aand, So blou en sonder wolke die hemel heerlik bo, So blomtuin-vol van kleure die asvaal ou Karoo...” (C. Louis Leipoldt)
  • 12. OCTOBER - a peculiarly dangerous month to invest in stocks… 12
  • 13. OCTOBER - a peculiarly dangerous month to invest in stocks… 13
  • 14. 14 OCTOBER - what’s the big deal? 1 19 Oct. 1987 −22.6% 2 28 Oct. 1929 −12.8% 3 18 Dec.1899 −12.0% 4 29 Oct. 1929 −11.7% 5 6 Nov. 1929 −9.9% 6 12 Aug. 1932 −8.4% 7 14 Mar. 1907 −8.3% 8 26 Oct. 1987 −8.0% 9 15 Oct. 2008 −7.9% 10 21 Jul. 1933 −7.8% 11 18 Oct. 1937 −7.8% 12 1 Dec. 2008 −7.7% 13 9 Oct. 2008 −7.3% 14 1 Feb. 1917 −7.2% 15 27 Oct. 1997 −7.2% 16 5 Oct. 1932 −7.1% (S&P 500: biggest daily declines in stock market history)
  • 15. 15 OCTOBER - what’s the big deal? 1 19 Oct. 1987 −22.6% 2 28 Oct. 1929 −12.8% 3 18 Dec.1899 −12.0% 4 29 Oct. 1929 −11.7% 5 6 Nov. 1929 −9.9% 6 12 Aug. 1932 −8.4% 7 14 Mar. 1907 −8.3% 8 26 Oct. 1987 −8.0% 9 15 Oct. 2008 −7.9% 10 21 Jul. 1933 −7.8% 11 18 Oct. 1937 −7.8% 12 1 Dec. 2008 −7.7% 13 9 Oct. 2008 −7.3% 14 1 Feb. 1917 −7.2% 15 27 Oct. 1997 −7.2% 16 5 Oct. 1932 −7.1%
  • 16. 16 OCTOBER - what’s the big deal? 1 19 Oct. 1987 −22.6% 2 28 Oct. 1929 −12.8% 3 18 Dec.1899 −12.0% 4 29 Oct. 1929 −11.7% 5 6 Nov. 1929 −9.9% 6 12 Aug. 1932 −8.4% 7 14 Mar. 1907 −8.3% 8 26 Oct. 1987 −8.0% 9 15 Oct. 2008 −7.9% 10 21 Jul. 1933 −7.8% 11 18 Oct. 1937 −7.8% 12 1 Dec. 2008 −7.7% 13 9 Oct. 2008 −7.3% 14 1 Feb. 1917 −7.2% 15 27 Oct. 1997 −7.2% 16 5 Oct. 1932 −7.1%
  • 17. 17 OCTOBER - what’s the big deal? 1 19 Oct. 1987 −22.6% 2 28 Oct. 1929 −12.8% 3 18 Dec.1899 −12.0% 4 29 Oct. 1929 −11.7% 5 6 Nov. 1929 −9.9% 6 12 Aug. 1932 −8.4% 7 14 Mar. 1907 −8.3% 8 26 Oct. 1987 −8.0% 9 15 Oct. 2008 −7.9% 10 21 Jul. 1933 −7.8% 11 18 Oct. 1937 −7.8% 12 1 Dec. 2008 −7.7% 13 9 Oct. 2008 −7.3% 14 1 Feb. 1917 −7.2% 15 27 Oct. 1997 −7.2% 16 5 Oct. 1932 −7.1%
  • 18. 18 OCTOBER - what’s the big deal? 1 19 Oct. 1987 −22.6% 2 28 Oct. 1929 −12.8% 3 18 Dec.1899 −12.0% 4 29 Oct. 1929 −11.7% 5 6 Nov. 1929 −9.9% 6 12 Aug. 1932 −8.4% 7 14 Mar. 1907 −8.3% 8 26 Oct. 1987 −8.0% 9 15 Oct. 2008 −7.9% 10 21 Jul. 1933 −7.8% 11 18 Oct. 1937 −7.8% 12 1 Dec. 2008 −7.7% 13 9 Oct. 2008 −7.3% 14 1 Feb. 1917 −7.2% 15 27 Oct. 1997 −7.2% 16 5 Oct. 1932 −7.1%
  • 19. 19 GLOBAL EQUITY INDICES - 1 Nov. 2013 to 20 October 2014 115 110 105 100 95 90 85 01/11/2013 01/12/2013 01/01/2014 01/02/2014 01/03/2014 01/04/2014 01/05/2014 01/06/2014 01/07/2014 01/08/2014 01/09/2014 01/10/2014 Dow Jones S&P 500 FTSE 100 Euro Stoxx 50 MSCI World ($) Source: Credo Group, Datastream Global equity indices (1Y) Dow Jones S&P 500 FTSE 100 Euro Stoxx 50 MSCI World ($)
  • 20. 20 THE CANARY IN THE COALMINE?
  • 21. 21 THE CANARY IN THE COALMINE?
  • 22. OCTOBER 2014 - "We’ve seen uglier sell-offs in 2013, 2012, 2011, 2010…” S&P Oct. 10 close: 1,906 (5.2% below 2,011 on Sep. 18) (Source: Sam Ro, Business Insider, 10 Oct. 2014) 22
  • 23. 23 IT’S NOT ALL NOISE THOUGH…
  • 24. 24 1. Germany feeling eurozone slowdown 2. Ebola 3. Oil 4. Fed turning off taps 5. Emerging markets 6. Europe continues to waver 7. Middle East conflict A WALL OF WORRY… - as summarised in press reports
  • 25. 25 1. Germany feeling eurozone slowdown - share of world exports: 8% (v. 2007: 9.1%) 2. Ebola - will it follow route of previous pandemics? 3. Oil - more complicated (on balance: good!) 4. Fed turning off taps - the real risk: deflation in Eurozone 5. Emerging markets - “new normal”: China grows +/- 7%? 6. Europe continues to waver - ditto point 4 above 7. Middle East conflict - what has really changed? A WALL OF WORRY… - some perspective
  • 26. 26 EBOLA -Tweet: SkyNews; 31 October 2014
  • 27. 27 EBOLA - another case of “misplaced” perception of risk?
  • 28. 28 PANDEMICS IN THE PAST - quickly shrugged off by markets historically… 2100 1900 1700 1500 1300 1100 900 700 500 S&P 500 over the last 15 years 1999: Y2K scare in 1999 in the context of a highly overvalued stock market 2002/03: SARS breaks out in China and spreads across Asia in 2003 2001: Sep 11th NYC terrorist attacks followed by anthrax scare 2004/05: Avian flu pandemic breaks out in Asia and gradually spreads across Asia and rest of the world 2009: Swine flu breaks out in Mexico and spreads across the world gradually 2010/11: Protests in Tunisia and Algeria, setting the basis for the upcoming "Arab spring" 2013/14: Ebola breaks out in Guinea and rapidly spreads across many West African countries 2014: Russia seizes control of Crimea in Feb'14 2014: ISIS takes control of Mosul, Iraq in Jun'14 01/01/1999 01/05/1999 01/09/1999 01/01/2000 01/05/2000 01/09/2000 01/01/2001 01/05/2001 01/09/2001 01/01/2002 01/05/2002 01/09/2002 01/01/2003 01/05/2003 01/09/2003 01/01/2004 01/05/2004 01/09/2004 01/01/2005 01/05/2005 01/09/2005 01/01/2006 01/05/2006 01/09/2006 01/01/2007 01/05/2007 01/09/2007 01/01/2008 01/05/2008 01/09/2008 01/01/2009 01/05/2009 01/09/2009 01/01/2010 01/05/2010 01/09/2010 01/01/2011 01/05/2011 01/09/2011 01/01/2012 01/05/2012 01/09/2012 01/01/2013 01/05/2013 01/09/2013 01/01/2014 01/05/2014 01/09/2014 Source: Credo Group, Datastream
  • 29. 29 1. Germany feeling eurozone slowdown - share of world exports: 8% (v. 2007: 9.1%) 2. Ebola - will it follow route of previous pandemics? 3. Oil - more complicated (on balance: good!) 4. Fed turning off taps - the real risk: deflation in Eurozone 5. Emerging markets - “new normal”: China grows +/- 7%? 6. Europe continues to waver - ditto point 4 above 7. Middle East conflict - what has really changed? A WALL OF WORRY… - some perspective
  • 30. 30 ANNUAL INFLATION RATES (UK) (1265 – present)
  • 31. 31 DEFLATION RISK? “Each success only buys an admission ticket to a more difficult problem…” (Henry Kissinger, 1979)
  • 32. …or Sliding down a Slope of Hope? 32 CLIMBING A WALL OF WORRY…
  • 33. SLIDING DOWN THE SLOPE OF HOPE? 33
  • 34. SLIDING DOWN THE SLOPE OF HOPE? 34 Jan ’12: 1st profit warning Apr ‘13: Pre-tax profits halve Apr ‘14: Profits fall further 7% May ‘14: Credo sells stake
  • 35. 35 Source: The Motley Fool A POPULAR VIEW - May 2014, Tesco share price: 290p
  • 36. SLIDING DOWN THE SLOPE OF HOPE? 36 Jan ’12: 1st profit warning Apr ‘13: Pre-tax profits halve Apr ‘14: Profits fall further 7% May ‘14: Credo sells stake Jul ‘14: CEO steps down Sep ‘14: Profit misstatement revealed
  • 37. HAVE WE SEEN THE BOTTOM IN THE TESCO SHARE PRICE? - hope is not a strategy… 37
  • 38. PESSIMISM HAS CERTAINLY BEEN RIFE… 38 Share prices went down today on rumours that share prices were going down…
  • 39. WE REMAIN OPTIMISTIC ABOUT THE LONG TERM 39
  • 40. WE REMAIN OPTIMISTIC ABOUT THE LONG TERM “Optimistic people play a disproportionate role in shaping our lives. Their decisions make a difference; They are inventors, entrepreneurs, political and military leaders – not average people. They got to where they are by seeking challenges and taking risks.” Daniel Kahneman 40
  • 41. Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic & the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497. 41 LOOK TO THE LONG TERM - quoting Warren Buffett (again)
  • 42. 42 FOCUS! - source: www.behaviorgap.com Things that matter Things you can control What you should focus on
  • 43. 43 CREDO BEST IDEAS PORTFOLIO  Launched: April 2011  Diversified portfolio of high conviction, global equities  Long term, value investing  Bias towards developed market, large capitalisation stocks  Aims to generate sustainable excess returns through careful stock selection  +45.4% vs. MSCI World +37.3% (14.04.2011 to 30.09.2014)  +41.3% vs. MSCI World +31.5% (14.04.2011 to 17.10.2014)
  • 44. 44 CREDO DIVIDEND GROWTH PORTFOLIO  Launched: December 2012  Diversified portfolio of high conviction, global equities  Focus on companies that pay attractive, sustainable, growing dividend yields  Bias towards developed market, large capitalisation stocks  Aims to provide investors with a sustainable & growing income stream  +31.7% vs. MSCI World +30.6% (28.12.2012 to 30.09.2014)  +28.3% vs. MSCI World +25.1% (28.12.2012 to 17.10.2014)
  • 45. BY ALL MEANS FOLLOW A CAUTIOUS APPROACH… 45
  • 46. BUT DO NOT TAKE ALL RISK OFF THE TABLE! 46
  • 47. BUT DO NOT TAKE ALL RISK OFF THE TABLE! “The best time to plant a tree was 20 years ago The second best time is now.” Ancient African Proverb 47