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
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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)
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4. CREDO CAPITAL PLC
Investment Philosophy
Wealth preserved & created by following long term, low turnover strategy
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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.”
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(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)
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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)
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8. Managing someone else’s EMOTIONS
(from website: A Wealth of Common Sense; www.awealthofcommomsense.com)
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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,
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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…
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13. OCTOBER
- a peculiarly dangerous month to invest in stocks…
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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
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
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…
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38. PESSIMISM HAS CERTAINLY BEEN RIFE…
38
Share prices went
down today on
rumours that
share prices were
going down…
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
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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.
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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)