The large market slump in 2018 has offered investors excellent investment opportunities in the financial sector, says one of South Africa’s best-known investors, Kokkie Kooyman.
The Denker Capital founder manages the award-winning Sanlam Global Financial Fund and the Denker Global Financial Fund. Kooyman was named Fund Manager of the Year four years in a row in the financials category by the UK-based publication Investment Week.
Kooyman sees a number of bargain shares in the global market, and his funds have bought more shares over the past three months after panic selling brought a long bull run to an end in 2018.
Wall Street's S&P 500 was down 6.2% in 2018, booking its worst year since the financial crisis and worst December since the Great Depression. The JSE lost more than 11% last year - also its worst performance since 2008.
“This time it was higher interest rates and macro-economic concerns and political uncertainty that triggered the sell-off. The rest followed driven by misplaced fear.
“Our own research (and the research of many others) highlights how small the effect of these macro concerns is on earnings of companies.”
“US financial shares were sold down aggressively due to fears about short-term effect of US interest rates not being hiked much further, while emerging market companies were sold because of fears of the effect of future higher interest rates.”
This has created a great opportunity to invest in good companies in strong growth environments whose share prices have fallen due to irrational fears of emotional investors about their prospects, says Kooyman.
He looks for these four factors before he invests:
Kooyman sees value in two JSE-listed financial shares: Absa and, his favourite, Investec.
Based on its share price compared to its net asset value, Investec is now the most undervalued it has ever been, Kooyman says.
"This is another case where the market has totally overreacted to three factors that do influence its earnings growth: the South African economy, pound currency risk if we have a hard' Brexit and then negative markets, which affect both its asset management and wealth management income stream.
"But the market is ignoring the fact that a lot has been done clearing debris left from 2008 and other problems, as well as the renewed focus and energy that new CEOs Hendrik du Toit and Fani Titi will bring."
Looking beyond South Africa, these are his top investment picks right now:
All of these companies have lost large chunks of their value in the past year:
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