Moneyweb Investment Seminars - David Shapiro
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Moneyweb Investment Seminars - David Shapiro

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We can see the light at the end of the tunnel, but we're still in the tunnel...

We can see the light at the end of the tunnel, but we're still in the tunnel...

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Moneyweb Investment Seminars - David Shapiro Moneyweb Investment Seminars - David Shapiro Presentation Transcript

  • We can see the light at the end of the tunnel, but we’re still in the tunnel… David Shapiro
  • We can see the light at the end of the tunnel, but we’re still in the tunnel…
  • JSE All Share Index JSE peaks on views housing collapse confined to US Lehman collapse brings end to bull market fueled by low interest rates, excess liquidity and booming housing prices Bail outs, stimulus measures, bond purchases calm nerves inspiring turnaround, but markets faltering on worries about weak recovery
  • Uncertainties in developed economies persist United States • Recovery faltering – further QE probable • Consumers working down debt – confidence lowest in 7 months – gas prices, job security, fall in house and equity markets keeping anxiety levels high • Unemployment rate unacceptably high • Housing still casting a gloomy shadow – price rebound losing momentum • Credit markets remain tight • Corporations in good shape – cash flush, but shy to hire • President Obama popularity plunging on jobs, high health insurance costs and anti-business rhetoric • Trade war with China possible if contentious currency bill passed by both houses Europe • German growth strong on booming exports • Rest of euro zone tepid, especially countries like Greece and Spain • Debt issues not fully resolved – Ireland currently in the spotlight • Consumer demand languid • Austerity measures could weigh on growth • UK – housing market drooping – calls for further stimulus measures
  • GDP growth rates Advanced markets ACTUAL FORECAST 2006 2007 2008 2009 2010 2011 World 5.1 5.2 3.2 -1.4 4.6 4.3 Advanced Economies 3.0 2.8 0.5 -3.2 2.6 2.4 USA 2.8 2.0 0.4 -2.4 3.3 2.9 Euro Area 2.8 2.6 0.6 -4.1 1.0 1.3 UK 2.8 3.0 0.5 -4.9 1.2 2.1 Germany 2.9 2.4 1.2 -4.9 1.4 1.6 France 2.0 1.9 0.1 -2.5 1.4 1.6 Japan 2.4 2.4 -1.2 -5.2 2.4 1.8 Canada 2.8 2.5 0.5 -2.5 3.6 2.8
  • Money flows to safe havens GOLD USD / YEN US Govt 10 Yr Bond US Govt 2 Yr Bond
  • Global gold holdings
  • GDP growth rates Emerging markets ACTUAL FORECAST 2006 2007 2008 2009 2010 2011 World 5.1 5.2 3.2 -1.4 4.6 4.3 Emerging Economies 6.9 6.6 6.1 2.5 6.8 6.4 Russia 6.7 7.0 5.6 -7.9 4.3 4.1 India 9.7 8.9 6.4 5.7 9.4 8.4 Brazil 3.7 4.4 5.1 -0.2 7.1 4.2 Mexico 4.8 2.9 1.5 -6.5 4.5 4.4 China 11.6 13.0 9.6 8.7 10.5 9.6 RSA 5.4 5.1 3.7 -1.8 2.8 3.7
  • Metal prices remain firm Concerns about deflation or “double dip” not evident in metal prices
  • Back home ZAR / USD JSE – Foreign Flows 80.00 60.00 40.00 20.00 ZAR'bn 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 -20.00 -40.00 -60.00 -80.00 Foreign Transactions Equities - Net R'bn Foreign Transactions Besa - Net R'bn
  • South African economy Foreign perspective South Africa is a compelling growth opportunity – Wal Mart Market a proxy for investing in Africa Low debt to GDP – 6% versus US 11% EZA quoted ETF up 13% in 2010 versus S&P500 3% Valuations attractive relative to other emerging markets First world financial markets – with high corporate governance standards Crime, corruption, politics and unemployment a worry but considered a normal risk of investing in emerging markets Recent deals a vote of confidence – HSBC/Nedbank, NTT/Didata
  • South African economy Local perspective Recovery stammering: • Consumers remain under pressure • Mining and manufacturing poised to slow • Tough times ahead for construction Strong Rand hurting competition Future power and water supply uncertain Labour demands continue to be excessive – restricting practises Unemployment unacceptably high – lead to increased social spending Expansion inhibited by bureaucratic incompetence, corruption, ideology Tenure of property rights unclear – nationalisation still on the ANC agenda Questions over education, healthcare and high crime levels Inevitably lead to: • Higher borrowing • Increased taxes
  • Investment ideas for difficult markets
  • Local stock selection Fin Commo- Pricing Equity Preference High Yield EM Strength dities Power Anglo American     BHP Billiton     Sasol    SABMiller    Richemont    British American Tobacco     Naspers   Shoprite   Clicks   ABIL   Standard Bank  
  • High yield opportunities Onshore Running Issuer Investment Currency Rating Yield Nedbank Perpetual Pref ZAR AA- 6.87% Investec Bank Perpetual Pref ZAR AA- 7.39% Investec Perpetual Pref ZAR A+ 7.30% Standard Bank Perpetual Pref ZAR AA+ 6.66% FirstRand Perpetual Pref ZAR AA 6.65% ABSA Bank Perpetual Pref ZAR AAA 6.96% Sasfin Holdings Perpetual Pref ZAR n/a 7.72% African Bank Perpetual Pref ZAR A1 7.47% Capitec Bank Perpetual Pref ZAR A2 8.27%
  • Global stock selection Fin Cons. Pricing Equity Preference High Yield EM Strength Staple Power Nestle     Coca-Cola Co    H&M   LVMH   YUM! Brands Inc  Colgate   Goldman Sachs  Google  Johnson & Johnson  ABB   Royal Dutch Shell   
  • High yield opportunities Offshore Running Issuer Investment Currency Rating Yield Perpetual Old Mutual Plc USD BBB- 8.04% Pref Perpetual Prudential Plc USD A- 9.71% Pref Perpetual Barclays Plc USD A- 7.18% Pref Perpetual Standard Bank Plc USD BBB+ 8.26% Pref Investec Plc 2016 GBP BB+ 7.53% Perpetual Investec Plc Tier 1 EUR B1 8.04% Pref PE Paper (Sappi) 2014 USD BB 6.89%
  • Company details Company 5 Yr Chart Company Description Nestle is the world’s leading nutrition, health and wellness company. The Group employs 280,000 people and have factories and operations in almost every country around the world. The Coca-Cola Company is the world’s largest beverage company, largest manufacturer, distributor and marketer of non-alcoholic beverage concentrates and syrups in the world. Hennes & Mauritz is a Swedish clothing company, known for its fast fashion clothing offerings for women, men, teenagers and children. The Group has 2,000 stores in 37 different countries. LVMH is one of the world’s largest luxury goods conglomerate. It is the parent of around 60 sub-companies that each manage a small number of prestigious brands. Yum! is the world’s largest fast food restaurant company, over 36,000 restaurants in more than 110 countries. Yum! operates or licenses Taco Bell, KFC, Pizza Hut worldwide.
  • Company details Company 5 Yr Chart Company Description Colgate is an American diversified corporation focused on the production, distribution and provision of household, health care and personal products. Goldman Sachs is a global investment banking and securities firm which engages in investment banking, securities, investment management and other financial services. Google is a multinational public cloud computing, internet search and advertising technologies corporation. Google processes over one billion search requests every day. J&J is a global pharmaceutical, medical devices and consumer packaged goods manufacturer. J&J includes 250 subsidiary companies with operations in over 57 countries. ABB is one of the largest engineering companies in the world, operating in around 100 countries. The Group’s focus is power and automation technology areas. Shell is a multinational petroleum company operating in over 140 countries. Shell was listed as the world’s eighth largest corporation for 2010 by Forbes.
  • Thank you Dave Shapiro