This document summarizes the investment philosophy of Credo Capital Plc, an independent wealth management group. It discusses Credo's long-term value-based approach, which focuses on capital preservation, yield, and transaction costs. The document also examines current market volatility and economic concerns, but argues these issues represent short-term "noise" and that focusing on long-term fundamentals is best. It advocates ignoring daily market fluctuations and remaining optimistic about the long-term prospects for equities.

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)
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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?
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34. SLIDING DOWN THE SLOPE OF HOPE?
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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
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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.
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
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48. #ThankYou
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FINALLY…