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Coronation Fund Managers |
Coronation are an asset manager at the top of their game, so it's worthwhile to read what their view of the world is. The Coronation Jan 2012 newsletter is out, and here are what I considered to be the highlights...
Global Equities |
attractively priced |
Global Bonds |
overvalued |
Global property |
one of the best priced inflation hedges available today |
Dollar Cash |
a healthy allocation makes sense given the risks in the system |
Local Equities |
"trading close to fair value" (in line with RECM & Allan Gray's comments that they are struggling to find value on the JSE) |
Local Bonds |
overvalued |
"We believe that relative valuations are still at levels that will support global equities outperforming local equities for the next several years. As a result, we continue to hold close to the maximum 25% offshore allocation in our asset allocation funds".
"Global equities are attractively priced with many blue chips trading on 12-14 PE multiples & 3-4% dividend yields".
"We continue to favour global businesses that happen to be listed in South Africa". "Having remained underweight resources for most of the year, we moved slightly overweight in our equity & balanced funds...we believe that resources currently offer value, with selected resource shares trading at less than 10 times our assessment of normal earnings...Any Chinese hard landing will have dire ramifications for commodity prices & consequently the pricing of resource shares. It is for this reason that we remain only marginally overweight. Our preferred resource holdings are Sasol, the diversified miners (specifically Anglo American) & Mondi Limited."
"Banks have been poor performers; however, we continue to hold our overweight position on the basis that valuations are attractive at 9 times our assessment of normal earnings & price-to-book ratios of 1.7 times."
"Our concerns about inflation are even more marked in South Africa than they are offshore".
"At the time of going to press, the South African Reserve Bank announced that it is no longer necessary to obtain a tax clearance certificate on the first R1 million taken offshore annually, making it even easier to diversify your holdings by externalising rands into a foreign fund" (Ed: this step is much-welcomed).
Coronation have a "material position" in Mondi across client portfolios, and it is one of their "highest conviction ideas". "Going into the crisis the company was at the start of a 3-year 850m Euro investment programme in 2 growth projects in Poland & Russia. Both these projects are now complete & shareholders will start to reap the benefits of these high return investments...In addition, Mondi permanently closed a material proportion of its high cost capacity during the crisis, which further improved its cost position & industry demand/supply fundamentals." " "Having come to the end of a period of heavy investment in growing the business, ongoing capital expenditure is likely to be...around 60% to 80% of depreciation, compared to 150% over the last 7 years". "The combination of a low earnings multiple on low earnings ticks the right valuation boxes."
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