• Autus Team

Stock selection skewed to new-generation companies


By Timothy Rangongo

Publication: 4 June 2020, Finweek Magazine

A four-pronged approach to choosing shares has delivered solid results for investors.

Fund manager insights:

Autus Fund Managers’ global equity fund aims to provide capital growth over the long term. At the end of April, a little over 90% of the fund’s assets were allocated to offshore equities, which are picked through a four-pillar-based, bottom-up fundamental analysis taking into consideration research; the business model; management; and economic, social and governance issues.

The fund focuses on companies with a global footprint and worldwide earnings, annuity income, strong cash flows, low debt and a low probability of incurring bad debts. The fund prefers companies with little need for external capital to grow the business, but that hold cash reserves on the balance sheet and have easily understandable business models and excellent management.

A company that adheres to the aforementioned criteria, according to the investment team, is Chinese-listed Ping An Insurance Group (which has 27 subsidiaries, including Ping An Health Insurance Company of China, in which SA’s Discovery is invested).

The Ping An conglomerate, whose subsidiaries mainly deal with insurance, banking, and financial services, is ranked seventh on the Forbes Global 2 000 list and 29th on the Fortune Global 500 list. The insurance arm was selected for the 2019 Dow Jones Sustainability Emerging Markets Index (DJSI).

The fund aims to limit maximum exposure to any share at 5% of the portfolio (and takes profit if it exceeds 5%). It is rarely fully invested and has so far managed considerable outperformance, holding on average more than 10% in cash to benefit from buying opportunities.

“We aim to invest smaller holdings in new-generation companies offering value over the long term. A good example is Shopify, which was bought initially at less than $98 and is currently trading at just more than $754. As the price increased, we took profit and kept the exposure at less than the current 2% of the fund,” says Dawie Conradie, leader of the fund management team.

“A great company is only an excellent investment if you pay the right price for it,” he says. In April, after the effects of the global pandemic became a bit clearer, the fund reduced exposure to equities deemed too expensive under current conditions. As a result, stocks such as Berkshire Hathaway, Target, Royal Dutch Shell and Siemens were sold. But, Conradie says, “we stand ready to invest in them again when the right prices are presented to us”.

Why finweek would consider adding it:

The fund has performed well in upswings and similarly managed to protect capital in market drawdowns. The portfolio is well-diversified and offers exposure to global companies with a minimum need for external capital to grow the business. ■


Click below for article reference, Finweek Magazine:

2020.06.4 - AFM Finweek
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Contact Dawie Conradie at dawie@autus.co.za or 086 610 0121

Autus Fund Managers (Pty) Ltd is an authorized financial services provider (FSP 4221).