PSG Asset Management has been highlighting the opportunities in neglected SA Inc stocks for some time. At their quarterly update event in Cape Town during May fund manager Justin Floor answered the question most investors are asking: Is SA Inc even investable?
According to Floor, it’s not only investable, but contains some exciting opportunities.
“Domestic sentiment is incredibly weak right now,” says Floor. “It is lower today than it was during the Global Financial Crisis in 2008, and lower than it was during the Asian Financial Crisis in 1998. In fact, it is around the same levels we saw in 1985 after PW Botha’s Rubicon speech, and in the early 1990s, when fears of a civil war were prevalent.”
“What these dire moments in our history have in common is that they were followed by periods of excess returns in the markets,” says Floor.
Investors often underestimate the opportunity in price
“Price doesn’t get the airtime it deserves when the narrative is as negative as it is now,” says Floor. “Just as overpaying for a share is one of the biggest risk factors for investors, low prices like we are seeing now present one of the biggest opportunities. Low prices mean lower expectations, and ultimately lower risk,” says Floor.
“80% of the shares in the ALSI are in bear market territory, and some of SA’s best companies have gone on sale,” says Floor. “Many of these businesses have proven track records and strong management teams, and we believe they have a good chance of weathering the storm – as they’ve done before.”
“One of the biggest risks facing investors today is the opportunity cost of not capitalising on the low prices available, but this is often overshadowed by the negative narrative,” he concludes.