RE:CM encourages investors to take advantage of value available in marketplace
There are various factors which contribute towards being a successful investor, but one of the most important is to distance investment decisions from the many stories, rumours and speculation which abound in the market place.
This is according to Piet Viljoen, Chairman of RE:CM, a value based asset manager, speaking at the recent Shifting Perspectives conference, which sought to bring together contrarian thinkers from around the globe. The conference featured prominent personalities including Michael Pettis, Beijing-based economic theorist and Professor of Finance at Peking University, Eusebius McKaiser, well-known South African political analyst and Marcel von Aulock, CEO of Tsogo Sun. Best-selling author, Dr Robert Cialdini, also widely known as the “Godfather of Influence”, was present to discuss his expertise in the fields of persuasion, compliance and negotiation.
Viljoen explained that the challenge for investors is that stories don’t encourage individuals to look deeply and properly assess data. “This often leads to bad decisions. As investors, we need to train ourselves to think deeply and not believe the stories that we tell each other.”
He admits that for value investors, such as RE:CM, it is scary to go against the grain and purchase the stocks that other investors do not want, particularly when there is a lot of bad news about those particular companies. “We however know that value investing enables investors to protect against capital destruction.
“We believe that value investing is successful in the long run and although it might result in investors sometimes being exposed to less of the market upturns, it definitely results in being exposed to significantly less downturns. It is better to lose less in the tough times than make the most during market highs.”
He says that in South Africa, there are very few asset managers that consistently hold the type of contrarian views that RE:CM does. “There is a definite difference between our strategy and other asset managers who claim to be value orientated but still hold expensive stocks in their funds.”
Viljoen says that by building a large margin of safety into their analysis, investors can ensure positive results in the long run. “Purchasing shares which are priced far below value ensures this margin of safety.”
He says that this involves taking advantage of depressed market periods or sectors to find quality companies which are priced cheaply. “This is when investors are able to find bargains. These businesses are still very high in value, but due to external economic and political factors the share price has been reduced considerably.”
Viljoen says that when it comes to stories, they are best left for bedtime, rather than investing.
