RE:CM eyes cyclical, construction and gaming shares in 2013
Value based asset manager, RE:CM, says that it does not base investment decisions on outlooks for an uncertain future, but instead bases decisions on the underlying value of an asset. However, there are a few key themes that it is keeping in mind going in
According to Daniel Malan, Investment Director at RE:CM, a key issue in 2013 will be the heightened tension between capital and labour within South Africa, and the extent of government involvement therein. “This is important as it may influence the perceptions and actions of foreign investors in the South African capital markets and business owners’ decisions on fixed investment capital allocation.”
He says that from a global perspective, RE:CM is very interested in policy development in Japan, which will determine if it can assist in kick-starting the economy, as well as economic developments in Western Europe. “Generally speaking, 2012 was a year of investors pursuing yield and safety, resulting in them bidding up the share prices of defensive businesses and smashing the share prices of cyclical businesses. Any signs of stability or an economic recovery in Europe could result in cyclical stocks doing very well.
“Generally speaking, our fund mandates across the board have lowered their exposures to defensives and increased exposures to cyclicals, especially in the platinum sector.”
He says that following years of relative and absolute price and business underperformance in both the construction and gaming sectors, RE:CM’s research shows that there is now good value in the gaming sector and the first signs of an emergence of value in the construction sector.
Malan says that investors should however steer clear of luxury goods stocks from a global perspective and retail businesses in South Africa. “While local retailers are fantastic businesses, they do not present an attractive value proposition for investors when compared with their global counterparts.
“Outside of equities, our work shows that bonds and listed property counters are not currently showing much value for investors,” concludes Malan.
Some of the key stocks RE:CM currently hold as part of their “best ideas” fund – the Global Flexible Fund - include Carrefour, Amplats, Microsoft, BP and Intel.
