Living in India I have had to become well acquainted with the process of bartering and asking for a discount. Although it is a way of life here, it’s a process I have never been very comfortable with. But if I don’t do it, I will be ripped off and pay more for something than it is really worth. It all comes down to determining the intrinsic value.
Intrinsic value – and looking for shares that trade at a discount to this value – is a key principle of investing. It is also the cornerstone of value investing – which has proven itself as the investment philosophy most likely to generate market beating returns for the long-term.
Nedgroup Investments Value Fund (A) is one fund based on the value investment paradigm. It is a home-grown fund that invests in established local equities that offer value opportunities. The fund manager identifies catalysts that drive the realization of that value – either through recognition by the market and therefore a re-rating of the share, or through corporate action that will return value to shareholders.
A typical investment would be a business operating in an unfashionable industry, but with sound prospects and a strong balance sheet. Usually, the shares are not covered by many broker-analysts, which contributes to the low PE’s and high dividend yields.
The fund was established on the 1st December 1997. So far this year, it has had a return of 12.40%. In the past twelve months it delivered more than 20%, delivering 60% over the past three years – beating funds in the same category, including the MET Value Fund (44%), the Momentum Value Fund (49%) and the Old Mutual Value Fund (30%).
Nedbank’s fund will always have an effective market exposure that is greater than 80% and is therefore suitable for investors seeking exposure to the domestic equity market with maximum capital appreciation as their primary goal over the long term. Investors should have a tolerance for short-term market volatility in order to achieve long-term objectives.
The top holdings include shares such as Woolworths, BHP Billiton, Steinhoff, Remgro and Anglo American. The remainder of the fund is made up mostly of cash holdings with the possibility of some exposure the South African bond and property markets.