“I have seen the future and it is very much like the present, only longer…”
This quotation from the author of The Profit is perhaps one of the most apt descriptions of financial markets in 2012. With many predicting financial Armageddon and pointing to rising social unrest in Africa, Europe and the Middle East, the writing seemed to be on the wall for financial markets. When it became apparent that social unrest wouldn’t be a catalyst for a collapse in markets, the focus moved to the “fiscal cliff”, which was expected to create just enough uncertainty to push markets over the edge.
Despite all this uncertainty the JSE finished at near-record highs and you get the sense that people feel pretty confident going into the New Year.
A very interesting factor to look at (and remember) is that quality really does count in both bull and bear markets. Last year Bruce Whitfield and Simon Brown didn’t try and swing for the fences with questionable small-caps, but they rather went for the quality counters including BHP Billiton, which had a one-year return of 30%, British American Tobacco (19%), Shoprite (53%), Aspen (78%), Woolworths (88%), Remgro (42%) and SABMiller (41%).
There was nothing complicated or fancy about this portfolio – good companies, good management and real returns for shareholders.
The big focus for many retail investors is what now? Will the so-called “fiscal cliff” annihilate investment returns in 2013 and will the world dip back into recession?
Two excellent pieces of advice for those who are focused on these factors, which are out of their control: The first comes from local entrepreneurship mentor Allon Raiz, who reminded me at a panel discussion at the Gordon Institute of Business Science (GIBS) last year: “Running a business is easy – buy for one rand and sell for two. If you can’t do that, you’re not running a quality business.”
Sounds simple, and as we’ve seen above, the businesses who stick to this basic premise deliver consistent returns for their shareholders.