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Coming together

No company operates in isolation, and few stay in the same shape and form. As bottom up stock pickers, one approach to outperform is to look for opportunities in areas where the bigger forces are pushing against the old models in ways where value can still be salvaged. The stock price can underperform excessively when the downside is well recognised, at the expense of overlooked or oversimplified positive outcomes. Ladbrokes is a Britain-based betting and gaming company. It started life in 1886 as a commission agent for horses trained at Ladbroke Hall (Warwickshire). Operating in a highly...

November in review

November was a positive month for US equities, where the S&P 500 rose 3.1%. This was against the backdrop of a potential pro-business tax reform bill. In contrast, markets across continental Europe were down over the period, with the CAC 40 and DAX falling 2.3% and 1.6% respectively. During the period, inflation was lower than expected and the euro continued to strengthen against the dollar. In the UK, Chancellor Hammond delivered his autumn budget cutting the UK's growth forecast from 2.0% to 1.5%. The FTSE 100 fell 1.7%. The major bond markets finished the month essentially where they began with 10 year rates in the US rising 3bps to 2.41%, whilst the UK remained unchanged at 1.33% and German rates rose 1bps to 0.37%.

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Contract Notes at your fingertips

CredoNews #

MyCredo now brings Contract Notes to you.

Pulling fuzzy strings

The United States houses of Congress released their respective tax reform draft bills earlier this month and the House of Representatives passed its bill this week. Tax codes are politically contentious, and unclear for investors too. As much a means of earning revenue for the government, they are also used to pull strings. Different interest groups want different strings pulled. The stated aim of the new legislation being proposed is that it is "intended to lower the rate for manufacturing companies making widgets and employing other people" (Rep. Chris Collins (R.,N.Y.)). The Republican belief is that by reducing tax, the incentive is there to invest, hire and grow. Due to the uncertainty surrounding the current administration...

October in review

October was a positive month for global equity markets. In the US, the DJIA rose 4.4% as both the Senate and the House approved a fiscal budget providing scope for future tax reform legislation. Secession was the theme across headlines in Europe, with the Spanish national government dissolving the Catalan Parliament and Catalonian leader Puigdemont announcing independence. The UK's Brexit Secretary David Davis admitted that any deal will likely favour the EU, as proposed transition talks were rejected by leading EU states until a divorce deal is agreed. Yet the Euro STOXX 50 rose 2.3% and FTSE 100 returned 1.8% during the period. The major bond markets saw some divergence with 10 year rates in the US rising to 2.38%, whilst UK and German 10 year rates fell to 1.33%, and 0.36% respectively.

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This too shall pass

Each investment opportunity presents itself in a different way, but there are threads that connect them. Two of these threads are the tendency to think current bad news will last longer than it will and to undervalue things that will happen too far into the future. A contrarian mindset lets you take advantage of the first behavioural challenge and a long-term investment horizon lets you benefit from the second. A contrarian isn't someone who just takes the opposite view for the sake of it. That is being contrary. A contrarian looks at the information, listens to concerns, and then forms an independent view. Opportunities then present themselves...

September in review

September was a generally positive month for global equity markets. In the US, the Fed remained committed to start unwinding its balance sheet and President Trump debuted at the UN general assembly, threatening to "totally destroy" North Korea. Despite this, the DJIA rose 2.2% during the period. In continental Europe, the Euro STOXX 50 rose 5.2% as the Euro weakened amid an indecisive German election that saw right-wing party Alternative for Germany (AfD) gain representation in the Bundestag. In the UK, members of the BoE's Monetary Policy Committee have increased expectations of a potential rate rise in coming months. Sterling rose to its highest post-Brexit level, before retreating to finish the month at 1.34 against the US dollar, whilst the FTSE 100 fell -0.7%. In fixed income, bond yields rose across major markets with 10 year rates in the US, UK, and Germany rising to 2.33%, 1.37%, and 0.46% respectively.

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Credo publishes "The vinyl revival" CREDONEWS

CredoNews #26

Cross referencing

CredoNews #

Do you need to know which of your clients hold a specific stock? MyCredo allows you to cross reference holdings across your client base.

Equity performance in perspective

Credo's flagship Best Ideas Portfolio (BIP) celebrated a six year track record earlier this year, having been launched in April 2011. In hindsight, timing of the launch proved to be somewhat fortuitous, as we now know that it was still relatively early in a bull market which originally started in 2009 and has been prevalent ever since (with only some relatively minor hiccups along the way): those who invested at inception will have seen an overall increase in their portfolio value before management costs of some 109.9% in GBP terms (68.7% in USD terms) until the 31st of August 2017. Not only has the absolute performance been satisfactory, but for most of the period since inception, the BIP has also been...

August in review

August was a tumultuous month for US coastal cities following Hurricane Harvey, with initial estimates for damages over $100bn. Despite this the S&P 500 rose 0.3% during the period. In continental Europe, the Euro STOXX 50 fell 0.7% as the euro saw continued strength after a lack of dovish comments from ECB president Mario Draghi at Jackson Hole. Brexit remains a key issue in the UK with reports of delayed trade talks. Sterling fell from its 2017 high in July to end the month at 1.29 against the US dollar, whilst the FTSE 100 rose 1.7%. In fixed income, bond yields fell across major markets with 10 year rates in the US, UK, and Germany falling to 2.12%, 1.03%, and 0.36% respectively.

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Individual Stories

ServiceMaster's core businesses are Terminix, a Pest Control Services provider, and American Home Shield, a Home Warranty Plan provider. Both are the largest in their respective sectors in the United States. We consider these to be fantastic businesses - highly profitable, cash generative, with a high proportion of recurring revenues (via customer retention) and decent growth potential. Both are industries where the largest players enjoy significant advantages. The Pest Control market is highly fragmented, consisting of some 10,000 companies with fewer than 100 employees each on average. Two large companies have dominant market share (c. 40%). ServiceMaster's Terminix (with a c. 21% market share), and its nearest competitor, Rollins (c. 19%), have been slowly buying up the smaller competitors, consolidating the market. They benefit from...

July in review

A collapse of the Republican's healthcare bill in the Senate and a significant weakening of the US Dollar didn't stop the DJIA ending the month up 2.7%.Returns in Europe were more mixed. Despite signs of continued divergence in stance during Brexit negotiations, the FTSE 100 finished 0.9% higher. On the continent, the Euro STOXX 50 rose 0.3% as the ECB reaffirmed its commitment to current stimulus. After sharp moves in June, major government bond yields were relatively stable, with 10-year rates staying around 1.23% and 0.54% in UK and Germany respectively. US 10-year Treasury yields ended the month roughly where they started at 2.29%.

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A good ear

As bottom-up stock pickers, we are conscious of looking at how a business is different from its peers. Businesses are rewarded for doing something well that others aren't. We are rewarded for finding what others have missed - for recognising value that isn't so obvious. For subtlety. Over time, an experienced analyst builds up a chest of 'stock stories' where lessons have been learned. The next time a similar situation occurs...

Finweek - Collective Insight

The path to non-retirement

The theme of the latest edition of research publication Collective Insight is Rethinking Retirement: how can we think more creatively about the concept and what could we potentially do more effectively? Is it a concept that even has relevance in this day and age?

June in review

This month saw Europe suffer a "June swoon", while other global developed equity markets rose. In the UK, the FTSE was down 2.5% as the general election saw the Conservatives strike a deal with Northern Ireland's DUP to maintain a majority. Elsewhere in Europe, the EUROSTOXX 50 fell 2.9% as the Italian government committed 17bn euros to help wind-up two regional banks. Over in the US, another interest rate hike from the Federal Reserve and withdrawal from the Paris climate accord didn't stop the DJIA ending the month up 1.7%. In fixed income, major government bond yields rose with UK 10-year gilts rising 21bps to 1.26%, US 10-year Treasury yields increased 10bps to 2.30% and German 10-year bunds rose 16bps to 0.47%.

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The opportunity cost of anxiety

CredoNews #

With financial markets at all-time highs and equities trading at expensive multiples, some clients are understandably nervous about a possible correction in the foreseeable future. In this article, Ainsley To provides some perspective on the matter.

Multiple ways to win (and lose)

We recently took the decision to sell Quest Diagnostics (DGX), having purchased it for our clients in February 2016. While the return, including dividends, over the period of 75%, and 46% outperformance of the index, are clearly positives, it perhaps, just as importantly, provides an illustration of the thinking that underpins our investment philosophy and processes. Before we make an investment in a company, we need...

Credo hosts its 5th International Investment Conference

CredoNews #

Last week, the Credo International Conference was held across 5 major cities in South Africa. Over 500 Attendees heard presentations by Roy Ettlinger (CEO), Alan Noik (Managing Director), Ainsley To (Research Analyst), Jarrod Cahn (Director), and keynote speaker, Deon Gouws (CIO). During Alan's presentation, the launch of Credo's Dynamic Fund was revealed. Topics included "The Allure of the Outlier", The Good, the Bad & the Ugly" and "Investing in a Post-Truth World".

May in review

May saw the continuation of a succession of major geopolitical events including the election of pro-EU candidate Emmanuel Macron as French President, a major terror attack in Manchester in the UK, President Trump's first overseas trip and the G7 summit in Sicily. Most developed equity markets rose, with the DJIA, EUROSTOXX 50, FTSE 100 and Nikkei 225 increasing by 0.7%, 1.3%, 4.9% and 2.4% respectively. In fixed income, major government bond yields fell with UK 10-year gilts falling 4bps to 1.05% and US 10-year Treasury yields decreasing 8bps to 2.20%.

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Eyes towards France

Much of the world's recent attention has been focussed on politics. As each country grapples with similar questions posed in different ways, eyes turned recently to France. The two established parties have been the Socialist Party and the Republican Party. Neither party's candidate proceeded to the second round, where voters chose between Emmanuel Macron and Marine Le Pen. Both presented new visions for France. Macron is 'neither of the right, nor of the left', and his party was only formed in April 2016. He is explicitly pro-European, and plans reforms to modernise the French economy. Le Pen sought to prioritise the national interests of France, and exit the Eurozone. Her focus was on security, immigration and sovereignty of the French state. The stock market reacts to...

April in review

April saw pro-EU candidate Emmanuel Macron finish ahead of the National Front's Marine Le Pen in the first round of the French election. Most developed equity markets rose, with the DJIA, EUROSTOXX 50, and Nikkei 225 finishing up 1.4%, 2.0%, and 1.5% respectively. In the UK, Prime Minister Theresa May announced a surprise snap general election for June 8th, and the FTSE 100 index finished -1.3% down during the period. In fixed income, major government bond yields fell with UK 10-year gilts falling 5bps to 1.09%, German 10-year bunds down 1bps to 0.32% and US 10-year Treasury yields decreasing 11bps to 2.28%.

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Perfecting your lists

CredoNews #

Tired of always having to select the same field from the "Field Picker"? MyCredo has the solution.

CNBC Africa

Bruce Whitfield interviews Deon Gouws on The Moneymakers

UK Prime Minister Theresa May's recent announcement of a snap election to be held on the 8th of June 2017 was the topic of discussion between CNBC Africa's Bruce Whitfield and Credo CIO, Deon Gouws.

Risky Risk-Free

Investment management is as much about risk control as it is about seeking returns. The overly simplistic idea that you get paid for blindly taking risk is not true. It makes for pretty mathematics with a switch between 'risky' assets (like equity) and 'risk-free' assets (like cash and government bonds). As fundamental investors, we are more concerned with what the underlying asset actually does. In the long term, you don't get paid for the risks you take (intentions), you get paid for...


Deon Gouws publishes on Moneyweb

In this article, Credo CIO, Deon Gouws, asks whether one should read anything into the surprising strength of the South African currency in the wake of political developments within the country.

CNBC Africa

Bronwyn Nielsen discusses South Africa's downgrade to a junk rating with Deon Gouws on CNBC Africa

CredoNews #

The suddenness of South Africa's recent downgrade to junk status by rating agency S&P caught most commentators by surprise. Credo CIO, Deon Gouws, was woken up in the middle of the night whilst holidaying in Australia when this happened and proceeded to participate in an interview with Bronwyn Nielsen on CNBC Africa at 03:00 in the morning (local Australian time).

March in review

After President Trump delivered a "presidential" first address to congress, he subsequently failed to unite the Republican Party in a bid to push through his healthcare bill, raising uncertainty over future tax reform and infrastructure investment. All the while US equity markets, after peaking on the first day of the month, pared gains with the DJIA finishing -0.6% down. The month also saw a number of geopolitical events in Europe, with the Dutch election result rejecting anti-EU populism, and PM May initiating the UKs exit from Europe through the triggering of Article 50. Local equity markets still ended the period in positive territory, with Euro STOXX 50 and FTSE 100 finishing the month 5.7% and 1.1% higher respectively. In fixed income, the Fed raised rates for the second time in 3 months, and whilst US 10-year Treasury yields rose initially, they finished the month where they started on 2.39%. Elsewhere, UK 10-year gilt yields fell 1bps to 1.14% and German 10-year bunds rose 12bps to 0.33%.

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CNBC Africa

Bronwyn Nielsen discusses the SA cabinet reshuffle with Deon Gouws on CNBC Africa

CredoNews #

Following months of speculation, SA Finance Minister Pravin Gordhan was eventually replaced in a major cabinet reshuffle. Credo CIO, Deon Gouws, discussed this topic with Bronwyn Nielsen on CNBC Africa.

CNBC Africa

Bruce Whitfield interviews Deon Gouws on The Moneymakers (CNBC Africa)

UK Prime Minister Theresa May has started the Brexit process by triggering Article 50; this was the topic of discussion between CNBC Africa's Bruce Whitfield and Credo CIO, Deon Gouws.

Credo publishes "The art of uphill investing" edition

CredoNews #25

Jarrod Cahn & Deon Gouws interviewed by BizNews

CredoNews #

Last week, BizNews founder & CEO Alec Hogg interviewed Jarrod Cahn (lead equity portfolio manager at Credo) and Deon Gouws (Chief Investment Officer). The conversation focused on a few of Credo's current stock picks.

Mind the GAAP

Many years ago, around the time Naas Botha made his NFL debut, the only earnings reported were "GAAP" numbers - that is those consistent with "generally accepted accounting practice". After these were released via newswire, investors had to wait a few days to receive the more detailed financial reports, by post. Those reports were sparse, when compared to today's standards. Over time, regulatory requirements have improved and the internet has made providing more information significantly cheaper than the paper and mail alternative, so companies are...

February in review

February was a good month for most equity markets around the world. Starting in the US, the DJIA returned 5.2% as President Trump met with top executives from some of America's biggest companies to discuss his administration's pro-business policies. In the UK, the FTSE 100 returned 3.1%, while elsewhere in Europe the DAX and CAC 40 both posted gains, returning 2.6% and 2.3% respectively. In fixed income, major government bond yields had their largest decline in 8 months, with UK 10-year gilts falling 27bps to 1.15%, German 10-year bunds down 23bps to 0.21% and US 10-year Treasury yields decreasing 6bps to 2.39%.

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Globally Local

Rather than providing a dogmatic answer, successful companies are often those that ask the interesting questions. Constantly learning. Multi-nationals have been at the forefront of striking the balance between global economies of scale, local tastes and risks. Through trial and error (hopefully learning from others), businesses are discovering better corporate structures, local awareness, and risk management. An early example of getting the balance wrong, led to...

Pirates Half Marathon

CredoNews #

One of the oldest and toughest road running events on the South African race calendar took place on Sunday the 19th of February 2017: the 40th running of the Pirates Half Marathon, proudly sponsored for the second consecutive year by Credo Wealth. The event attracted a record field of some 3,500 runners and was a tremendous success all round.

Finweek - Collective Insight

Algorithms versus human judgement

Ainsley To, Research Analyst at Credo, was featured in Finweek's February 2017 issue of Collective Insight. In the article he discusses algorithm aversion, a behavioural bias which could lead investors to irrationally trust human judgement over decisions made by a computer, even when presented with evidence that the human performs worse.

January in review

January saw a mixed period for equity markets. The month began with broad indices continuing their ascent, with the FTSE 100 closing at an all-time high after fourteen consecutive days of gains stretching back to 21st December and the Dow Jones Industrial Average breaking the 20,000 barrier. However with geopolitics coming to the fore towards the end of the period, optimism waned, as the indices ended the period with muted returns of -0.6% and 0.6% respectively. Elsewhere in Europe, the DAX rose 0.5% and the CAC 40 fell -2.3%. In Asia, Hong Kong's Hang Seng finished the month 6.2% higher while in Japan the Nikkei 225 fell -0.4%. In fixed income, the rise in global bond yields continued, with UK 10-year gilts climbing 18bps to 1.42%, German 10-year bunds up 23bps to 0.44% and US 10-year Treasury yields rising to 2.45%.

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Is it time to invest offshore?

CredoNews #

It has been said that the only "free lunch" in investment markets is diversification. For the benefit of specifically our South African investor base, we have put together a few interesting facts regarding the opportunity to diversify by investing offshore.

The US market's Trump dividend and SA's possible Zuma penalty

CredoNews #

Last week, Credo CIO Deon Gouws was interviewed once again by Alec Hogg from BizNews, covering a variety of topics.

Are you tough enough?

CredoNews #

On 19 February 2017, Credo Wealth will be sponsoring Gauteng's toughest half marathon, the Pirates Half Marathon for the second consecutive year. The race follows a circular route, running up Northcliff Koppie, past the water tower at the top and back down the other side again.

The Pirates Half Marathon offers participants in this year's Ironman and/or Comrades Marathon the opportunity for some additional preparation. With a hefty 370m gain on elevation, you are sure to test the limits of not only your fitness but your mental vigour too. This is not only the toughest race over 21 kilometers in Gauteng, but also one of the best organised races in the country.

Trees do not grow to the sky

Investing in any single company is an inherently uncertain process, the outcome of which can be influenced by a wide range of factors - some relatively easily foreseeable and others less so. Add to that the fact that the most successful of investors will be wrong from time to time, and it's not surprising that a level of diversification in any portfolio of equities is always a prudent strategy. Recognising this underlying uncertainty, our investment process at Credo...

Credo joins James Hay's Managed Portfolio Panel

CredoNews #

We are pleased to announce that Credo Wealth was included on James Hay's Managed Portfolio Panel, adding a valuable enhancement to the platform. Our Multi-Asset Portfolios, a set of four risk scaled model portfolio offering low-cost exposure to global asset classes.

James Hay's Managed Portfolio Panel provides to financial intermediaries access to an outsourced investment management solution. The Panel offers a choice of investment portfolios from top Investment Managers, at a competitive price.

December in review

The final month of 2016 saw the FTSE 100 experience a "Santa rally" as the market closed at an all-time high of 7,142 points and finished the month up 5.4%. Results around Europe were equally impressive with the CAC 40 and DAX rising 6.4% and 7.9% respectively as the ECB extended its QE program until December 2017. In the US, the DJIA continued its post-Trump rise 3.4% and coming within touching distance of a 20,000 close. In Asia, the Nikkei 225 rose 4.5% as the yen continued to weaken against the dollar. In global government bond markets, major European yields fell slightly, including UK 10-year gilts dropping 18bps to 1.2%. Meanwhile US 10-year Treasury yields rose to 2.4% as the Fed raised its target federal funds rate to a range of 0.50 to 0.75%.

Click below for the latest factsheets.