We are in a time where so much is happening – reading through information on the SONA seems outdated, but it was only last week Friday that it was presented! Since then government has re-iterated that we cannot afford nuclear power, cutting the nuclear deal at the knees; VAT is increasing for the first time in 25 years; a new President is representing South Africa at the UN council; and ministers’ heads are being called to roll from Brown to Van Rooyen.
Dynasty Thought
Follow the link for an 8-minute webcast on the Investec Global Franchise Fund which reflects on 2017, as well as outlines potential yields for the forthcoming year.
Dynasty continues to include this Fund as an important component of our local and offshore portfolio construction for the following reasons:
- The Fund is concentrated and will typically comprise of only 25-40 individual stocks;
- It has outperformed its benchmark at lower risk over the long-term, net after all fees;
- There is an inherent quality overlay which historically has offered a strong measure of protection during periods of sharp market weakness;
- Double-digit earnings growth is expected from the aggregated portfolio for 2018;
- The earnings stream of the underlying shares is relatively predictable over the medium-term; and
- The current dividend yield is approximately 2.5% and most of the companies should provide dividend growth into the future, as they tend to generate increasing free cash flows.
Global News
- After a suggestion of some form of gun control following the recent Florida massacre, President Trump has backtracked saying that teachers should be armed instead.
- The shooting has revived the gun control debate with Wall Street reconsidering its relationship with guns. BlackRock Inc. said it was exploring ways to cull gun companies from the portfolios of clients who no longer wish to invest in them. And in Florida, teachers expressed frustration that their retirement funds own gun stocks.
- In Brexit news, Theresa May has confined her ministers to the countryside in order to come up with a united position.
- The Russians have been implicated in multiple doping scandals during the Winter Olympics in South Korea. Nadezhda Sergeyeva, a female bobsleigh pilot, has tested positive for a heart medication that is banned by the World Anti-Doping Agency.
- Police said on Wednesday that 111 girls from the state-run boarding school in Dapchi, Yobe State, were unaccounted for following a jihadist raid on Monday night. Boko Haram has claimed responsibility.
Local News
- Malusi Gigaba presented his first, and perhaps last, budget speech. Under difficult circumstances, Dynasty found the balanced nature of the budget to be broadly acceptable in that the VAT was increased in favour of what could have been a higher marginal tax rate for individuals, a new wealth tax, and increased tax rates for trusts.
- The budget was also generally well received by the Rating Agencies while Fitch was less enthusiastic, releasing a tepid report. Investec’s Nazmeera Moola’s views – Good Budget shows willingness to make difficult decisions – echo our sentiments very closely.
- The increase in Estate Duty for estates above R30m, from 20% to 25% means that, in certain cases, the use of local and offshore trusts to hold growth assets could remain compelling.
- South Africa’s inflation rate slowed to 4.4% in January 2018.
- In Cape Town, Day Zero of the water crisis has been pushed out to 9 July 2018.
- Lynne Brown has been found to have inadvertently misled parliament.
- Discovery released very strong results with their net income growing by 29% for the six months to December which led to the share price rallying by 10%.
Source: Dynasty, Stanlib, Prescient, Daily Maverick, Moneyweb, Reuters, and Bloomberg Markets etc
