| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 12% | 3% | - |
The Merchant West SCI Value Fund delivered a 3.0% net return in Q2 2026, outperforming the JSE All Share Index by 5.4% as the benchmark fell 2.4%. The quarter was dominated by the Middle East oil shock, which drove inflation to 4.5% and prompted a 25bp SARB rate hike to 7.00%, even as oil prices ultimately retreated 38% by quarter-end. The fund's underweight to gold stocks, which fell 14%, and overweight to tin miner Alphamin (+26.7%), Oceana Group (+30.5%), and Argent Industrial (+16.3%) drove outperformance. The largest detractor was Sasol, down 28.3%. New positions were initiated in Bid Corporation and Reinet Investments to increase hard currency exposure, and in Kumba Iron Ore as an attractively valued iron ore play, while a special situation position in PPC was added on takeover speculation by Heidelberg Materials. The portfolio trades at 7.3x forward earnings versus 11.4x for the index, with superior 14.7% ROIC and lower leverage, reflecting the fund's focus on quality businesses at discounted valuations. South Africa's improving fiscal credibility and reform progress support a constructive medium-term outlook, though growth remains constrained by structural challenges.
The Merchant West SCI Value Fund employs a disciplined value-based investment philosophy focused on quality South African businesses with genuine growth prospects, shareholder-friendly capital allocation, and shares trading at a discount to intrinsic value, providing both downside protection and upside potential.
South Africa's economic outlook remains one of gradual but modest improvement, supported by easing structural constraints, improving fiscal credibility, and stronger investor confidence following recent sovereign credit rating upgrades. However, growth is expected to remain below potential, constrained by persistent unemployment, weak private investment, infrastructure bottlenecks, and global uncertainty. The outlook will depend on continued implementation of economic reforms, the outcome of local government elections in November and their implications for GNU stability, the SARB's ability to manage inflation amid external shocks such as higher oil prices, and the resilience of global demand for South African exports. While the medium-term trajectory has improved, risks remain tilted to the downside if global growth weakens further or domestic reform momentum slows.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Aug 16 2026 | 2026 Q2 | AFM.JO, ART.JO, BID.JO, BTI, KIO.JO, NPN.JO, OCE.JO, PPC.JO, RNI.JO, SBV.JO, SOL.JO | financials, Hard Currency, inflation, Mining, oil, South Africa, value |
BID.JO KIO.JO RNI.JO PPC.JO |
Merchant West SCI Value Fund outperformed the JSE All Share by 5.4% in Q2 2026, delivering 3.0% net returns despite oil shock volatility. Underweight gold exposure and strong stock selection in Alphamin, Oceana, and Argent drove performance. New positions in Bid Corp, Kumba Iron Ore, and PPC reflect opportunistic value deployment. The portfolio trades at 7.3x forward earnings with 14.7% ROIC, targeting quality South African businesses at discounted valuations. |
| May 11 2026 | 2026 Q1 | - | fixed income, inflation, liquidity, Money Market, rates, South Africa | - | Merchant West's money market fund outperformed benchmarks while maintaining ultra-liquid positioning amid rising inflation risks. Iran conflict and oil shocks prompted central banks to scale back rate cut expectations, with SARB reducing 2026 cuts from two to one. Fund's defensive stance emphasizing liquidity and credit quality positions it well for potential growth slowdown scenarios. |
| Feb 20 2026 | 2025 Q4 | ABG.JO, INL.JO, NED.JO, SBK.JO, SHP.JO | inflation, liquidity, Money Market, rates, South Africa | - | Conservative money market fund outperformed benchmark with 7.60% annual returns, benefiting from South African rate cuts and improving economic conditions. Heavy treasury bill allocation and quality bank exposures provide defensive positioning. Manager emphasizes liquidity and credit quality, expecting the fund to outperform risk assets during global growth slowdowns. |
| Nov 27 2025 | 2025 Q3 | - | duration, fixed income, Government Bonds, inflation, rates, South Africa | - | The fund delivered strong quarterly outperformance through strategic government bond positioning, benefiting from foreign investor interest in South African fixed income. The manager maintains disciplined duration management while emphasizing floating rate notes and inflation-linked bonds for volatility protection, viewing South African bonds as attractively priced with compelling real yields. |
| Jun 30 2025 | 2025 Q2 | BP, BRK-A, COLB.CO, CVX, DHR, ISRG, NPN.JO, SHEL, SHP.JO, SYK, TTE, XOM | demographics, energy, healthcare, Investment Management, liquidity, policy, South Africa, technology |
TTE FP TTE |
Merchant West advocates learning from mistakes and adapting to change as core investment principles. The firm sees opportunities in JSE small caps due to liquidity constraints affecting large managers, healthcare MedTech resilience despite policy headwinds, and energy transition plays like TotalEnergies. Organizational culture emphasizes challenge and rigorous analysis over defending failed positions to capitalize on market inefficiencies. |
| Mar 31 2025 | 2025 Q1 | ADH.JO, AVI.JO, BOX.JO, CPI.JO, LHC.JO, MC.PA, OUT.JO, PNP.JO, SHP.JO, TIF | dividends, Economic Reform, growth, Luxury, retail, South Africa |
BOX.JO MC.PA |
Merchant West Investments maintains a global investment approach while selectively investing in undervalued South African opportunities. Despite economic headwinds and Trump-related uncertainties, they see potential in structural reforms and companies with strong value propositions. Key holdings include discount retailer Boxer and luxury leader LVMH, while their Payers & Growers strategies target sustainable income growth for retirement investors. |
| Sep 30 2024 | 2024 Q3 | AVI.JO, CL, NPN.JO, OUT.JO, PG, PRX.AS | Central Banks, China, emerging markets, Government Unity, interest rates, REITs, South Africa | - | South Africa's Government of National Unity has triggered a positive investment cycle with markets rallying strongly in Q3. Combined with global central bank easing, this creates favorable conditions for both domestic SA Inc stocks and interest-sensitive assets like REITs. The firm increased SA allocations post-election while maintaining global REIT exposure, expecting the next decade to significantly outperform the last. |
| Jun 30 2024 | 2024 Q2 | LHC.JO, PIK.JO, SHP.JO, SPP.JO, WHL.JO | dividends, Elections, Politics, Recovery, retail, South Africa | - | South African assets offer exceptional long-term value after years of underperformance, with the new Government of National Unity providing political stability that should drive economic improvements. SA Inc. stocks could deliver 17% annual returns over the next decade if growth recovers to 2.5% and valuations rerate from current conservative levels. |
| Mar 31 2024 | 2024 Q1 | AAL.L, BHP, CL, KO, NESN.SW | Consumer Staples, credit, Elections, fixed income, Governance, Politics, South Africa | - | South African markets offer compelling value at 1994-level cheapness despite election uncertainty. Merchant West positions for post-election recovery through longer duration bonds rather than competing in distorted credit markets, while maintaining defensive consumer staples exposure. The firm expects patient investors to benefit from eventual governance improvements and yield normalisation over the next five years. |
| Sep 30 2023 | 2023 Q3 | ATD.TO, NVDA | adaptation, Global Markets, Investment Process, Long Term, Quality, South Africa, technology, value | ATD.TO | Merchant West emphasizes adaptation and long-term thinking amid Q3 market weakness. Despite geopolitical tensions and technological disruption, the firm maintains conviction in quality investing and disciplined processes. Key themes include AI's exponential growth trajectory and convenience stores adapting to EV transition. Interest rate peaks expected with central bank cuts anticipated in 2024, supporting long-term market outlook. |
| Jun 30 2023 | 2023 Q2 | ADBE, AMD, GOOGL, MSFT, NVDA, TFG.JO | AI, dividends, Energy Transition, inflation, Load Shedding, Quality, South Africa, technology | - | Merchant West balances AI growth opportunities with quality-focused inflation protection. Strong performance from technology holdings like NVidia and Microsoft offset South African market weakness. Quality companies with pricing power provide defensive characteristics during inflationary periods. High-yielding South African bonds and dividend-growing Payers & Growers funds offer attractive income despite load shedding headwinds. |
| Mar 31 2023 | 2023 Q1 | APN.JO, DIP.JO, EQU.JO, LHC.JO, NTC.JO, SAF.JO, SSS.JO, TFG.JO | Banking, dividends, healthcare, Property, Quality, South Africa, value | - | Merchant West Investments completed its rebranding while maintaining focus on quality dividend-paying South African companies. Despite load shedding challenges creating near-term headwinds, the firm sees long-term opportunities from forced privatization and is positioning portfolios accordingly. Strong dividend recovery post-COVID with forward yields of 7.4% and 6.6% well above historical averages provides attractive income generation for investors. |
| Sep 30 2022 | 2022 Q3 | HDC SJ | - | - | |
| Jun 30 2022 | 2022 Q2 | SSS SJ | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
OilThe Middle East oil shock dominated the quarter, with oil prices spiking due to the US/Israeli invasion of Iran before retreating sharply by -38% in USD terms through June. This volatility drove inflation concerns and prompted the SARB to hike rates, while also causing steep declines in energy stocks. The fund's underweight to Sasol detracted as the stock fell 28.3%. |
Oil Iran Energy Inflation Sasol |
InflationHeadline consumer inflation jumped to 4.5% in May from 3.1% in March, driven overwhelmingly by fuel price increases linked to the Middle East conflict. The SARB responded with a 25bp rate hike to 7.00% in May, citing the need to prevent second-round inflation effects despite downgrading GDP growth forecasts. As oil prices retreated in June, inflation concerns moderated. |
Inflation Rates SARB Oil CPI | |
South AfricaSouth Africa's economic outlook improved with stronger fiscal credibility, credit rating upgrades, continued economic expansion, and reform progress. However, growth remains below potential due to persistent unemployment, weak private investment, and infrastructure bottlenecks. The outlook depends on continued reform implementation, local government elections in November, and GNU stability. |
South Africa Reforms Credit Rating GDP Elections | |
GoldGold prices fell sharply by -14% in USD terms over the quarter, contributing to an -18.7% decline in the Resources Index. The fund's underweight position to gold stocks, which saw sharp drawdowns, aided relative performance significantly as the manager actively avoided this exposure. |
Gold Precious Metals Resources Commodities | |
Iron OreA new position was taken in Kumba Iron Ore, viewed as attractively valued despite near-term bearish consensus. Kumba is investing in UHDMS technology to extend mine life and improve yield, though this carries execution risk. The manager sees a robust long-term outlook for iron ore and views Kumba as a good-quality company at a reasonable price, noting its 46% average ROIC since 2006. |
Iron Ore Kumba Mining Technology ROIC | |
ValueThe fund employs a disciplined value-based investment philosophy, focusing on quality businesses with genuine growth prospects trading at a discount to intrinsic value. The portfolio trades at a forward P/E of 7.3x versus 11.4x for the JSE All Share Index, with superior ROIC of 14.7% versus 13.1% and lower leverage. This is a deliberate departure from deep value or distressed investing. |
Value Quality Valuation ROIC Discount | |
FoodserviceA new position was entered in Bid Corporation to increase hard currency exposure, as the company generates over 85% of earnings in hard currency from Europe, UK, and Australasia. The manager views recent rand strength as an opportune entry point at a reasonable 15x forward P/E. Bid Corp has been a steady compounder delivering mid- to high-single-digit revenue growth with stable margins since spinning out in 2016. |
Foodservice Bid Corp Hard Currency Europe Compounding | |
CementA small special situation position was added in PPC after reports that Heidelberg Materials is exploring a takeover. The rationale is that Heidelberg has no South African presence despite a broad African footprint, has significant acquisition firepower, and PPC's turnaround has left shares trading well below global cement peers. The position is sized as an attractively priced way to participate in plausible corporate action, and is up 24% since purchase. |
Cement PPC M&A Special Situation Heidelberg | |
| 2026 Q1 |
InflationUS inflation showed renewed upside risk with CPI at 2.4% year-on-year, while oil shocks threatened to push readings higher. The Iran conflict fundamentally altered monetary policy calculus, with SARB raising 2026 inflation forecast to 3.7% and projecting fuel inflation exceeding 18% in Q2. |
CPI Oil Fuel Monetary Policy SARB |
RatesFederal Reserve held rates steady at 3.50-3.75% adopting a wait and see posture after three consecutive cuts in late 2025. SARB held repo rate at 6.75% with the March decision unanimous to hold, now projecting only one rate cut in 2026 down from two previously. |
Federal Reserve SARB Repo Rate Rate Cuts Monetary Policy | |
LiquidityThe fund continues to emphasize liquidity and credit quality as core to the Merchant West Investments fixed income philosophy. Asset allocation shows 74.4% in 0-1 month instruments, maintaining high liquidity positioning. |
Credit Quality Asset Allocation Short Term Money Market | |
| 2025 Q4 |
RatesThe SARB cut interest rates by 25 basis points in November 2025, bringing the repo rate to 6.75%. The SARB has cut rates by a cumulative 125 basis points since September 2024 and predicts a 75-basis-point decline over the next 15 months, with the repo rate expected to stand at 6.0% by March 2027. |
Interest Rates SARB Repo Rate Monetary Policy |
InflationSA's consumer price inflation for November 2025 came in at 3.5% and is expected to remain subdued, reaching 3.0% by February 2026. The SARB's new inflation target of 3% with a 1 percentage point tolerance band contributed to lower inflation expectations and positive sentiment. |
CPI Inflation Target Price Stability | |
| 2025 Q3 |
RatesThe fund is positioned to benefit from interest rate movements, with significant exposure to floating rate notes and government bonds. The manager discusses Fed rate cuts and SARB monetary policy decisions affecting bond yields and portfolio performance. |
Interest Rates Fed SARB Monetary Policy Yield Curve |
InflationThe fund maintains overweight exposure to inflation-linked bonds providing protection against macroeconomic volatility. South African inflation eased to 3.3% in August while US inflation accelerated to 2.9%, with the SARB preferring inflation at the lower end of the 3-6% target range. |
CPI Inflation Protection Real Yields SARB Target Price Pressures | |
| 2025 Q2 |
LiquidityJSE liquidity has been declining with trading concentrated in fewer stocks. Large asset managers face significant challenges building meaningful positions in illiquid stocks without moving prices. This creates opportunities for boutique managers who can access under-researched small and mid-cap companies. |
JSE Trading Volume Market Cap Asset Managers Small Caps |
HealthcareHealthcare sector underperforming despite strong fundamentals due to policy headwinds including Medicare price negotiations and reimbursement changes. MedTech companies showing resilience driven by aging demographics and hospital efficiency needs. Sector appears trapped in extended pause while regulatory framework reshapes. |
Medicare MedTech Demographics Policy Reimbursement | |
Energy TransitionTotalEnergies positioning as multi-energy company spanning oil, gas, biofuels and renewables. Company expects 40% jump in LNG production by 2030 while oil production grows modestly. European oil majors shifting capital allocation toward shareholder returns and diversified energy portfolios. |
LNG Renewables Multi-energy Capital Allocation European Oil | |
| 2025 Q1 |
South AfricaSouth Africa faces significant economic challenges with GDP growth averaging just 0.6% annually over the past decade, compared to 2.4% for the US and 1.5% for the EU. The World Bank highlights excessive institutional burden that smothers implementation capacity and creates corruption opportunities. However, the new Government of National Unity offers prospects for structural reform and quick wins to foster improved confidence and catalyse growth. |
Economic Growth Government Reform Structural Reform GDP Institutions |
Discount RetailBoxer operates as a soft discounter with a distinct competitive advantage through smaller stores, fewer SKUs, simplified supply chain, and stronger supplier relationships. The company holds 4.2% of South Africa's formal grocery market and 68% of the discount retail segment, with significant growth opportunities through market share expansion and capturing informal market migration. |
Boxer Market Share Supply Chain Expansion Competition | |
LuxuryLVMH operates as the conductor of the luxury industry with diverse brand portfolio spanning fashion, leather goods, watches, jewelry, perfumes and cosmetics. The Fashion and Leather Goods segment contributes 48% of total revenue with robust 36% margins. The company maintains leading positions in key luxury geographies like Asia Pacific and United States, with strategic acquisitions like Tiffany & Co enhancing US market presence. |
LVMH Brand Portfolio Margins Geographic Diversification Acquisitions | |
DividendsThe Payers & Growers strategies focus on providing high income levels while delivering growth in distributions to protect against inflation and longevity risks. The Stable P&G Fund aims for 5% annual distribution growth while the Managed P&G Fund targets 7% annual growth over the next three years, with current net income yields of 5.9% and 4.9% respectively. |
Income Growth Distribution Inflation Protection Yield Retirement | |
| 2024 Q3 |
South AfricaThe Government of National Unity has generated positive momentum with business confidence rising and financial markets rallying strongly. The FTSE/JSE All Share Index gained 9.6% in Q3, with SA Inc stocks leading performance as consumer and business confidence gradually returns. |
GNU Business Confidence SA Inc Political Stability Economic Recovery |
RatesCentral banks globally have begun cutting interest rates with the Fed delivering a 50bp cut in September. The SA Reserve Bank also cut rates for the first time since 2021, moving from 8.25% to 8.0%, supporting both consumers and businesses. |
Fed Cuts SARB Monetary Policy Bond Yields Easing Cycle | |
REITsGlobal REITs have been highly correlated with bond yields since 2022 but are positioned to benefit from falling interest rates and improving economic conditions. The asset class should see positive performance as central banks continue easing monetary policy. |
Property Yield Correlation Interest Sensitivity Global Property Income | |
ChinaChinese stocks surged 24% during the quarter as the government announced larger than anticipated monetary easing measures and stimulus aimed at overcoming multi-year lacklustre growth. This boosted emerging market performance significantly. |
Stimulus Monetary Easing Economic Recovery MSCI China Government Support | |
| 2024 Q2 |
South AfricaThe formation of a Government of National Unity following elections has created political stability and improved investor confidence. South African assets are priced extremely conservatively and offer exceptional long-term value after years of underperformance. |
Political stability Government of National Unity Investment opportunity Asset valuations Economic reform |
GrocersThe South African retail sector shows significant shifts with Spar and Pick n Pay facing operational challenges while Shoprite and Woolworths capitalize on opportunities. Competition intensifies particularly in food retail where consumer loyalty and price sensitivity drive market dynamics. |
Retail competition Market share Operational challenges Consumer loyalty Price sensitivity | |
DividendsThe Payers & Growers portfolios received substantially higher distributions due to Life Healthcare's special dividend from the Alliance Medical Group sale. Distribution growth is expected to exceed inflation in 2024 but may decline in 2025 without further special dividends. |
Special dividends Distribution growth Income investing Life Healthcare Inflation protection | |
| 2024 Q1 |
South AfricaThe upcoming May 29 election represents the first time the ANC may not achieve an outright majority, with polls suggesting support could fall to 38-46%. Four potential scenarios are outlined ranging from fascist coalitions to market-friendly outcomes. The country desperately needs good governance and investor confidence restoration. |
Elections Coalition Governance Policy Investment |
Credit StressSouth African credit markets are distorted with too much money chasing limited assets, forcing fund managers to reach for riskier credit. AT1 subordinated bank notes have been bid up from 7% spreads in 2015 to just 3% today. Recent financial distress in the mini-bus taxi industry highlights risks in high-yield credit strategies. |
Credit Spreads Risk Distortion Yields | |
Consumer Finance RetailConsumer staples companies are described as 'Steady Steamers' with remarkable resilience through various crises. These companies face challenges balancing price and volume amid inflationary pressures, but excel in providing stability and dividend income. Many lack significant pricing power despite their defensive characteristics. |
Staples Resilience Dividends Pricing Stability | |
| 2023 Q3 |
AIArtificial Intelligence is discussed as a rapidly evolving technology with exponential growth trajectory. The manager notes that AI development has been ongoing for 15 years, with large language models expected to be 100 times more powerful than GPT-4 within two years. Nvidia is highlighted as dominating the AI sector with significant share price gains. |
Artificial Intelligence Machine Learning GPUs Technology Innovation |
Convenience StoresConvenience stores are analyzed as a resilient business model with unique positioning advantages. The sector faces challenges from electric vehicle adoption potentially reducing fuel-related foot traffic, but opportunities exist through EV charging stations. Alimentation Couche-Tard is positioned as a market leader adapting to changing consumer behavior. |
Retail Consumer Staples Electric Vehicles Fuel Adaptation | |
Electric VehiclesElectric vehicles represent both a threat and opportunity for traditional fuel-based businesses. The transition is expected to reach 40% adoption by 2030, requiring adaptation from convenience stores and fuel stations. Fast charging infrastructure creates new business opportunities with potentially longer customer visits. |
Transportation Energy Transition Infrastructure Charging Disruption | |
| 2023 Q2 |
AIAI represents a once-in-a-generation investment opportunity following ChatGPT's release in November 2022. The team is invested in AI beneficiaries like Alphabet, Microsoft, and Adobe, with NVidia surging 177.7% year-to-date as the dominant GPU provider for AI applications. |
ChatGPT NVidia GPUs Large Language Models Generative AI |
Energy TransitionMerchant West Group has been financing solar energy solutions since 2019, recognizing renewable energy as a viable alternative to traditional sources. Solar power offers reduced energy costs, backup power solutions, and reduced carbon footprint for businesses and households. |
Solar Renewable Energy Load Shedding Carbon Footprint Energy Crisis | |
QualityQuality companies with pricing power outperform during inflationary periods, delivering positive real returns 85% of the time over 5-year rolling periods. Quality businesses possess sustainable competitive advantages and the ability to pass through cost increases to customers. |
Pricing Power Inflation Protection Sustainable Returns Competitive Advantages Warren Buffett | |
InflationGlobal inflation reached 40-year highs driven by unprecedented QE programs and supply chain disruptions. The team uses inflation-linked bonds and quality strategies to protect against inflation risk, while acknowledging both inflationary and deflationary forces at play. |
Quantitative Easing Supply Chain Inflation-Linked Bonds Real Returns Central Banks | |
DividendsDespite load shedding headwinds, distributions are forecast to grow in 2023 for the Payers & Growers funds. The Stable P&G Fund offers a 7.6% forward distribution yield while the Managed P&G Fund yields 6.6%, providing attractive income for retirement planning. |
Distribution Growth Income Yields Retirement Income Load Shedding Impact Dividend Cover | |
| 2023 Q1 |
DividendsThe Payers & Growers funds focus on high-quality dividend-paying companies with proven track records of sustainable dividend growth. Distribution payments for 2022 approximated 2019 levels as companies resumed normal dividend payments post-COVID. Forward distribution yields remain well above long-term averages at 7.4% and 6.6% respectively. |
Dividend Growth Income Distribution Yield Sustainability |
Energy TransitionThe government announced tax measures to encourage businesses and individuals to invest in renewable energy and increase local electricity generation. This represents a significant opportunity as load shedding forces state privatisation by stealth, which will benefit the country long-term despite short-term frustrations. |
Renewable Energy Tax Incentives Load Shedding Privatisation | |
QualityThe firm believes that compounding over long periods is the most powerful force in investing. Quality businesses possess the ability to sustainably generate high returns on investment. The investment approach focuses on companies with effective capital allocators managing appropriately priced businesses. |
Compounding Capital Allocation Sustainable Returns Long-term |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Aug 16, 2026 | Fund Letters | Merchant West | BID.JO | Bid Corporation | Other | Food Distributors | Bull | - | Australasia, compounder, Currency Hedge, Europe, Food Distributor, Foodservice, Hard Currency Exposure, Offshore Earnings, United Kingdom | Login |
| Aug 16, 2026 | Fund Letters | Merchant West | KIO.JO | Kumba Iron Ore | Other | Steel | Bull | - | capital expenditure, contrarian, high-ROIC, Iron ore, mine life extension, Mining, South Africa, UHDMS Technology, Value | Login |
| Aug 16, 2026 | Fund Letters | Merchant West | RNI.JO | Reinet Investments | Other | Multi-Sector Holdings | Bull | - | arbitrage, Currency Hedge, discount to NAV, Euro Cash, Hard Currency Exposure, Investment Holding Company, Special Situation | Login |
| Aug 16, 2026 | Fund Letters | Merchant West | PPC.JO | PPC Ltd | Other | Construction Materials | Bull | - | Cement, construction materials, Event-driven, M&A Arbitrage, South Africa, Special Situation, takeover target, turnaround | Login |
| Jun 30, 2025 | Fund Letters | Daniel King | TTE FP | TotalEnergies SE | Energy | Integrated Oil & Gas | Bull | Euronext Stock Exchange | cashflow, energy, LNG, renewables, valuation | Login |
| Jan 1, 2025 | Fund Letters | Merchant West | BOX.JO | Boxer | Consumer Staples | Food & Staples Retailing | Bull | JSE | consumer staples, discount retail, Emerging markets, grocery, IPO, market share, Private-label, Soft Discounter, South Africa, store expansion | Login |
| Jan 1, 2025 | Fund Letters | Merchant West | MC.PA | LVMH | Consumer Discretionary | Textiles, Apparel & Luxury Goods | Bull | Euronext Paris | brand portfolio, Consumer Discretionary, Cosmetics, Europe, fashion, Geographic Diversification, Jewelry, Leather Goods, Luxury goods, Perfumes, premium brands, Succession Planning, Tiffany, Watches | Login |
| - | Fund Letters | Merchant West | TTE | TotalEnergies | Energy | Integrated Oil & Gas | Bull | Euronext Paris | Breakeven, cash generation, dividend, energy transition, European oil major, Gas reserves, LNG, Multi-energy, oil reserves, renewables, shareholder returns | Login |
| - | Fund Letters | Merchant West | ATD.TO | Alimentation Couche-Tard Inc. | Consumer Staples | Food & Staples Retailing | Bull | Toronto Stock Exchange | Canada, Circle K, consumer staples, convenience stores, Electric Vehicle Charging, Ev infrastructure, Fuel Stations, North America, retail | Login |
| TICKER | COMMENTARY |
|---|---|
| SBV.JO | Strong returns in investment holding company Sabvest Capital (+11.1%) were also significant contributors to the Fund's outperformance. |
| SOL.JO | The biggest detractor from relative performance was the Fund's overweight position in Sasol, which was down 28.3% for the quarter. During the quarter positions in Sasol were trimmed. |
| ART.JO | Strong returns in Argent Industrial (+16.3%) were also significant contributors to the Fund's outperformance. |
| NPN.JO | Existing positions in Naspers were meaningfully increased over the quarter. |
| OCE.JO | Strong returns in Oceana Group Ltd (+30.5%) were also significant contributors to the Fund's outperformance. |
| AFM.JO | Furthermore, the overweight position to tin miner Alphamin Resources (+26.7%) contributed positively, generating strong absolute and relative returns versus the ALSI. |
| BID.JO | During the quarter new positions were entered in Bid Corporation. Our rationale behind Bid Corp was triggered with the objective of increasing the hard currency exposure of the portfolio. Bid Corp generates more than 85% of its earnings in hard currency from Europe, the United Kingdom and Australasia. Over the past twelve months the rand has strengthened 9.4% against the pound and 9.8% against the euro which is a material headwind for a company earning in euros and pounds and reporting in rand. We thus view the recent strength as an opportune time to increase the offshore earnings component of the portfolio at a reasonable 15x forward price-to-earnings multiple. Since spinning out from Bidvest in 2016, Bid Corp has been a steady compounder delivering mid- to high-single-digit revenue growth in hard currency with remarkably stable operating margins, barring the impact the COVID-19 lockdown had on the food services industry. |
| KIO.JO | A position was taken in Kumba Iron Ore which should be viewed within the context of our broader materials exposure. We have rotated some capital out of BHP Group and Glencore, both of which have seen strong price appreciation over the past twelve months, into lowly valued iron ore exposure. We believe the consensus view for iron ore and Kumba's equity is overly bearish. Kumba is investing in UHDMS (Ultra-High Dense Medium Separation) technology allowing them to economically process lower-grade ore that older plants couldn't handle profitably, extending mine life and improving yield at operations like Kolomela and Sishen. This carries meaningful capital expenditure and execution risk. As a result, the full year dividend payout ratio has been reduced. We acknowledge that there are numerous reasons to be bearish on Kumba in the near term, however we view the current price as an attractive entry into a good-quality company at a reasonable price relative to its long-term history with a robust long-term outlook for iron ore. Since listing in December 2006, Kumba has generated an average return on invested capital of 46% and has not generated a loss in any single year. The same cannot be said for the majority of the mining companies listed on the JSE. |
| PPC.JO | We added a small special situation position in PPC for the Fund after reports that Heidelberg Materials is exploring a takeover of the group. The rationale is straightforward: Heidelberg has no presence in South Africa despite a broad African footprint, has significant acquisition firepower it wants to deploy, and PPC's turnaround has left the shares trading well below global cement peers. We see this as an attractively priced way to participate in a plausible corporate action, while recognising the outcome is uncertain and the position is sized accordingly. The position is currently playing out favourably with the share up 24% since our initial purchase. |
| RNI.JO | Reinet is the offshore investment vehicle that spun out of Richemont in 2008. Performance of the share has hardly been desirable over the past decade, delivering an annualised 10-year return of 6.72% versus the JSE All Share Index return of 11.4%. So why have we bought into the share despite this less-than-desirable long-term track record? Reinet's net asset value now comprises more than 80%-euro cash and cash equivalents, and with the share trading at a 24% discount to net asset value, and a discount to net cash, we see this as a reasonable place to allocate capital in the short term, capitalising on the strong rand. |
| BTI | Existing positions in British American Tobacco were meaningfully increased over the quarter. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
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| Industry | Prev Quarter % | Current Quarter % | Change |
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| No industry data available | |||
