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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"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."
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.
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