Coronation Equity comment - Sep 04 - Fund Manager Comment19 Oct 2004
The fund delivered a satisfactory return for the quarter. Furthermore since the restructuring of the fund exactly two years ago it has been placed in the upper quartile of the general equity funds' category of the independent ranking tables. It is also pleasing to note the fund's significant outperformance of the 50% low mining index. What has contributed to this success?
The major reasons are:
- A focussed approach to the portfolio
- A closer alignment to the house investment process
- A pure domestic equity fund
- A two year period of staying out of trouble
The recent strength in local equities has not been unexpected. There are many good reasons why the future looks very bright, with some being rather obvious.
One factor which I believe has not been fully discounted by the markets is the lower cost of capital that companies need to meet. Furthermore, companies coupled with share buybacks and shareholder activism are allocating capital in a rational fashion. All of which bodes very well for the future.
However, a word of caution: our view on local equities is a five to 10 year view. In the short-term a lot of money has been made, and as a well known investor remarked "you pay a high price for cheery consensus".
Coronation Equity A Class to launch 1 Jan 05 - Official Announcement01 Oct 2004
The Coronation Equity Fund A Class will be launched on 1 January 2005. This class will charge an annual fee of 1.25% per annum and all new business will invest in this class. All existing debit order and LISP business will continue to be invested in the existing R-class of the Coronation Equity Fund.
Coronation Equity - Day in the sun coming - Media Comment02 Sep 2004
Fund manager Walter Aylett's "pig in the trough" approach resulted in Venfin being switched into Telkom at the end of the second quarter. The formula of holding less than 30 shares in the portfolio continues to benefit investors, though relative performance has slipped in the past three months. Collectively, Bidvest, Remgro, AECI and AVI comprise 20% of the portfolio and Aylett expects these companies to have their day in the sun.
Coronation Equity comment - Jun 04 - Fund Manager Comment20 Aug 2004
The fund outperformed the All Share Index for the first six months of the year due to its higher exposure to industrials and banks. Our formula of holding a portfolio of less than 30 shares continues to benefit investors as well as providing us with the challenge of ensuring that we have the best house picks in the fund.
My term for it is "the pig in the trough approach". Just like all the pigs that try to get their snout in the food trough, they need to bump one off at the end so that the hungrier one can get in somewhere. It is equally so with the equity fund. The one that got bumped off this quarter was VenFin. While VenFin is a fine stock, I felt that Telkom gave the portfolio more concentrated exposure to the telecommunications sector.
When I think about the fund (which is all day every day), I get quite excited about its prospects. There are quite a few shares that have as yet not had their day in the sun. These are good companies with strong dividend yields and which are trading at reasonable discounts to their intrinsic values. Bidvest, Remgro, AECI, AVI are very good examples. Collectively these companies make up 20% of the portfolio. Finally, our investment in Global Resorts (casinos) which is due to be listed in the second half of the year should trade significantly higher than its purchase price.
The rand continues to play havoc with many company profits and will more than likely stay stronger for longer. Over the longer term the expectation is for it to weaken. It is for this reason that a portion of the fund is exposed to some of the mining companies. In addition, commodity companies have been neglected by investors as an asset class. There is a strong belief that as we enter this uncertain world of stock markets companies that rely less on paper assets and more on hard assets, there will be a re-rating. Commodity companies fit quite well into this category. For more on this subject, read Marc Faber's recent "the Gloom, Boom and Doom report".
The next six months will be an interesting time in the stock markets. We go into an election year for the United States and a rising interest rate environment. South Africa will enjoy a strong local domestic economy, but will the rand spoil the party? For that, we will have to wait and see.
Coronation Equity - Different strokes - Media Comment19 Jul 2004
Having demonstrated resilience in down markets, fund manager Walter Aylett's challenge now is to improve the fund by narrowing the number of stocks from 30 to 25. The "exotic" shares - those not included in the portfolios of its peer group - comprise 15%, the intention being to increase that to 20%. These stocks are AECI, ABI, Metlife, Kagiso Media, Delta, VenFin and Kersaf. Aylett believes this group will make the difference.
Coronation Equity - On a somewhat maverick path - Media Comment07 May 2004
Coronation Equity Fund (CEF) manager Walter Aylett has a strategy of focused share selection. In a portfolio of 30 shares, the top 15 now comprise 76% of the portfolio and there is a slant towards shares not widely held by CEF's peer group. Hopes are pinned on AECI, ABI, Metlife, Kagiso, Delta, VenFin and Kersaf. Aylett says this "will make the difference" but adds that to expect returns of 10%-15% for the rest of 2004 could be optimistic.
Coronation High Growth - name change - Official Announcement15 Mar 2004
Effective from 15 Mar 04, the Coronation High Growth Fund changed its name to the Coronation Equity Fund.
Coronation High Growth comment - Dec 03 - Fund Manager Comment21 Jan 2004
The fund manager's focused approach to the management of this fund has been rewarded. For the year ended 31 Dec 2003 the fund returned 25.33% versus the 18.24% produced by the All Share index. Furthermore, it is now ranked 8th out of 44 unit trusts in the equity general category.
Much of this performance was as a result of the combined efforts of the Coronation investment team, and in particular the funds research team.
The fund manager's have endeavoured to limit the fund to 30 counters, and may in time take this lower. At present the fund is underweight in resources, and should the rand weaken the fund will underperform the index. However, the local shares that the fund manager's have selected do have some exposure to a weak rand that will benefit in the longer term. The downside of this strategy is that one does not immediately see the returns.
There are quite a few shares in the portfolio that have yet to perform -Bidvest, Sanlam and Trencor are just a few that have not yet reflected their full intrinsic value. Remgro is another share whose discount to NAV is not fully appreciated by the market.
The next twelve months look challenging and it is difficult to forecast. Offshore markets look expensive but local markets still represent good value. Dividend yields are attractive, certainly on an after tax basis. Coupled with the low interest rate environment and strong confidence in the business sector the fund manager's expect returns to be in the 10% -15% range.