Welcome to the Fantasy Fund Manager podcast, the nexus where finance and real-world events collide. This week, Stuart Lowman navigates through the tumultuous waves of the market with Corion Capital’s Garreth Montano and Caelib Hannibal from Sharenet, exploring the impact of geopolitical tensions, humanitarian crises, and the ever-volatile resource counters. Dive deep into a candid discussion about the intricacies of market movements and the subtle art of maintaining stability amidst chaos, and glean insights into strategic plays in the current economic climate. Whether you’re an investor, a market enthusiast, or someone keen on understanding the economic ripples of global events, this episode is your ticket to comprehending the complex world of investing amidst uncertainty. Remember, each dawn of Monday is your chance to pitch your winning stocks. With enticing prizes awaiting, the game is on. Rally your comrades and head to www.fantasyfundmanager.co.za to register—big thanks to our platinum sponsors, Sharenet, Terebinth Capital, ClucasGray Asset Management, and MoneyBetter. And mark your calendars: Subscribe now to our podcast to keep up with every episode.
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An edited transcript of the 24th episode of the Fantasy Fund Manager Podcast
Stuart Lowman: This week has seen the resource counters, especially gold, topping the charts while the bling of Richemont props up the rear. Guests today are Garreth Montano, director at Corion Capital and Caelib Hannibal, portfolio manager at Sharenet. Gareth, as we enter the last three weeks of the game, are there any lessons you’ve learned that could be used in investing?
Garreth Montano: I’ve been around investing now for over 20 years. And you were saying earlier that you don’t know how we do it as professionals. The truth is, that markets are tough. We’ve had a really sad week from a humanitarian perspective. Lots of innocent lives were lost—no need to go into too much detail there. But obviously, all of these things do affect the market.
It’s been muted somewhat. I think Monday there was a bit of concern, but you know, just more volatility, higher oil prices to start the week. So, markets are never easy. It is the nature of the game. Suppose that the lesson is that every time you get comfortable, beware because there’s always something to provoke thought, volatility and action in markets.
Stuart Lowman: There’s the quote that we are at our weakest when we are in comfort. It’s an interesting concept when you reverse it. Caelib, first time on the podcast, can you describe a day in the life of Caleb, the portfolio manager?
Caelim Hannibal: Thank you very much for the opportunity, Stuart. Typically, during the morning, we log onto our platform. We started as a data offering, and we branched out to various other services. So first thing, look at the SENS; just see which SENS was announced during the morning. And also, companies usually try and sneak in a SENS in the late afternoon after the market closes. So those are my priorities in the morning because that impacts client portfolios. I have a bit of a rundown on what happened in the US session and the Asian session and then try and create a view either for the day or, if there’s any macro events that need attention. Just try and navigate through that.
Stuart Lowman: As Garreth mentioned, markets are difficult at the moment. We see a potential war in the Middle East. How are you seeing markets going forward?
Caelim Hannibal: I’m very bullish, short-term. Markets have been incredibly difficult, you know, over the last, you can call it the last six or seven months. Lots of volatility, a lack of liquidity in the JSE, and volumes dried up. Having said that, I did monitor a few indicators, and one of those indicators triggered last week. Look at the overall market, the JSE was down probably 10 or 12 percent as of last week Tuesday or Wednesday in rand terms but in dollar terms actually, they were down over 20 percent so it was a perfect dip buying opportunity that doesn’t come around very often the only other time the signal fired for the year was back in March and since that signal fired the market went bull up about 10 percent, 12 percent. So, I am cautiously optimistic on the market going forward. I think there’s enough value in the market. Prices have come down quite a bit in many counters, from resources, retailers, and food retailers. So I think there is ample opportunity in the market in the future.
Stuart Lowman: On the markets, Garreth, with the oil price, inflation and exchange rates, we have spoken about rate cuts. Do you believe these events make that a longer window away?
Garreth Montano: So I think the big question is, will the conflict be constrained to Israel and Palestine? If that is the case, I don’t see a longer-term impact on oil or any further inflationary pressures due to this. However, should any conflict escalate beyond that, specifically with Iran? You could then have further pressure on the oil price, directly influencing oil. So it will be driven by how far these tensions in the Middle East escalate. But I think what is, and potentially speaking to Caelib’s point, there has been optimism for the last year, talking about load shedding, saying we’re in the worst of it. And at the beginning of 2023, this will be the last tough year. And I think we’re starting to see signs of that coming through. I think the renewable uptake has been massive. South Africa has jumped forward and become quite green concerning electricity. So that’s a big positive for the negatives we’ve had to navigate. And I think there are also murmurings that Kusile is coming on stream early next year. You compound that and there will be a massive tailwind coming for these retailers who don’t have to spend vast amounts of money on diesel, keeping the lights on, and keeping goods refrigerated. So I do think that will help in the South African construct a lot.
Stuart Lowman: Back to Garreth’s comment there. The retailers, does anything else stand out for you with those potential green shoots on the cost front?
Caelim Hannibal: I think there would be a bit of potential upside in the retail sector. As I said, if we have an improvement in the low trading situation, that immediately translates into a multiplier effect because it not only affects direct costs because costs will be lower, but it will also affect sentiment. I think sentiment in South Africa is probably at its worst level in a while. And I think sentiment drives markets to a large extent. So I think any uptick in that situation would translate to positive earnings in the future for many companies. Consumers are under pressure, but if they feel slightly better about the outlook going forward and confidence returns, then I think there is some upside across the sectors.
Stuart Lowman: With three weeks of the game left to play, is there anything that sticks out from a strategy point of view on your side, Garreth? Any way to potentially play the game?
Garreth Montano: It depends on where you are on the ranking table. Top of it, try and hold on, but if you’re not at the top, I think it becomes quite a lot of luck when you’re talking about such a short time frame. So if you’ve got massive points to make up, potentially, you’ve got to look at some of the worst performers and hope for rebounds because there will be a lot of luck and timing around that. But that’s the only way you’re going to really gain ground in such a short space of time. But along the lines of the theme we’re discussing, a Pick n Pay that has just been a brutal share to hold from the start of the competition, that would maybe be a pick for the last three weeks. And with Joburg seeing a lot better load shedding time schedule, maybe that sentiment, as Caelib speaks about, starts playing through. Sentiment does change very quickly.
Stuart Lowman: And Caelib on your side with three weeks to go, have you got any tips for the gamers?
Caelim Hannibal: I like Blue. I know it’s been in the news quite a bit, you know, with the Cell C acquisition, but I think Blue in terms of a company on its own, is a little company that reminds me a lot of Tencent in Asia. They’ve actually got their tentacles in many businesses that have been aware of everything from airtime to prepaid vending, and ticketing systems, vouchers. We’re not necessarily always aware of the back-end systems, but they’ve got a neat tech ecosystem. And I think they could definitely, the synergies between Blue and Cell C could drive earnings going forward. So I like Blue.
I’m a bit of a gold bug right now. Obviously, gold has been in the news quite a bit with all the geopolitical concerns out in Israel and Palestine. AngloGold would probably be one of my picks that recently moved their primary listing from Joburg to New York. And I think there are better capital pools out in the US. Most of the volume in AngloGold trades out of the American ADR. So I think in the future, I think there could be a bit of an upside in AngloGold.
Stuart Lowman: Garreth, have you got any of those in your selections, Anglo or Blue?
Garreth Montano: I do hold Blue but not AngloGold. My resource play was the broader resource basket and bringing in a copper play which hasn’t panned out. I do think, in the longer term, that is still a play. As we move more to electric vehicles, copper is a key component. And I think longer term structurally it is, diversified miners should form part of a portfolio, but certainly nothing that’s going to get me to the top of the tables in the next three weeks that’s more of a longer-term play.
Stuart Lowman: That was Garreth Montana, Director at Corion Capital, and Cealim Hannibal, Portfolio Manager at Sharenet. And a big thanks to our sponsors that make the podcast possible. Terebinth Capital, MoneyBetter, ClucasGray Asset Management, and Sharenet. Remember to subscribe to the show below so you don’t miss an episode and make any portfolio changes before 9am on Monday.
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FFM podcast ep23: Dinner table reputations; Recession concerns; Pick n Pay; Implats
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FFM podcast ep21: Hawks, doves or uncertainty; Tencent doused Bob-less Naspers; Retailers kicking back
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