Fund Provider Presentation

1Allan Gray Proprietary Limited is an authorised financial services provider. © Allan Gray 2019

Duncan ArtusJanuary 2019

Fund ProviderPresentation


Source:

Is being early indistinguishable from being wrong?

Alexcartoon.com


Source:

Excess returns of South African equities vs. Cash

Allan Gray Research, Triumph of the Optimists: 101 Years of Global Investment Returns, Princeton University Press, 2002, INET BFA, data to 31.12.2018 (NW070119ns)

-20

-15

-10

-5

0

5

10

15

2014 2015 2016 2017 2018

Exce

ss re

turn

(%)

Excess Return Average Excess Return (last 5 years) Average Excess Return (since 1900)


Source:

Historic US$ Returns

Bloomberg, AG research, numbers may be rounded

11 Year Returns 20 Year Returns

All Share Index 1.6% 10.8%

MSCI World Index 3.7% 4.4%

S&P 500 7.3% 5.6%

MSCI World ex US 0.3% 3.7%

US CPI 1.8% 2.2%


Source:

Central Bank Balance sheet expansion

Bianco research, Bloomberg

5 2666 742

10 049 10 13011 291

13 60714 658

15 760 16 296 16 91318 748

21 562

-

5 000

10 000

15 000

20 000

25 000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

US$

Billi

ons


Source:

Bubbles

BOAML


Source:

Bubbles

St Louis Fed


Source:

Central bank balance sheet contraction

Bianco research, Citi


Source:

US T – bill

INET BFA


Source:

World Index: broad bear market in stocks

MSCI, Datastream, Orbis. Data shows the drawdown from the highest price in the last 12 months to the price on 31 December 2018, for each constituent of the MSCI World Index.

0

50

100

150

200

250

300

350

400

450

500

0% to 10% 10% to 20% 20% to 30% 30% to 40% 40% to 50% 50% to 60% over 60%

MSC

I Wor

ld In

dex

cons

titue

nts


Source:

Percentage of JSE ALSI Top 40 companies within 5% of all time high

RMB Morgan Stanley Research, data to 31 December 2018

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Ja

n-95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Jan-

14

Jan-

15

Jan-

16

Jan-

17

Jan-

18


Source:

Percentage of JSE ALSI Top 40 companies off all time high

RMB Morgan Stanley Research, data to 31 December 2018

0%

20%

40%

60%

80%

100%

120%Ja

n-95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

Jan-

17

>20% off of all time high >40% off of all time high


Historic distribution of net equity exposure

Based on total month-end net equity exposure; data to 31 December 2018.

65,0%

39,6%

62,2%

24,7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Allan Gray Balanced Fund Allan Gray Stable Fund

Net

equ

ity e

xpos

ure Mandate restriction

Range since inception

Current level

Average since inception


Source:

Avoiding big mistakes was important

IRESS , AG research ^ Looking back two years

Share Spot Peak Price^ Fall Low Price Fall Relative

Fall Peak PE PE DY

ALSI 51485 61766 17% 51454 17% N/A 24 16 3.6%Steinhoff 170 7401 98% 107 99% 98% 16 N/A N /A

MTN 8555 14000 39% 6907 51% 37% N/A 15 7.3%Aspen 13351 32750 59% 12818 61% 56% 35 9 2.4%

Resilient 5748 15350 63% 4432 71% 56% 31 N/A 9.8%EOH 3052 16650 82% 2339 86% 82% 24 11 0.0%

Tiger Brands 27033 47806 43% 24696 48% 36% 22 17 4.0%Intu 2136 5007 57% 1925 62% 56% N/A 7 10.5%

Mediclinc 5928 15261 61% 5655 63% 59% 28 12 2.3%Impala Platinum 3698 5889 37% 1561 73% 32% N/A N/A 0.0%

Hyprop 8375 13545 38% 8007 41% 38% 24 11 9.0%BAT Plc 46358 96074 52% 46358 52% 50% 24 10 7.5%


Source:

BAT plc: valuation and net debt

Allan Gray Research

Market cap, 58,8

91,7

11,5

Net debt,43,6

ITC, 12,1

Minorities,1,5

0

20

40

60

80

100

120

EV Adjusted EV EBITDA

GBP

billi

on


Source:

BAT plc: but… volumes and currencies

UBS


Source:

BAT plc: but… regulation

UBS, BAT Capital Markets Day


Source:

BAT plc: holdings and price

IRESS, Allan Gray research, data to 31 December 2018.

0

10 000 000

20 000 000

30 000 000

40 000 000

50 000 000

60 000 000

0

200

400

600

800

1 000

1 200

Sep 2008D

ec 2008M

ar 2009Jun 2009Sep 2009D

ec 2009M

ar 2010Jun 2010Sep 2010D

ec 2010M

ar 2011Jun 2011Sep 2011D

ec 2011M

ar 2012Jun 2012Sep 2012D

ec 2012M

ar 2013Jun 2013Sep 2013D

ec 2013M

ar 2014Jun 2014Sep 2014D

ec 2014M

ar 2015Jun 2015Sep 2015D

ec 2015M

ar 2016Jun 2016Sep 2016D

ec 2016M

ar 2017Jun 2017Sep 2017D

ec 2017M

ar 2018Jun 2018Sep 2018D

ec 2018

Num

ber o

f sha

res

Ran

d

Number of shares held, RHS Share price (R), LHS


Source:

Fixed Income Instrument Yields

IRESS and Allan Gray research

8,40%9,15%

10,32%

3,00%

5,10%

0%

2%

4%

6%

8%

10%

12%

1-year NCD 10-year SA Governmentbond

10-year Corporate bond 10-year GovernmentInflation-linked bond

Inflation


Source:

Listed property has de rated

IRRES, Allan Gray research

8,9

4,72

6,4

10,7

5,76,9

9,06

3,87

11,7

9,8

3,17

13,5

0

2

4

6

8

10

12

14

16

Spot Low 3-year growth

Yield DPS

% p.a.

Growthpoint Redefine Hyprop Resilient


DY 3.5% + slightly above trend growth in real earnings 3% p.a.+ alpha= reasonable prospect for real returns over medium term

Real returns from fixed income (currently)

Currency risk

Local outlook


Local opportunity setWeak ZAR – resources Strong ZAR – SA consumer

Weak ZAR – global / other Strong ZAR – SA financial

Risk

Risk

Relative attractiveness

Relative attractiveness

SOL

SPG

SAP

GFI

BHP

IMP

GLNNHM

WHL SUI

LHCTSH

PIK TBS

NTC

AVI

REM OMU

NPNCFR

BTI

APN

RMINED

SBK

INL


Top 10 local equity holdings as at 31 December 2018

Allan Gray Balanced Fund % of Fund

Naspers (*) 6.7

British American Tobacco 4.5

Sasol 4.5

Standard Bank 3.0

Remgro 2.9

Glencore 2.7

Investec Ltd 2.1

Woolworths 1.7

Old Mutual Ltd 1.7

Life Healthcare 1.6

Total 31.5

(*) Including positions in related stub certificates


Source:

Offshore opportunities: Chinese Gaming / Internet

Citi


Source:

Gaming market in context

Statista


Offshore opportunities: biopharmaceutical

Source: Thomson Reuters Datastream

2014 2015 2016 2017 2018

30

40

50

60

708090

100

200

300

ABBVIE - PE/S&P 500 COMPOSITE - DSPECELGENE - PE/S&P 500 COMPOSITE - DSPEBRISTOL MYERS SQUIBB - PE/S&P 500 COMPOSITE - DSPE


Source:

As at 31 December 2018

Stocks % of Orbis Funds

NetEase 5.6AbbVie 4.5Taiwan Semiconductor Mfg. 3.4Naspers 2.7Bristol-Myers Squibb 2.5XPO Logistics 2.5Celgene 2.5Mitsubishi 2.4SPDR Gold Trust 2.4BP 2.2Total 30.7

Allan Gray Balanced FundTop 10 Foreign holdings

Allan Gray (MH 080119)


There has been significant creation of credit and distortion of interest rates globally.

In US$ terms, SA equities have gone nowhere since 2006

Fixed income is currently giving you real returns & property is on our radar

There are some interesting local valuations but a) the market is not at trough valuations and b) earnings need to start growing

The world index performance has been very narrow: a significant amount of global shares are already in a bear market

Reversion to mean for Orbis alpha

Conclusion


CopyrightThe content and information provided are owned by Allan Gray Proprietary Limited ("Allan Gray") and are protected by copyright and other intellectual property laws. All rights not expressly granted are reserved. The content and information may not be reproduced or distributed without the prior written consent of Allan Gray.

Information and contentThe content of this presentation is provided by Allan Gray as general information about the company and its products and services. Allan Gray does not guarantee the suitability or potential value of any information or particular investment source.

The information provided is not intended nor does it constitute financial, tax, legal, investment, or other advice. Before making any decision or taking any action regarding your finances, you should consult a licensed financial adviser.

Nothing contained in the presentation constitutes a solicitation, recommendation, endorsement or offer by Allan Gray, but shall merely be deemed to be an invitation to do business.

DisclaimerAllan Gray has taken and will continue to take care that all information provided, in so far as this is under its control, is true and correct. However, Allan Gray shall not be responsible for and therefore disclaims any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon any information provided.

Legal notes


Source:

The world has been flooded with money

Bank Credit Analyst (https://www.bcaresearch.com/reports/view_report/25756/ems)


Source:

Market valuation relative to history

INET BFA and Allan Gray Research, data to 30.11.2018 (SK031218m)

50 664 52 190

38 376 39 532

31 127

0

10 000

20 000

30 000

40 000

50 000

60 000

Current Market Price Trendline Earnings ×Spot PE

Current Earnings × LTPE

Trendline Earnings × LTPE

Bottom Earnings × LTPE

Current Market Price 50 664Spot PE 16.7Long Term Average PE 12.7Current Earnings 3 034Trendline Earnings 3 125Bottom Earnings 2 461


Thank You

Date post:	18-Nov-2021
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