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The party is getting a bit tired

Portfolio positioning for 2019 – investing for all clients and seasons

By William Meyer

So where do investors find themselves in January 2019?

The US economy is on track to register the longest economic expansion in history. This milestone will be hit in July.

Against this backdrop a major collapse in US stock prices is unlikely, but certainly the party is getting a bit tired and investors should be positioned accordingly.

The South African economy is another story altogether and most certainly investors need to be very, very careful. Just as the seasons come and go, we need to be very aware of the stages of economic growth and the inevitable declines that follow.

Stealth bear

The JSE has suffered a stealth bear market for years and investors who envisaged this are now well placed to score.

2018 was brutal! The JSE All Share Index declined by 8.5% and the S & P 500 index (the 500 largest US listed companies) declined by 5.6%, the UK market fell by 9.4% and the German DAX dropped a massive 19.3%.

Fenestra has, for a very long time, held significant cash balances, but we anticipate that during the course of 2019 we will be patient buyers of stocks, if we can get them at the right price.

Fenestra looks for opportunities, company by company, but we do have industries that we prefer. I can’t be too specific here because we are buyers of these shares.

Our portfolios are very concentrated, with a maximum exposure of 15 stocks on large portfolios. Bear in mind that you get 90% of the maximum theoretical benefit from diversification from only 13 stocks.

Benjamin Graham, the father of the investment management industry, always referred to the margin of safety when investing in stocks. The idea is to buy only the shares of companies which have been knocked down below the present value of their future cash flows.

More articles by William Meyer

Fenestra buys stocks that we believe are trading at 70% or less of the conservative value of the attributable cash flows. But if we can’t find these stocks, we will let our cash positions grow. When no one wants them and no one cares, then Fenestra will take a good hard look.

It is easy to get lost in portfolio theory and the investment management process.

Money managers busy themselves designing investment policies and objectives, but Fenestra never forgets that behind every investment portfolio there is a flesh-and-blood investor, and every single one is unique.

Many investment decisions are qualitative, some quantitative, but each portfolio must be clear in meeting the specific needs and objectives of an individual investor.

Consumer news and views from Wendy Knowler

Next month I will elaborate on seasonal investing.

If you are not happy with your portfolio performance or would like a second opinion, do not hesitate to contact Fenestra for a free review of your portfolio.

Info: 079 624 4031;


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