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Long-term investing in a world of instant gratification

Lee is a wealth manager and has been with Anchor since June 2013. Prior to joining Anchor, Lee was a wealth manager at Investec for 9 years and worked for Credit Suisse and JP Morgan in London for 5 years.

2019 has been a year of the vague, the uncertain and even of fear. The SA political and economic context have done well to feed these emotions. We are also becoming increasingly aware of the less-than-perfect world in which we live. US President Donald Trump continues to be, well, Trump and tariff wars against China serve only to add to our sense of uncertainty. And then we have the Brits. After their exhaustive and embarrassing zoo-like parliamentary drama, they finally reconfirmed that they want nothing to do with the EU. All of these factors have been an odd, albeit welcome, reminder that we are not alone in our struggles.

But politics and narcissistic world leaders aside, 2019 also brought with it one of the JSE’s most significant events in over two decades: The transition of a portion of Naspers’ assets onto the Rotterdam Stock Exchange. Considering that Naspers accounts for one-quarter of the total value of the JSE, this was indeed an event of enormous significance for almost every participant in and of the SA market.

At Anchor, research and analysis led us to believe that having shares in Prosus, the new Rotterdam (Naspers) listing, was going to be favourable for investors. It was therefore optimal for investors to opt for Prosus shares, rather than electing more Naspers shares. However, the former led to a capital gain trigger (in some cases of enormous proportions) to shareholders who had faithfully held Naspers shares for a long period of time.

It was in meeting many of these Naspers shareholders that gave birth to the idea for this article. Some of these shareholders are well known and well-heeled business people, but many are also obscure and unsophisticated investors.

Regardless of their individual profiles, all have amassed astonishing wealth through holding onto the shares of this remarkable company. How exactly did the Tannie Elsie de Vries (not her real name), living alone in a R800k flat in Boksburg, arrive at a point in time where she owns R50mn worth of Naspers?

The story goes as follows

Anchor advisor: Hello Mrs de Vries, my name is Lee from Anchor Capital. Would now be a good time for you to chat?

Tannie Elsie: Hello Lee. What is the call regarding?

Anchor advisor: Mrs de Vries, some research has shown us that you are the owner of 15,000 Naspers shares. There is an important event approaching. Are you aware of this?

Tannie Elsie: Yes, I am aware of an event, but I did not think I had a choice.

Anchor advisor: Mrs de Vries, are you aware of what your Naspers shares are worth?

Tannie Elsie: When I last checked, around R27mn.

Anchor advisor: That must have been sometime ago Mrs de Vries. Your shares are now worth R50mn.

Tannie Elsie: That’s been a good couple of years then! My late father bought me these shares in 1995 and all he said when he handed me the share certificate was “Never sell these shares.”

As it turns out, Tannie Elsie’s late father passed away in 2003. The 15,000 shares, worth R180,000 in 1995, had never been dematerialised. They existed on the Naspers share register and in the form of a one-page share certificate, which sat in the fourth drawer of the desk in Tannie Elsie’s study.

In years gone by, it was a bureaucratic and tedious process to dematerialise shares. Even if a beneficiary hadn’t been left with an instruction to never sell the shares, the arduous nature of selling these shares meant that shares were often held for longer periods. If Tannie Elsie’s shares were dematted into an electronic trading account in 2003, would the emotion of her father’s passing have tempted her to sell her Naspers shares at that stage? Or perhaps she would have clicked the sell button in November 2008 when the share price collapsed during the global financial crisis (GFC).

Naspers is indeed a remarkable story, but there are many other stories of Tannie Elsies who have held onto shares such as Remgro, PSG, Richemont, Bidvest, to name a few, which have all, over time, delivered huge returns to faithful long-term shareholders. Many will argue that those days are gone, and stories like these will never be repeated in SA. I remember similar stories at the turn of the century when people were debating how much more Capitec could grow from its R89 share price (it is now at R1,550 [as at 4 January 2020]). I wonder how many regrets there are by those who clicked the electronic “sell shares” button at prices between R100 and R300/share?

I own an investment property in Kensington, Johannesburg. It’s a modest old-style, small 3-bedroom home, which yielded a 10% rental yield in its first year. For the most part, it has been a great investment, although I do have to admit it has caused my wife and I some anxiety over the last few years. Property is the last asset class you want to own in a country in crisis. If I had access to sell this house by the click of an electronic “sell house” button would I have bailed in the last few years? The answer is most probably yes, and the question is yet to be answered as to whether I will be grateful or not in 20 years’ time for having hung on. In the meantime, the current 13% rental yield is the short-term reward.

But perhaps some of you are right about SA. Perhaps it is all over and Capitec is the last of any such share price action we will see in our lifetime. What then of offshore stocks? A colleague sent this caption on Apple which gives food for thought: “If in 2001, you bought $399 of Apple stock instead of buying the original iPod, today that stock would be worth $62,000.” Quite astonishing, but even if you had bought Apple stock in 2001, how many valid reasons would you have had to hit the electronic sell button over the past 18 years? The answer is most likely too many to not have reaped the most handsome of rewards of the past 5 years.

We live in a fast-moving, fast-changing, no-time-like-the-present world Information flows across the globe electronically like wildfire. We are made aware of potential crisis more often and more regularly than ever before in history. And, eventually, after being battered relentlessly by the news, our quivering fingers hit the electronic “sell buttons”.

Going into 2020, I am going to be spending a lot of time thinking about Tannie Elsie’s story. And every time I invest in anything, I am going to be asking if this is an investment which Tannie Elsie’s late father would have been prepared to invest in. I too want to be able to open a bottom drawer in 20 years’ time to see that something I invested only a few rand in, has turned into a small fortune.



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WEBINAR | The Navigator – Anchor’s Strategy and Asset Allocation, 2Q24

Anchor CEO and Co-CIO Peter Armitage will host the webinar, provide an introduction to current global and local market conditions and give his thoughts on offshore equities. Together with Head of Fixed Income and Co-CIO Nolan Wapenaar, Pete will also discuss Anchor’s strategy and asset allocation for 2Q24, focusing on global equities and bonds. In addition, Fund Manager Liam Hechter will provide insights into local equities, highlighting some investment ideas; Global Equities Analyst James Bennet will discuss Ferrari and give an update on Tesla, and finally, Analyst Thomas Hendricks will participate in a Q&A with Peter, explaining the 10-year US Treasury to attendees.