Our portfolio manager's commentary on the world and local markets

5 Equity Investment Rules

1. Equities are real assets. Earnings and dividend yields are real so compare them to real interest rates.

2. Long term returns are always linked to earnings growth.

3. The JSE earnings growth rate is not South Africa GDP anymore - Our valuation should look like developed markets because our stocks are global and the source of capital has moved.

4. Valuation of stocks is linked to cash flow, ignore techniques that don’t account for this.

5. Confront market/sector PE extremes vs historical average, but respect industry/stock PE extremes.

5 Books Worth Reading

The Effective Investor – Franco Busetti
Cash Return on Capital Invested – Pascal Costantini
A Cynic’s Guide to the Stock Exchange – Jan H. Hofmeyr
Market Wizards – Jack D. Schwager
Just What I Said – Caroline Baum