“Men wanted for dangerous expedition: Low wages for long hours of arduous labour under brutal conditions; Months of continual darkness and extreme cold; Great risk to life and limb from disease, accidents and other hazards; Chance of fame in case of success.”
Sir Ernest shackleton, arctic explorer
South Africa is today what America was during the gold rush of the 19th century: A veritable gold mine for enterprising individuals with a penchant for the unknown. We have a country littered with opportunity for those willing to turn over the rocks and scrummage through the dust. Opportunity to buy such wonderful companies at such low prices should be seized with both hands by those looking to unearth a fortune.
When one Googles “South Africa”, the top recommended searches that accompany it are “Is South Africa safe?”, “Is South Africa poor?” and “Why is South Africa so dangerous?”. These results are unfortunately indicative of much of the pessimistic paradigm pervading international onlookers.
On the home front too, South Africa faces much negativity: If you are a local, you have no doubt heard several of your somewhat less patriotic friends speak wistfully of immigration. Perhaps you yourself have been considering moving some money offshore, not a bad decision, but certainly one people make without due thought to the potential returns South Africa offers.
As a perennial optimist, I began this site with the idea of rummaging through the 350 or so companies listed on the local South African stock exchange – the JSE – to prove to myself that not only does South Africa offer some of the best bargains for cheapskates like me, but also that these bargains are actually world-class businesses that I can invest in for the long-term.
If through my musings I can assemble a community of like-minded investors who are similarly optimistic of the future of South Africa, then I will consider myself a truly lucky man.
As you can see, I have a startlingly strong bent towards confirmation bias: If I am seeking value in South Africa, it will be hard for me not to find it should I look at only that which reinforces my belief that the value is there. With that in mind, I am beginning this site to open myself up to criticism or review and to establish a track record for all to see.
I am a very simple man, and I will be writing as simply as I know how. Readings must be short, concise and to the point. Most of this site will be dedicated to business analysis with a few forays into book reviews, studies of great investors and some musings of my own. Exactly the thing I would like to read.
In answer to a journalist asking where to find value in an overpriced market at one Berkshire Hathaway Annual General Meeting, Charlie Munger responded that one should “look where nobody else is looking”. Many readers will be familiar with names like Naspers, AB-InBev, Anglo American and British American Tobacco. These are some of the giants of the South African exchanges. They – along with most of the JSE Top 40 constituents – are covered by numerous analysts and will likely experience more market efficiency with prices truer to intrinsic value than I am looking for. As such, I will be focussing mostly on players in the small to mid-cap space where far fewer eyes are looking.
My capital allocation approach is simple and has been used by a myriad before me. It will be drawn majorly from the likes of Buffett, Munger, Pabrai, Spier, Graham and Greenblatt, all powerhouses in their own rights. In their works I have found much inspiration and sense-making of an industry regarded with such widespread scepticism. To summarize the approach I will be taking, here is a rather butchered quote from an interview with Mohnish Pabrai (doctored slightly to favour my investment preferences).
“Invest large sums infrequently in no-brainer, existing, simple, distressed businesses with durable moats and lots of cash flow where the downside is virtually nothing and the upside is potentially unlimited. These businesses are rare, they come about in low-risk, high uncertainty situations, and usually make use of a sort of market arbitrage.”
Mohnish Pabrai, Manager at Pabrai Investment Funds.
I will be posting on this blog chiefly due to the lack of viable alternate sources I can find online covering South African small to mid-cap stocks (with the exception of Keith McLachlan’s excellent smallcaps.co.za). It will serve to create a track record and hopefully a feedback loop I can use to obtain criticism on my ideas. Furthermore, it will be a forerunner to the website of a fledgling, self-seeded fund I am managing currently – Vineyard Holdings.
With that dear reader, welcome to my e-home. I hope you enjoy reading these articles as much as I enjoy writing them.
“After months of want and hunger, we suddenly found ourselves able to have meals fit for the gods, and with appetites the gods might have envied.”
Sir Ernest Shackleton, Antarctic Explorer.
Vineyard Holdings 