DOMESTIC EQUITIES: SASFIN

FINFUND 28 MARCH 2013 21

Sasfin’s David Shapiro notched up a magnificent performance during the past three years and deservedly won top honours in

the latest Raging Bull Awards.The Sasfin Value Fund (renamed the

Sasfin MET Equity Fund), managed by David, was the top performer in the ASISA Domestic Equity – General, Value and Growth sectors. With an annu-alised return of 22.01% over the three years to December last year, it outper-formed all other general domestic equity unit trusts.

Shapiro attributes his success to keep-ing his investing simple, applying the right principles, being able to identify opportunities and maintaining strict dis-cipline.

“No, it’s not a question of having the right tricks,” he says. “I think that too many investors over-complicate matters for themselves by trying to understand every rand earned by a company, looking at elaborate charts and models, and/or allowing defence mechanisms to take over completely.

“Over the years, I have drifted to Buffet-type investing without becoming rigidly obsessed with it. Buffett often ignores important industries and becomes too narrowly focused on strategies that may have been relevant a long time ago. You’ve got to adapt to change.”

Shapiro neverthe-less recognises that the genius of Buffett is also to be boring. “He (Buf-fett) has preached the virtues of dull but steady businesses for a generation, with, for example, his stake in Coca-Cola fizzing on. This arguably makes little sense

to investors brought up to think that an efficient market rewards those who take more risk.”

In terms of themes, Shapiro believes it’s important to establish who’s got the money and who’s spending it. For exam-ple, he places a high premium on leading emerging markets because they tend to be both spending and exporting nations.

Global sectors that appeal to him include material companies, especially iron ore and copper; oil; branded goods such as Coca-Cola, Yum (owns the Ken-tucky Fried Chicken brand) and Colgate; and luxury goods companies such as Richemont and BMW.

By the same token, he maintains that North America deserves considerable attention. “We are starting to look at the US as a growth area. More money will be spent on infrastructure; it will be self-sufficient in energy by 2020; natural gas is cheap; manufacturing promises to become more competitive again; and its trade bal-

ance is rapidly improving.”Shapiro places considerable

emphasis on seeking out com-panies with all the right criteria, especially those with top rate,

inspirational managers. These, in his book, include the likes of

Brian Joffe, Stephen Saad and Koos Bekker.

“I prefer big compa-nies that have exposure across the world, and I have more faith in them than I have in governments. I would rather invest in a leading multinational

than have to decide whether my money

should go to Obama or Zuma.”

Shapiro models his portfolios along the lines

Learning from SA’s star performer

of a “champion’s league”. In managing his clients’ portfolios, he incorporates the best companies from around the world. “I keep it lean without adding to the total number of companies, and if I add one, one has to fall away. The worth of a new one has to be greater than the worth of my worst one. And I don’t do small caps because you can’t be sure of easily getting in and out of them.” ■

DAVID SHAPIRO’S GUIDING PRINCIPLES Here are several of David Shapiro’s guiding principles that you can’t ignore:

• Maintain a relatively simple approach to investing. Beware of engaging in deriva-tives and other exotic trading practices;

• Take heed of the ways of maestros such as Warren Buffett and his disciples such as the Brandes group;

• Place a high premium on important mar-ket themes;

• Seek under-valued, solid businesses with excellent management and good earn-ings records.

• Watch the market closely for clues. You need to measure a clue with the funda-mentals, and if a share runs up, you need to ask what the market knows and you don’t know. Often the market gives clues that fundamental analysis doesn’t give.

• Ensure that you adapt to changing mar-kets such as globalization and the open-ing up of capital markets. The markets of today are very different to what they were 10, 20 or 30 years ago;

• Maintain a lean portfolio. Limit your port-folio to between 20 and 25 stocks and place between 4% and 6% in each.

• Look to stable high dividend yielding stocks as a major underpin. However, this doesn’t preclude promising low divi-dend stocks such as chemical company Omnia, technology company Pinnacle and media group Naspers which still have some momentum;

• If you are heavily invested in an excellent stock and it keeps proving itself, then it’s a good idea to keep topping up your investment;

• Don’t automatically sell shares that have produced fair value. They may or may not include the likes of Shoprite and Mr Price;

• Avoid small and mid caps that may throw up superb short-term performance and then become value traps.

DavidShapiro