WEBVTT

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You're listening to Strictly Business
Podcast with Lindsay Williams.

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With me is John Bickard, Portfolio
Manager, Value Fund at 91, speaking to us

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from his Manhattan base.

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John, welcome.

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We haven't spoken for a long time and
there's a lot of water gone under the

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bridge.

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I just want to say that sometimes I find
markets really, really intriguing and dare

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I say enjoyable.

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And I thought of you occasionally when I
see markets selling off.

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And then seeing all the value stocks
getting even cheaper.

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And I can imagine you licking your lips
and enjoying yourself.

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So it's interesting on the whole value
thing is there's only one market in the

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world where value is still

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underperforming, and that's the U.S.

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market.

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So it's been an interesting split that in
South Africa and other emerging markets

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and in Europe,

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value has actually been outperforming
growth for a couple of years now.

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So.

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like in South Africa our domestic stocks
have massively outperformed the market and

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internationally they have as

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well but in the biggest market which is
obviously very important the US is 70%

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of the world market the value is continued
to underperform massively because you know

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we had that correction in

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in April in all the growth stocks and all
the magnificent seven and they've regained

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everything they lost and so the markets
rally back to

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an all-time high So.

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Yeah, that's just an interesting split.

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I think it speaks to the power of the
Magnificent Seven and the story and the

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bubble that is in US stocks.

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But the rest of the world actually values
doing very well.

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Very good.

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Long may it continue.

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Before we talk about the fund and the
strategy, you've had an opinion on an

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article that appeared in the Wall Street
Journal.

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And here's the first paragraph.

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It says the following.

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A reckoning is coming for South Africa.

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The Trump administration sees it.

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So does Congress.

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But financial markets don't.

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And that's a problem.

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I tend to think you disagree.

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So I did read the article with some
interest.

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And the first thing I would just point out
that if you look who wrote the article,

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it appeared in the Wall Street Journal,
but it is, let's just say, a very

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right-wing commentator.

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And, you know, it's not the views of
mainstream America.

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It's the views of some parts of America.

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So it shouldn't be taken as the views.

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of everyone in America.

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That's really important.

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And if you look at the history of the
author, that's, they have a particular

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bias.

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So that's the first thing.

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I mean, there are some elements of truth
in it.

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But I think the key thing for me is, you
know, he concluded, you know,

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all this bad stuff is coming to South
Africa because of their policies,

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political and economic.

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And, you know, Wall Street doesn't see it.

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In other words, in this case, he's talking
about the JSE He doesn't see it.

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And I think… That's where I really
disagree, because if you look at the

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valuation of South African shares,

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they pretty much do agree that the day of
reckoning is coming for South Africa,

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because the fact of the matter is, you
know,

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the JSC has done pretty well recently,
especially in the last year or two,

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but it's been driven all by gold stocks
and platinum stocks and NASPAS.

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and the shares that every South African
share has.

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Had a nice rally on the election, but gave
most of that back up in the first half of

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this year.

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And South African shares, South African
shares, that is shares that are based on

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South African earnings,

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pure South African incorporated shares,

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are basically trading as cheap as they've
ever traded compared to emerging markets,

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as cheap as they've ever traded compared
to world markets, and in absolute terms,

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pretty much as cheap as they've ever
traded.

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So.

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That's where I really disagree is the day
of reckoning is pretty much priced into

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South African shares.

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So it may or may not come the day of
reckoning.

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I personally don't think it will, but the
shares think it is coming.

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So that's the kind of thing that where we
make money for the value fund is we don't

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know what's going to happen in

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the future, but the shares are pretty much
priced in the worst case for South Africa.

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And I think just to take a step back, why
are South African shares so cheap?

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I think A third of the reason is exactly
because of that article.

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And the market, South Africans and
offshore, are worried about

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South Africa's political positioning and
their antagonism with the United States.

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And it's called that the political worries
are a third of the reason.

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And two-thirds of the reason is the
disappointing GDP growth the last year.

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And there, I have to say, if you wind back
a year ago, I would say, you know,

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if you said interest rates are going to
come down then.

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everything that was going to happen in
South Africa, I would have thought the

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economy would be growing at two or three
percent, and it's growing at one.

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And I think two-thirds of the problem with
South African shares is the disappointment

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in growth.

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Basically, a lot of South African shares
have now priced in, you know, that South

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Africa will never really grow again.

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And I think the last point on this is the
best example is something like Nedbank or

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ABSA.

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You know, they trade on like 10% dividend
yield for Nedbank, 8% for ABSA.

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So let's call it nine.

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You know, the cost of 10-year money is
9.5% in South Africa.

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So you can buy a South African bond, which
is a nominal yield.

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in perpetuity at 9.5%, or you can buy
those two banks and get a 9% yield.

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And that suggests that the market does not
expect the dividends of APSA and NetBank

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to

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grow, even in nominal terms in the future,
leave alone in real terms.

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So the lack of growth is now priced into
selling.

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Okay.

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So you disagree with the article, and you
must be licking your lips during that

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disagreement.

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Now then, let's talk about the value fund.

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Did it start 25 years ago or did you start
with the fund 25 years ago?

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So I started 25 years ago and the fund, I
think, was run about,

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it started about two years before I took
it over.

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But it was, let's just say it was a 50
million rand fund.

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It was, you know, we'd run it for two
years, but it hadn't gained.

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Okay, certainly gain traction now because
25 years later, it's over 8 billion.

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We can maybe talk about some numbers
later, but what I'm more interested in is

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the philosophy and how it's grown because

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there was one piece in an article that you
kindly sent me or your organization kindly

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sent me,

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and it was to do with what you'd learned.

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And I thought to myself, so this is a sort
of living, breathing organism.

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You're continually learning.

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Has your learning come to a halt now after
25 years?

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Or, for example, has 2025 taught you a few
new things?

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I would say, I mean, I'm still learning
about different markets and different

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shares,

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but I'm not learning about the process
anymore because I've been doing the same

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thing for 20 years.

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So I'd be a very slow learner if I didn't
work it out by now.

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So I have learned.

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I'm not learning anymore about the
process, but I would say one thing is as

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you get older and you do it more and more,

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I think you get more confident because
you've seen.

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that situation play out a lot of times.

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So I feel, to be honest, I feel that I'm
doing the best job I've ever done with the

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fund,

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but it's not because I'm learning more,
it's more because I've seen that situation

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play out now.

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You know, 10 years ago, I saw the
situation play out once, and 15 years ago,

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twice, and now it's been four times.

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And every time it happens, you're a little
bit more confident.

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And so you...

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place you you you place bigger bets on the
situation and so i think that's the part

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that you learn is that you you

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get more confident in saying before like a
share of interest me i'd buy two percent

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day 20 years ago now i'd buy eight

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percent in it because i've i've seen it so
i think that's that's the part so you

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think history is going to

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repeat itself you're confident it's going
to repeat itself and you're confident

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again that south africa is not going to
fall on its head

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And these stocks that you so eloquently
told me were...

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at their lowest in so many different ways,
they are not going to stay that low for

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that much longer.

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No, I think, look, I don't know for 100%
certainty that South Africa is not going

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to fall on its head,

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but I would say the probability it's not.

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But, you know, the thing about investing
in the stock market is it's really just a

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game of odds.

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You know, the shares are discounting a
very high probability of a problem as

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described in

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the Wall Street Journal.

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and South Africa's GDP growing at 1% in
perpetuity or even 0%.

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And my view on everything is it's 50-50
because I've been around long enough to

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know you can't really tell the future.

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But in this case, I would think it's 70-30
that South Africa won't run into that big

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problem as

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described in the Wall Street Journal and
that South Africa will, in a year's time,

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will be sitting here and the growth will
be 2% or 3% in GDP.

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That's what I think.

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I could probably ascribe a 70%
probability.

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But the shares, I think, ascribe a 10%
probability.

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So all buying South African shares is
really just playing the odds between,

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let's call it 50-50,

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if you have my view, or 70-30 on my view.

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And the market's saying it's 10-90 the
other way.

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And the interesting thing about South
African shares, I think we spoke 18 months

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ago prior to the election.

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and that was the same story and you know
we bought a lot of south african inc

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shares

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basically the whole fund was south african
inc in april before the election april

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last year south african shares went up

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50 in dollar terms in the next six months
and to be honest i sold most of them

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because i made so much money in

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six months and then they came down pretty
much all the way down A month ago,

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they got almost to the same level as they
were prior to the election on these two

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concerns that we've discussed about.

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So all I've done in the last three or four
months is buy back into South African

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shares.

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And because once again, they're basically
nearly as cheap as they were prior to the

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election, which doesn't make sense to me.

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And if you actually wind back a bit, in
December, I went back and looked in

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December and I said,

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what was the cost of 10 year money?

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I think the 10-year bond was 10 or 11%.
Got to 11, yeah.

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Yeah, got to 11.

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It's now 9.6.

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The rent was 18, 15, 19.

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It's now 17, 50.

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And we've also had the news that South
Africa's,

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we're now running a current account
surplus and our terms of trade are at an

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all-time high.

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So if you would have said to me in
December, gold price and the platinum

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price are going to go up.

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more than 30% in RAND, that the cost of
money is going to fall from 11% to 9.5%

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and that the RAND is going to strengthen
from 1850 to 1750 and South African shares

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were trading on

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that.

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I would say, I think anyone would have
said South African shares would be up 20%

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in RANDs this year if that happened
because that's what drives the returns and

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yet South African shares,

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most of them are down 20%.

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because of those two concerns we
discussed.

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So the macroeconomic drivers for South
Africa are moving in the right direction.

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We run a current account surplus and we
run a fiscal surplus

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before interest.

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So you know what we like to do is add
those two deficits or surplus together.

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So we run a maybe two or three percent
current account surplus and maybe a four

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percent deficit, five percent deficit.

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So you add the twin deficits together you
get like minus two for South Africa.

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That number in the U.S.

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is more like minus 13.

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So from a macro point of view, our terms
of trade are improving.

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Our fiscal situation is improving.

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Our current account is improving.

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The cost of money is coming down.

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Interest rates are being cut.

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The GNU is just hanging in there.

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It's doing okay.

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It's not brilliant, but all those things
are moving in the right direction.

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00:12:19.078 --> 00:12:23.703
I think the only real negative is the
politics, which we discussed about the

235
00:12:23.703 --> 00:12:25.703
Wall Street Journal.

236
00:12:25.703 --> 00:12:30.810
And then obviously what happens on the
ground in South Africa, which is, you

237
00:12:30.810 --> 00:12:32.810
know, the lack of municipality delivery,

238
00:12:32.810 --> 00:12:34.810
the lack of water.

239
00:12:34.810 --> 00:12:36.810
Lack of jobs.

240
00:12:36.810 --> 00:12:38.810
Those things, the lack of jobs.

241
00:12:38.810 --> 00:12:40.810
Those things are still there and those are
impediments.

242
00:12:40.810 --> 00:12:44.029
But, you know, and that but the bigger
picture that the way the country's been

243
00:12:44.029 --> 00:12:46.029
run from a macro

244
00:12:46.029 --> 00:12:47.763
point of view, not from a micro point of
view, is actually very positive.

245
00:12:48.201 --> 00:12:52.951
And I can build a whole portfolio of
between five and 10 percent of it in yield

246
00:12:52.951 --> 00:12:53.026
shares.

247
00:12:53.169 --> 00:12:53.869
So.

248
00:12:54.329 --> 00:12:56.111
Yeah, it's a combination of, yeah.

249
00:12:56.151 --> 00:12:57.431
So that's the interesting thing.

250
00:12:57.472 --> 00:13:02.076
So all I've done is I've rotated back into
South African shares, although this time

251
00:13:02.076 --> 00:13:02.178
around

252
00:13:03.056 --> 00:13:09.103
I happen to have bought different types of
South African shares than prior to the

253
00:13:09.103 --> 00:13:11.103
election, just because of price movements.

254
00:13:11.103 --> 00:13:13.103
Just because you can.

255
00:13:13.103 --> 00:13:14.642
And essentially what you just did was you
bought,

256
00:13:14.689 --> 00:13:19.048
they weren't shooting up because of the
government of national unity plus a couple

257
00:13:19.048 --> 00:13:21.048
of other factors.

258
00:13:21.048 --> 00:13:22.064
They fell on their head because of
government of national unity.

259
00:13:22.801 --> 00:13:24.862
and it's infighting.

260
00:13:25.342 --> 00:13:28.081
And now you're buying them back again, or
have been buying them back again.

261
00:13:28.104 --> 00:13:29.264
It's very, very interesting.

262
00:13:29.342 --> 00:13:33.620
So as I thought, you've been having an
enjoyable time, certainly in South Africa.

263
00:13:34.424 --> 00:13:39.807
But has it been a fertile field of
opportunities elsewhere as well, apart

264
00:13:39.807 --> 00:13:41.807
from the United States?

265
00:13:41.807 --> 00:13:46.667
So, yeah, offshore actually, this year
we've done better offshore than South

266
00:13:46.667 --> 00:13:47.023
Africa.

267
00:13:47.023 --> 00:13:49.573
And interestingly, our offshore
components...

268
00:13:50.385 --> 00:13:53.687
30% in dollars this year, which is really
good.

269
00:13:53.930 --> 00:13:58.637
And the reason for that is firstly, it's
got 20% in gold shares.

270
00:13:58.793 --> 00:14:05.262
And I've got no gold shares in South
Africa because South African gold shares

271
00:14:05.262 --> 00:14:07.262
have been the best gold shares in the
world by so far.

272
00:14:07.262 --> 00:14:09.262
For whatever reason.

273
00:14:09.262 --> 00:14:11.004
So I've sold out of them mainly because
they just did too, too well.

274
00:14:11.769 --> 00:14:18.129
But the international gold shares, and
I've got three gold shares

275
00:14:18.129 --> 00:14:20.129
internationally, Barrick, Newmont and
Frisnillo,

276
00:14:20.129 --> 00:14:22.129
which is gold and silver.

277
00:14:22.129 --> 00:14:25.560
You know, they have literally, you know,
in the last, off the top of my head, the

278
00:14:25.560 --> 00:14:27.560
last three or four years,

279
00:14:27.560 --> 00:14:30.286
South African gold shares up four times in
dollars and these shares up one times.

280
00:14:31.060 --> 00:14:32.669
So this gap is enormous.

281
00:14:32.670 --> 00:14:38.779
So the gold, I like to get it rather
international and they're starting to do

282
00:14:38.779 --> 00:14:40.779
really well internationally.

283
00:14:40.779 --> 00:14:44.279
And then I've got money in emerging
markets in China and China's quietly done

284
00:14:44.279 --> 00:14:44.291
very well.

285
00:14:44.935 --> 00:14:48.700
You know, the last year, China's actually
outperformed America by a massive amount.

286
00:14:48.837 --> 00:14:55.167
in constant currency, remembering the
dollar's been weak, and the Chinese market

287
00:14:55.167 --> 00:14:57.167
a year ago was considered uninvestable.

288
00:14:57.167 --> 00:14:57.315
Well, even though everyone's so happy the
U.S.

289
00:14:57.370 --> 00:15:00.456
market's back at an all-time high, the
Chinese market's killed it in the last

290
00:15:00.456 --> 00:15:00.734
year.

291
00:15:00.995 --> 00:15:02.198
And other emerging markets.

292
00:15:02.917 --> 00:15:04.739
have also done really well.

293
00:15:04.740 --> 00:15:11.249
I mean, even South Africa's up, I think
the number's something like 25 in rand, 35

294
00:15:11.249 --> 00:15:13.249
in dollars in the last year,

295
00:15:13.249 --> 00:15:15.249
which is way ahead of the US market.

296
00:15:15.249 --> 00:15:16.069
So, offshore, we've got our money in
emerging markets.

297
00:15:16.131 --> 00:15:17.108
We've got it in China.

298
00:15:17.850 --> 00:15:18.889
We've got it in gold.

299
00:15:18.991 --> 00:15:24.663
And then we've got a lot of special
situation shares that are across the world

300
00:15:24.663 --> 00:15:26.663
that are really, really cheap.

301
00:15:26.663 --> 00:15:27.194
And every now and then, one of them gets
bought out.

302
00:15:27.397 --> 00:15:31.522
And so, yeah, there's a lot of opportunity
in the rest of the world.

303
00:15:32.501 --> 00:15:38.104
I would just say, if you just forget about
where the US market is, if you just group

304
00:15:38.104 --> 00:15:40.104
a line of the MSCI

305
00:15:40.104 --> 00:15:45.628
Emerging Market Index, just in absolute
terms, not relative, you know, it's been

306
00:15:45.628 --> 00:15:47.628
gradually moving up for years now.

307
00:15:47.628 --> 00:15:48.182
And it's actually a very, very good chart.

308
00:15:48.268 --> 00:15:51.026
It's sort of gradually breaking out.

309
00:15:51.198 --> 00:15:53.588
It's trades on like 12 times earnings.

310
00:15:54.292 --> 00:15:56.088
There's nothing wrong with emerging
markets.

311
00:15:56.089 --> 00:15:56.823
You don't have to worry.

312
00:15:56.901 --> 00:16:01.745
So you can go and play, hope that the
Magnificent Seven keep going up, or you

313
00:16:01.745 --> 00:16:03.745
can just put your money in.

314
00:16:03.745 --> 00:16:08.831
12 e-merging markets and go to the beach
okay you can also go to the beach if

315
00:16:08.831 --> 00:16:10.831
you've been adjusting gold

316
00:16:10.831 --> 00:16:15.870
now a few people i will admit have
probably sort of drifted off a little bit

317
00:16:15.870 --> 00:16:17.870
and started fiddling with

318
00:16:17.870 --> 00:16:22.675
the tv remote control and then they
suddenly heard gold and they say so what

319
00:16:22.675 --> 00:16:24.675
was that what was what was what did the
nice gentleman say and

320
00:16:24.675 --> 00:16:28.753
suddenly their interest is peaked and
that's just the nature of gold you're

321
00:16:28.753 --> 00:16:30.753
still bullish aren't you yes

322
00:16:30.753 --> 00:16:35.343
so i think People think the gold price has
gone up because of Russia and geopolitics.

323
00:16:35.421 --> 00:16:36.581
It's got nothing to do with that.

324
00:16:37.382 --> 00:16:42.190
The real story with gold is we've got to
the end of the road of the debt,

325
00:16:43.167 --> 00:16:45.448
the debt bubble in the developed world.

326
00:16:45.550 --> 00:16:47.854
So we're talking about Japan, Europe, and
the US.

327
00:16:48.839 --> 00:16:54.573
And we have got to the situation where all
those three regions are completely

328
00:16:54.573 --> 00:16:56.573
bankrupt.

329
00:16:56.573 --> 00:16:57.120
And there's no debate.

330
00:16:57.511 --> 00:16:59.120
There is no debate about that.

331
00:17:00.066 --> 00:17:05.532
You know, if you look at Greece, they
saved their way back to prosperity in the

332
00:17:05.532 --> 00:17:07.532
last 10 years.

333
00:17:07.532 --> 00:17:09.532
Those three regions,

334
00:17:09.532 --> 00:17:13.896
the debt to GDP and the deficits are so
big that there is no saving your way back

335
00:17:13.896 --> 00:17:13.916
from here.

336
00:17:13.997 --> 00:17:19.271
There is only one way out for those three
regions, and that is to inflate away the

337
00:17:19.271 --> 00:17:19.549
debt.

338
00:17:19.549 --> 00:17:22.646
And, you know, what you're seeing in
America with

339
00:17:23.974 --> 00:17:27.958
Trump being so vocal about rates coming
down and interfering with the Fed.

340
00:17:28.381 --> 00:17:33.261
is exactly because of that, because he
knows that's the plan.

341
00:17:33.542 --> 00:17:38.882
And they have to reduce interest rates
back to negative in real terms.

342
00:17:38.944 --> 00:17:44.241
And all those three regions have to run
negative real interest rates like QE was

343
00:17:44.241 --> 00:17:46.241
10 years ago.

344
00:17:46.241 --> 00:17:47.507
They have to run it for the next 10 or 15
years.

345
00:17:47.600 --> 00:17:53.772
And if you're going to have negative real
rates, you're going to have those three

346
00:17:53.772 --> 00:17:55.772
currencies depreciating and a real asset

347
00:17:55.772 --> 00:17:57.772
like gold keeping going up.

348
00:17:57.772 --> 00:17:59.772
So the gold price is in.

349
00:17:59.772 --> 00:18:05.162
a multi-decade bull market because in the
inflating way of debt you cannot hold

350
00:18:05.162 --> 00:18:07.162
government

351
00:18:07.162 --> 00:18:12.170
bonds and you cannot hold cash because
you're going to get negative real returns

352
00:18:12.170 --> 00:18:14.170
on cash and government bonds to

353
00:18:14.170 --> 00:18:18.818
be honest they can't really pay you back
so all they can do is raise inflation and

354
00:18:18.818 --> 00:18:20.818
keep interest rates low

355
00:18:20.818 --> 00:18:23.974
and basically steal from the savers of the
world to pay the debtors of the world

356
00:18:24.021 --> 00:18:30.836
which are the governments and that's the
case for gold so I mean, it's incredible

357
00:18:30.836 --> 00:18:32.836
because they raised rates in the U.S.

358
00:18:32.836 --> 00:18:34.860
so much, and interest rates went to
positive 2% in the U.S.

359
00:18:34.879 --> 00:18:40.047
in the last couple of years, and the gold
price just went up because you can't hold

360
00:18:40.047 --> 00:18:42.047
the dollar anymore.

361
00:18:42.047 --> 00:18:45.047
And aside from the economic thing, what's
happening to the dollar,

362
00:18:45.094 --> 00:18:48.688
obviously there's the other thing about
all the policies of the U.S.

363
00:18:48.719 --> 00:18:50.969
at the moment being pretty bad for the
dollar.

364
00:18:52.172 --> 00:18:53.782
That's another aspect to the whole thing.

365
00:18:53.875 --> 00:18:55.438
So I think the gold price...

366
00:18:57.005 --> 00:19:03.871
the gold price will continue to go higher
and the gold shares have only just started

367
00:19:03.871 --> 00:19:05.871
especially internationally just in the
last three or six months

368
00:19:05.871 --> 00:19:10.359
have started to recognize the story so the
average fund manager in the world has not

369
00:19:10.359 --> 00:19:12.359
participated in gold

370
00:19:12.359 --> 00:19:17.226
in south africa they have but in the rest
of the world you know if you look at

371
00:19:17.226 --> 00:19:19.226
barrack or newmont the shares of hardly
but

372
00:19:19.226 --> 00:19:23.836
they got into date notes it's very
interesting because people listening to

373
00:19:23.836 --> 00:19:25.836
this will say well you know people go

374
00:19:25.836 --> 00:19:27.493
People always say gold never doesn't pay a
dividend.

375
00:19:27.532 --> 00:19:28.954
It doesn't yield anything.

376
00:19:29.594 --> 00:19:32.176
You've just completely countered that
argument.

377
00:19:32.598 --> 00:19:35.684
And another person will say, well, then,

378
00:19:35.957 --> 00:19:42.481
why do I need to buy South African banks
with their high dividend yield in the

379
00:19:42.481 --> 00:19:44.481
state of the South African bond market
when I can

380
00:19:44.481 --> 00:19:46.481
buy gold?

381
00:19:46.481 --> 00:19:48.481
Which sounds so much more exciting, John.

382
00:19:48.481 --> 00:19:49.887
Well, it is more exciting, but it is nice
to start every year.

383
00:19:50.340 --> 00:19:51.934
You know, gold doesn't pay a dividend.

384
00:19:52.559 --> 00:19:53.871
You buy Nedbank and Absa.

385
00:19:54.593 --> 00:19:58.380
You start the year 9% ahead of the gold
price, which is a good start.

386
00:19:59.462 --> 00:20:01.185
And so that's the first thing.

387
00:20:01.186 --> 00:20:02.025
The second thing is...

388
00:20:02.688 --> 00:20:07.973
If the gold price keeps going up, you
know, the platinum price will also keep

389
00:20:07.973 --> 00:20:09.973
going up because they are linked somewhat.

390
00:20:09.973 --> 00:20:11.258
And that's good for South Africa and good
for the economy.

391
00:20:11.540 --> 00:20:14.477
And gold and platinum is still pretty
important to South Africa.

392
00:20:15.016 --> 00:20:17.266
The economy will improve and you're in a
9% yield.

393
00:20:17.282 --> 00:20:23.891
So in a funny way, you can buy those two
banks and you're getting a fantastic

394
00:20:23.891 --> 00:20:25.891
dividend yield and

395
00:20:25.891 --> 00:20:27.891
you're getting the shares at the same
level.

396
00:20:27.891 --> 00:20:28.954
I think Nedbank's the same level as 25
years ago in Rands.

397
00:20:29.579 --> 00:20:31.297
You're getting really cheap shares.

398
00:20:32.492 --> 00:20:34.793
And you have actually got some exposure to
gold.

399
00:20:34.913 --> 00:20:37.614
So you should have both, would be my one.

400
00:20:38.075 --> 00:20:40.993
Yes, or you should have one fund, and I
won't mention which one it is.

401
00:20:41.094 --> 00:20:43.774
Now, to end off, I need you to do
something for me.

402
00:20:43.775 --> 00:20:45.079
I need you to pick a share,

403
00:20:45.696 --> 00:20:52.289
a share that could be a favourite of yours
because of a previous history with it or

404
00:20:52.289 --> 00:20:54.289
you've just bought it.

405
00:20:54.289 --> 00:20:58.477
I just want a share that sort of
characterises and epitomises the value

406
00:20:58.477 --> 00:21:00.477
fund.

407
00:21:00.477 --> 00:21:00.914
Just give me one, please, and why.

408
00:21:01.692 --> 00:21:05.075
Probably the best one is the one that I
just finished buying yesterday.

409
00:21:05.076 --> 00:21:10.343
It's always nice to talk about a share
that you just finished buying yesterday,

410
00:21:10.343 --> 00:21:12.343
which is Woolworths, which is interesting,

411
00:21:12.343 --> 00:21:16.484
a share that I haven't held for probably
20 years, and it's done incredibly badly,

412
00:21:16.507 --> 00:21:17.351
so it ticks the box.

413
00:21:17.429 --> 00:21:20.351
I mean, it was 110 Rand six years ago.

414
00:21:20.398 --> 00:21:21.413
It's 50 Rand today.

415
00:21:22.194 --> 00:21:26.554
At 50 Rand today, you know, it fits the
mold of it's a South Africa share.

416
00:21:26.601 --> 00:21:30.273
They've given up on all that David Jones
nonsense, so it's back to South Africa

417
00:21:30.273 --> 00:21:30.363
only.

418
00:21:31.204 --> 00:21:37.666
At 50 Rand, if you place the food business
on the same valuation as ShopRite, which I

419
00:21:37.666 --> 00:21:39.666
think is justified because

420
00:21:39.666 --> 00:21:43.424
Woolworths Food is, in my view, the best
business in South Africa, you get to 50

421
00:21:43.424 --> 00:21:45.424
Rand a share.

422
00:21:45.424 --> 00:21:49.026
So you basically get all the clothing and
homeware for free, and you get Country

423
00:21:49.026 --> 00:21:51.026
Road for free.

424
00:21:51.026 --> 00:21:53.026
And Country Road is losing money.

425
00:21:53.026 --> 00:21:55.026
People will say it's not worth anything.

426
00:21:55.026 --> 00:21:57.026
Obviously, that's not true.

427
00:21:57.026 --> 00:21:59.026
It's still worth something.

428
00:21:59.026 --> 00:22:01.026
It's a great brand, and they may sell it,
and they may not, but it's worth

429
00:22:01.026 --> 00:22:03.026
something.

430
00:22:03.026 --> 00:22:04.349
So basically, I think you're getting those
two businesses for free if I value the

431
00:22:04.728 --> 00:22:07.693
clothing business at the same as the
average

432
00:22:07.732 --> 00:22:14.556
valuation of other clothing businesses in
South Africa and put Country Road at a low

433
00:22:14.556 --> 00:22:16.556
valuation that they may sell it at,

434
00:22:16.556 --> 00:22:17.181
you get over 70 Rand and the shares 50.

435
00:22:18.228 --> 00:22:21.088
And it's a quality business still.

436
00:22:21.431 --> 00:22:27.806
And the last thing is, the easiest thing
is it just came out of the indexes, the

437
00:22:27.806 --> 00:22:29.806
MSCI World Index.

438
00:22:29.806 --> 00:22:32.608
And as an aside, all these nice
fundamental stories I tell you,

439
00:22:33.290 --> 00:22:37.931
if you just bought the shares that came
out of the MSCI index every three or six

440
00:22:37.931 --> 00:22:38.091
months,

441
00:22:38.673 --> 00:22:43.516
you could actually make a living because
that is always the biggest buy signal.

442
00:22:43.618 --> 00:22:49.720
And in the last few years, I remember
Tiger Brands coming out of the index at

443
00:22:49.720 --> 00:22:51.720
130 rand, today over 300.

444
00:22:51.720 --> 00:22:54.813
Impala Platinum coming out of the index at
35, today 160.

445
00:22:55.788 --> 00:22:59.111
Last year, earlier this year, Xara came
out at 140.

446
00:22:59.132 --> 00:22:59.992
It's now 200.

447
00:23:00.613 --> 00:23:02.695
And Woolworths came out yesterday at 50
rands.

448
00:23:02.957 --> 00:23:04.437
That's such an interesting story.

449
00:23:04.460 --> 00:23:10.265
And the reason is, of course, is because
people have to get out of the stock

450
00:23:10.265 --> 00:23:12.265
because it's no longer in the index and
they're an index tracker.

451
00:23:12.265 --> 00:23:14.265
Correct.

452
00:23:14.265 --> 00:23:18.070
And do you know how much the index held
of, because it's the MSCI World Index,

453
00:23:18.070 --> 00:23:20.070
they held over 8% of Woolworths.

454
00:23:20.070 --> 00:23:22.195
So they had to sell 8% of the company,
which they traded yesterday.

455
00:23:24.196 --> 00:23:30.561
John, as always, I asked you about
learning new things, and I've just learned

456
00:23:30.561 --> 00:23:32.561
something from you, as I always do.

457
00:23:32.561 --> 00:23:34.561
John, thank you very much for your time.

458
00:23:34.561 --> 00:23:36.612
And we'll speak again, not in 18 months'
time, but in around about six months, I

459
00:23:36.612 --> 00:23:36.929
hope.

460
00:23:36.929 --> 00:23:42.049
John Bickard is Portfolio Manager, Value
Fund at 91.

461
00:23:42.050 --> 00:23:48.987
The views and opinions expressed in these
podcasts are those of Lindsay Williams and

462
00:23:48.987 --> 00:23:50.987
various contributors and do not reflect
the policy,

463
00:23:50.987 --> 00:23:53.502
position, or opinion of any other agency,
organization, employer,

464
00:23:53.828 --> 00:23:57.672
or company associated with
StrictlyBusinessPodcast.com.

465
00:23:58.131 --> 00:24:05.100
Assumptions made on the analyses are not
reflective of the position of any other

466
00:24:05.100 --> 00:24:07.100
entity other than the speaker or the
author.

467
00:24:07.100 --> 00:24:11.279
And since we are critically thinking human
beings, these views are always subject to

468
00:24:11.279 --> 00:24:13.279
change, revision,

469
00:24:13.279 --> 00:24:13.420
and rethinking at any time.

470
00:24:13.732 --> 00:24:16.154
Please do not hold us to them in
perpetuity.