ReThink July

Welcome to the first edition of Rethink, our new monthly note. Our regular readers will notice our most popular thought pieces have been retained in this new format. As Mark Twain once said, “History doesn’t repeat itself, but it often rhymes.”

We hear history rhyming a lot of late, and echoing the world over. South Africans continue to grapple with the legacy of apartheid writ large in the public consultations on land expropriation without compensation taking place this month and next. Abroad we see the rise of nationalist populism continue to spread throughout Europe and the Americas and, in this, along with the growing trend of border closures and protectionist tariffs, we hear similar refrains from the 1930s.

President Barak Obama’s words at the 2018 Nelson Mandela Annual Lecture bear mentioning: “We’ve been through darker times, we’ve been in lower valleys … Every generation has the opportunity to remake the world.” He then went on to cite South Africa’s President Mandela, who said, “Young people are capable, when aroused, of bringing down the towers of oppression and raising the banners of freedom.” Which leaves us to concur with President Obama: “Now is a good time to be aroused.”

Brand value

Rigour

The world’s most valuable brands share two common traits: they are daring, and they adopt a long-term outlook. The above infographic from HowMuch.net illustrates the 100 most valuable brands in the world according to a recent Forbes’ ranking. Together, these brands are worth an astounding $2.15 trillion – the equivalent of Brazil’s entire economy, currently ranked eighth largest in the world.

And it comes with little surprise that the top five spots belong to technology-related stocks, following the remarkable recovery the sector staged since the global financial crisis. Indeed, investor interest in technology stocks is now the highest it has been since the 2008 global financial crash.

Apple ($182.8 billion brand value) currently leads the pack, its allure evident in the successful launch of the iPhone X in late 2017. Priced at a premium $999, the company sold around 30 million iPhoneX units in less than two months. Apple is followed by Google ($132.1 billion) and Microsoft ($104.9 billion). Coca-Cola ($57.3 billion), in sixth place, is the highest ranked non-technology stock on the list. Despite changes in drinking habits globally, the brand remains a world leader in a sector under pressure.

Resilience

Cannon Asset Managers’ Global Champions Portfolio seeks to produce capital growth and outperform its benchmark and industry peers over the long term with lower-than-market volatility. This is achieved by investing in leading companies that operate across all major industries and environments, including fast-growing emerging markets and the developed markets of North America, Europe and Asia. The portfolio is comprised of around 30 companies with established track records and sustainable competitive strengths. The benchmark is the MSCI All Country World Index (MSCI ACWI), with performance measured inclusive of dividend income (gross of withholding taxes) and net of all fees and other investment charges. Returns are measured and reported in US dollars, and currency exposure is managed separately to equity market exposure.

The portfolio is designed for investors who have made the decision to invest a predetermined amount in global equities, and who are able to tolerate high volatility in capital en route to long-term capital growth. Investors should understand that the investment manager generally assesses an equity investment’s attractiveness using a time horizon of five years and longer, and that investments in the portfolio may suffer capital loss depending on market cycles. Currently, the portfolio’s holdings include global champions such as Amadeus, BlackRock, Boston Scientific, BMW, Nestle, SoftBank and Stryker Corporation.

Watch CE Dr Adrian Saville discussing this portfolio on Business Day TV

Results

The rand has fallen more than 10% against the US dollar in the year-to-date, hurt by global risk-off sentiment as well as poor domestic economic data. At the same time, the global economy still has some positive momentum, albeit with more market volatility that has been fed by the utterances of Trump and the dramas of Turkey. In this setting, the US economy’s fundamentals remain strong despite heightened geopolitical risk, and proposed tax cuts are likely to provide some stimulus which will offset headwinds from increases in energy prices and higher interest rates. Moreover, US consumer spending seems to be ticking up after a relatively subdued start to the year, and recent data further suggest that consumer price inflation will not pick up pace just yet. Even so, the flattening in yield curves in all of the developed economies points to expectations of slower economic growth in major markets, which would translate into lower commodity prices and that would go some way in explaining market skittishness around the rand, and other emerging market currencies, such as the Russian rouble, Indian rupee and Brazilian real.

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