There are few fund managers that have the strength of conviction of Pieter Fourie. He knows what he likes to hold in his portfolio – and what he will not touch – and will then build up meaningful stakes. Fourie backs his judgment big time, happy on occasion to hold cash if he cannot buy the companies he likes at the right price.
It is a high conviction – and somewhat risky – approach but so far it has reaped rich rewards for investors in the fund he runs, Sanlam Global High Quality. Since the fund launched in February 2014, investors have enjoyed profits in excess of 90 per cent, better than equivalent returns from most global equity funds.
In the last 18 months alone, the fund has doubled in size – a result of inflows from new investors jumping on board and strong investment performance. Fourie has won a number of awards for the passionate – and meticulous – way he goes about his business.
Since it launched in February 2014, investors have enjoyed profits in excess of 90 per cent
He is delighted with the way the fund has developed, but he knows he cannot take his foot off the pedal. The high valuations put on many listed companies make the case for holding on to them less compelling.
Finding value, he says, is becoming more difficult which explains why the fund has a healthy 16 per cent cash holding. He refuses to overpay, preferring instead to play a waiting game until a buying opportunity presents itself.
Apart from its slug of cash, the fund has exposure to just 30 stocks. Most have common characteristics. They are capital light which explains the absence of energy companies, utility and telecoms giants in the portfolio. They are also cash generative with the ability to pay a healthy dividend.
The result is a fund heavy on companies operating in information technology, health care and consumer goods.Although the number of holdings is small compared to many competing funds, Fourie is constantly assessing whether he has the balance right.
So, since the turn of the year, he has built new positions in French food manufacturer Danone, restaurant operator Yum China, South Korean phone giant Samsung, travel software company Sabre and UK firm Sage.
To make way for these, he has sold stakes in the drinks manufacturer Pernod Ricard and medical technology firm Stryker. He has also trimmed positions in Microsoft, credit ratings agency Moody’s and United States-based medical equipment company Edwards Lifesciences.
‘It is all about trying to find value at attractive prices in stock markets that look expensive,’ says Fourie.
‘The companies we have sold are not bad businesses. Far from it. It is just that their shares, compared to the earnings they are generating, look pricey. If we can find better value in sectors we like, then it is our duty to do so.’
Yum China is a company he currently prefers. It has exclusive rights in China to fast food brands including KFC and Pizza Hut. Fourie adds: ‘Yum China is the kind of Steady Eddie company you want to hold at the moment. It operates through the granting of franchises, absorbs little capital, has no borrowing and generates lots of cash. All of this is underpinned by a good management team at the helm.’
Fourie and his six-strong global equity team at Sanlam are watching 120 companies, looking only to invest when valuations appear compelling. Sanlam UK is part of South African financial services giant Sanlam Limited. Fourie’s team manage global assets of some £900 million from offices in London.