(Health Warning; Every investor is different and each strategy has to be tailor made for each individual investor).
Investable capital should be allocated equally between these three categories. In South Africa there are now some clearly identifiable growth stocks that are offering very good value.
Most South African JSE investors have been treading water for more than two years but in contrast the S&P 500 has gained over 11% for 2016. That is great news for Fenestra clients already invested overseas but what are the best shares right now?
The return on cash is dismal especially in overseas currencies but there are stocks that offer compelling value. True growth stocks are the most effective way to capture extraordinary profits for your portfolio and some of these also pay handsome dividends. The dividend yields can even exceed the return on cash.
Simplistically, growth shares are companies that are growing faster than the market as a whole. But growth can come from many sources. The most dramatic growth companies have inner growth, new products, rapidly growing markets and an increasing market share. Inner growth or organic growth is critical.
The ability to conjure up a new market is the most strategic and overriding characteristic of a true growth company.
This all leads to higher sales and profits. Most importantly, however, it adds a quality to the earnings not provided by any other source. The advantages of gaining market share, for example, in a mature market is not nearly as valuable as true organic growth.
There are some new companies that are transformative, have totally dominant platforms, and that straddle recent technological breakthroughs – think virtual reality, artificial intelligence, deep learning, data centre acceleration and autonomous driving.
Is there still time for investors to jump aboard? Absolutely! And circumstances are constantly changing. The electronic and internet areas remain fertile ground for any investment search.
If you are not satisfied with the returns on your portfolio or simply would like another free opinion contact our office to arrange a personal and confidential appointment.