Brett Horner: Don’t risk putting all your nest eggs in the SA Inc basket

The duties of editing have had unintended consequences on my sideline interest in investing.

Spare time, which I used to have in fair abundance, seems to have evaporated in the last year, leaving fewer moments to tuck into a company report or catch up on market gossip.

So it was pleasing to get some affirmation yesterday from Jeremy Baxter of Investec Wealth & Investment of a recent decision of mine to follow my rights in the Life Healthcare Group.

The stock plunged last month after Life went to the market to raise capital following its significant acquisition of Allied Medical Group in the UK. Major pullbacks on a share price are a stern test of one’s nerves. I managed to hold mine, took up the offer and, not long after, the price began its recovery. Phew!

Baxter believes the acquisition was a good one for Life. So there’s your hot stock tip for the week. Small proviso, though: like any investment, give it time. If you want a punt, place a wager on the third at Fairview.

The thing with a company like Life Healthcare and so many others on the JSE is the globally diversified nature of their operations, providing the sort of varied earnings profile that comes with international expansion.

Baxter makes the point that our stock market is unique when seen from this perspective. Whether you put your savings into a Top 40 Exchange Traded Fund or allocate a chunk of your monthly income into a retirement annuity or pension fund, you are, to a large extent, securing foreign exposure automatically.

“We are privileged in this country to buy South Africa and get an international portfolio,” says Baxter.

He’s right. It’s a neat advantage because with the current political risk to our sovereign, you probably don’t want all your nest eggs in the SA Inc basket.

What I liked about Baxter’s overview of our political and economic landscape, delivered at a small business breakfast yesterday morning, was his absence of outright alarm. That is not to say he cannot see the fault lines. They abound, make no mistake. But he offers welcome relief from the rabid discourse of late.

For starters, he sees “green shoots starting to appear in Europe”, which is positive for us as a trading partner.

Currently, Baxter says, the “emerging market play is on”, another plus for SA. It also explains why the rand has been able to withstand a complete goring following the musical chairs over at treasury.

On the subject of Malusi Gigaba, Baxter reckons – and I agree with him here – that the finance minister has “no choice but to get to the middle”.

You can see Gigaba already wrestling with the extreme inputs of the nationalisation lobby, on the one hand, and the pro-growth agenda which we so desperately need, on the other.

“A poor man participates in GDP growth,” Baxter says, “so when there’s no growth, he doesn’t participate.” How true. Unfortunately, mass exclusion from the economy will end badly with what Baxter calls “wealth-neutralising events” like targeted taxation (currently under way) or revolution. And “revolution is redistribution of poverty,” says Baxter.

Many in this country profess a strange aversion to wealth, it must be said. I understand why. But tethering it to a debatable trinity – “white monopoly capital” – and casting it as malevolent infers something immoral on the pursuit of better fortunes. And yet, one of our democratic success stories has been the wealth created by, and for, millions of previously excluded South Africans.

Over time this trend will continue, unless we seriously think Venezuela is a fine economic model.

“People get richer when the economic pie gets bigger,” says Baxter.

Growth remains our ground zero. Without more to go around, the slices will just keep getting smaller.

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