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Published 18 September 2012 05:11, Updated 20 September 2012 04:16
Simon Marais is head of Allan Gray Australia, a joint venture between himself, his staff and a previous employer, South African-based funds manager Allan Gray. These are his investment tips.
What investments do you like at the moment?
We’re contrarians, so we like retailers, media companies, advertising companies. APN News & Media is just ridiculously cheap. (Allan Gray owns about 18 per cent of APN.) Their radio and outdoor businesses are very good businesses. Everyone is focused on the newspapers, and sure they’re in trouble but the company is not losing money – and nor will it, we think. Then there’s Pharmaxis, which has disappointed more recently but is just at that point where it begins to become profitable. It has a drug for cystic fibrosis that has just gone on the Pharmaceutical Benefits Scheme here. It’s been approved in the United States and Europe. It’s transitioning from biotech to drug company.
What are you avoiding or selling?
I think commodity shares are still very early in the downturn. They’ve had a huge “up” cycle but the “down” cycle is always equally as long. We’re wary on the mining services providers, too, because you know the next thing the miners are going to do – cut costs. Iluka and Caltex are big stocks we’ve sold out of but only to take profits.
What has been your best single investment decision?
The most money I’ve ever made off a single stock was, of all things, a little Afrikaans-language newspaper company called Nasionale Pers (now Naspers). It used its cash flow well. Despite being a tiny business it was one of the first to invest in pay TV, then mobile phones, then back in 2001 it bought into [internet service provider] Tencent, which is now one of the biggest listed companies in China. It’s still the largest investor. I was an analyst at Allan Gray and it bought in [to Naspers] at 20¢. I bought some, too, but sold mine to buy my first house – I thought I was a genius because they were at $20. It ended up being an expensive house because now Naspers trades at around $400.
Now describe your worst and what you learnt.
It’s not Fairfax yet! (Allan Gray owns about 9 per cent of Fairfax Media.) Probably PaperlinX. We bought in around $1, now it’s 6¢, we’re waiting for it to be taken over but we’ll never get our money back. We’ve bought a lot of distressed things and done well, so the strategy is sound. There’s just no redeeming features in this particular case.
Who is your investment hero and why?
There’s a lot of 10-year heroes, hardly any who can keep up the track record for 20 or 30. Others eventually catch up to your tricks.
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