This EasyVestor is TalkingCents

INVSTR portfolio

The EasyResearch INVSTR series is back with a bang and kicking things off all the way from Thailand is David Keth, an investor who is all about “TalkingCents”.

Introduction

I am a 29-year-old South African investor, teacher, and part-time trader. I am originally from the Eastern Cape, East London. However, I’m currently living and working abroad in Thailand.

While I was looking for the best and most affordable degree to enrol for, I stumbled across an article highlighting the government’s inefficiencies in the educational industry. It was at this moment that I began learning about companies, both listed and unlisted, in the South African economy.

I started my investment journey in late 2012 and my first two shares were Advtech and Curro Holdings. I was confident that these private players would be beneficiaries of the government’s inability to foster growth in the sector. In hindsight, I got lucky investing in these companies, because this was before I learnt about P/E ratios, Earnings per share, and assets and liabilities. It was these two shares that captured my attention and fostered my passion for the markets.

Jumping into my current portfolio,

A lot has changed since those early years of investing. I’ve celebrated my victory, I have cried in my defeats, and I have my battle wounds to remind me of how far I have come. My experience has taught me that simplicity is the easiest form of investing. I always start with fundamentals when I decide to make long term investments.

There are a few things I look out for:

1. Growing customer base
2. Growing revenue
3. Management’s collective experience
4. Capital allocation

My top holdings:

I think the markets are overheating and are in for a reckoning, however, that doesn’t mean panic and sell, it simply means hold your highest conviction stocks and stay invested in quality companies over the long term.

With that being said, I will focus entirely on my highest conviction stocks for the long term and why I have opted for them. My stock picks are a mixture of JSE and US-listed Stocks.

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Sibanye -Stillwater (SSW) A leading precious metals company from South Africa with a diversified portfolio operating in Southern Africa and the United States.

They are less than 10 years young and are working under the leadership of Neal Froneman who has a proven track record of delivering even when the odds are against him. Although the stock is cyclical, I think the growth story hasn’t even begun to unfold here yet.

We are faced with lower global growth and a global economy that is on life support kept alive by stimulus and unprecedented amounts of capital. In order for the world to grow again, we will need to deleverage and then rebuild. Commodities play a key role in the advancement and growth of many economies, both in monetary and productivity terms – commodities should be a beneficiary.

PayPal Holdings Inc (PYPL) Is an American company that operates online payments in over 200 countries. It is a payment processor giant that continues to grow from strength to strength. They stand to benefit greatly from the growing trends in Fintech and blockchain, and on top of all this, they benefit from their existing network.

Over the next decade, more users will gravitate to doing business and making purchases online. PayPal, in my opinion, will grow exponentially from this network effect. They are the existing incumbent with prudent management steering the ship. It’s hard to see them not benefitting from the changing tide in the way we transact.

Purple Group (PPE) is A financial service and technology group homebred in Sunny South Africa. This is a favourite of mine; the runaway ahead is filled with opportunity and I don’t want to miss out on the next potential Capitec investment. The fintech environment is an exciting place and it is changing the way South Africans think about saving and investing. EasyEquities is becoming a household name and I truly believe it will attract millions of more uses as it becomes ubiquitous.

The share price has run ahead of itself because it is a retail favourite, however, it does offer long term upside, especially if management continues to be prudent in their decision making. The sky is really the limit in this stock and I’m truly excited about their future prospects.

Sea limited A global consumer internet company headquartered in Singapore. We always hear other’s say, “Invest in what we use” well, I’ve done exactly this. I currently live in South East Asia and Sea limited is growing rapidly in the region. I use Shopee quite regularly and I see them advertised where ever I go. They have stolen market share from Lazada and they continue to grow while simultaneously reinvesting back into other industries like gaming and banking.

This brings me to my next point, the students here in South East Asia love playing the game Free Fire, and as a teacher, I often have to take their cellphones away so they can pay attention in the class. With over 1 billion downloads for their gaming app, growing revenue and a promising future, Sea limited is a share to own, or at least to have on your watchlist.

I am under the belief that South East Asia will experience the biggest boom, globally, over the next decade, it’s one of the reasons I have positioned myself on this side of the world.

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Portfolio Performance

2020, the anomaly it was, was one of the most destructive and beneficial years for stocks in history. Anyone could have gone in blindfolded and picked any name on the stock market and felt like a genius. This psyche has continued to spill over in 2021 and I think for many they still believe that stocks only go up, which is a dangerous mindset to be caught in.

Returns have been astronomical for most, rising over 100% for many, and for myself, I have benefited from this too. From 2020 - 2021 my portfolio was up over 300%, some big winners like Sasol and Jubilee Metals were the biggest contributors to that.

Going forward, I don’t see those attractive returns on offer anymore, I’ve decided to take a more sensible approach and not chase returns in high-risk companies. Rather, I’m looking for long term gains in quality companies.

I’ve started restructuring my portfolio and shifted a lot of my profits to the above-mentioned companies. My portfolio consists of a few other companies and ETFS, too. My current portfolio performance is a work in progress. My TFSA is doing well, and my biggest winner so far is Purple Group with over a 50% gain. PayPal is a close second, with +- 30%, and Sibanye-Stillwater and Sea limited are sitting at around 20%.

Objectives for 2021 and ahead

My main objective going forward is strictly focused on capital preservation, protecting gains, cutting losses early, and building onto my strong conviction stocks. In fact, I have started to sell many of my winning shares from 2020 and have started moving to cash in the short term. I’m focused on short term trades at the moment and then flushing those profits back into my long-term winners.

I’m working on a new investment strategy with pre-determined dates to dollar cost average in over the next 24 months. I’m pretty confident in the stocks I’m currently holding because I believe in the long-term prospects of them, and if there is a market correction/crash then I’ll load up in the stocks I have now. This allows me to focus primarily on ways to grow my income, cut expenses, and research stocks rather than panic about what could happen in the markets.

My Outlook

I’m a bit nervous about the current market and I want to have some cash to take advantage of any downwards pressure. As mentioned earlier, I’ve started shifting more into cash and I am looking at some gold equities. I want my portfolio to be set up in a way that minimizes potential global risks and hedges against the debasement of currency in the long run.

I think US markets are overcooked and I believe we will have a sizeable correction in the coming months/year. Therefore, I only want to hold the best of the best to avoid panic or uncertainty. Let me end this off by telling you that I’m not taking any new long-term positions, but what I am doing is looking for undervalued companies in emerging markets, more specifically, in South Africa, Russia, and Southeast Asia.

How it all unfolds is anyone’s guess, if there has been one thing I’ve learnt over the last decade, it would be that the market is unpredictable, unforgiving and unsympathetic, but it can be highly rewarding.

The truth is; no one knows what’s going to happen.

Stay invested, stay safe, and keep learning.

David

New to investing

and want to learn more about other INVSTRs picks?

Read: Three (Ess)ential Stock Picks

David Keth

INVSTR

Want to see the pros in action?

Join the INVSTR Conference this Saturday 28 August 2021