It is difficult NOT to pick a winner in 2021

If you pinned the list of SA companies to a wall on the first of January 2021 and threw a dart at it, your chances of hitting a winner was very high. You could have been unlucky enough to hit Naspers (0%), Anglo Gold (-8,6%), ABI InBev (0%), BATS (-3,6%), Discovery (-7,5%) and a few others; but you would have hit the jackpot with Anglo American (+27%), Anglo Plats (+21%), Richemont (+30%), Bidvest (+26%), MTN (+70%) and many more.

It is clear that the year-to-date performance on the JSE has been very good, which is long overdue after what we have experienced over the past five years. As we have mentioned before, the rand is also hitting fantastic levels and is trading at R13,40 against the US$ at the moment (+20% over the last 12 months), and now everybody is expecting it to go to R13,35 and even R13.

So let us talk about the rand. As we have mentioned before, decisions regarding longer-term  investments should not be made based solely on the level of the currency. The rand will always be volatile and depending on the news, will always swing between overbought and oversold. These swings can offer you some timing advantage to implement longer-term investment plans but should not dominate those plans. We felt comfortable with the implementation of international investments when the rand dropped below R15 to the dollar and the stronger it gets, the better the timing for international investments. What we should realize, however, is that unlike the investment in quality shares, the value of the rand is not underpinned by fundamentals, but rather by sentiment towards the health of the country.

Currently SA is experiencing a kind of best-case scenario with commodity prices at record highs, hence the performance of our commodity stocks and our currency. Also the fact that the dollar is under a lot of strain due to the low interest rates in the USA and the reluctance of the Federal Reserve to raise them, combined with the excess liquidity in the system searching for yield.

We have to keep one thing in mind, however, namely the deteriorating relationship between the USA and two of our BRICS companions, China and Russia. The USA has added 59 additional Chinese companies to their Economic Blacklist and Russia has ditched all US dollar assets in its National Wealth Fund. We know that these are the political games countries play but it is precisely these political games that can have a substantial impact on a currency, and politics always reign in South Africa.

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