Good Markets, Bad Markets

Good Markets, Bad Markets

Market Overview

The market has been on a roller coaster ride over the last 3 months, showing good gains in August, but having a significant pull-back in September and October, both locally and offshore.

The markets are largely driven by high valuations in the US; rising interest rates in the USA and Europe; and low appetite for emerging markets, possibly as a consequence of trade wars and governance issues.

Whilst there are macro-economic and socio-political risks, there are pockets of value emerging in South Africa.

Portfolio Overview

The portfolio declined in October, more or less in line with the market.

During the month, we sold some of our Amazon and Nvidia shares to further reduce our Technology exposure and to increase our cash holdings. We do however think that these are great businesses.

Approximately 36% of the portfolio is offshore; 29% of the portfolio is in Cash; 15% is in the Technology sector; 22% in Financials; and 8% in Biotechnology. The high cash exposure is conservative and allows us to acquire companies we deem are cheap relative to intrinsic value.

We continually seek opportunities in our preferred investment themes to deploy our cash, but remain patient until the right opportunities present themselves.

Key Indicators


Top 10 Holdings


What we are thinking about: Good Markets, Bad Markets

\”The biggest mistake that most people make is to judge what will be good by what has been good lately. So, if a market has gone up a lot, they think that\’s a good market, rather than it\’s more expensive, and when the market goes down a lot, they think, \’That\’s a bad market, and I don\’t want any of it,\’ rather than realizing it may be a good time to buy certain stocks at a bargain price.” Ray Dalio, Bridgewater Associates

It is common sense that we should buy something when the price is cheaper than the value that we can derive from it. Similarly, we should be selling when we can get more than the value that we can derive from the asset that we want to sell. Strangely, people do not behave this way when they buy stocks on the stock market. When stock prices have had a good run, then most people want to buy stocks; and similarly, when there has been a major drop in the stock market, then investors want to be selling their stocks. The gyrations in the stock market can truly mess with an investor’s mind.

Ray Dalio, from Bridgewater Associates puts it in a very nice way with his quote above. The guidance that one should take from Dalio is that the market is more expensive when the stock markets have gone up, especially when it has gone up over a very long period of time. Similarly, when there is a major sell-off in the market, then the market is in fact cheaper than it was. If one looks at the US markets, it has risen significantly over the last 10 years or so. The South African market, on the other hand has been more-or-less flat over the last 3 years. One can thus argue that there are better opportunities in the South African market than there are in the USA markets.

The bigger lesson though is that investors should be buying more when markets have come down significantly, and similarly being more cautious when markets have gone up a lot. Psychologically, this is very difficult to do. We are wired to feel more pain when we take losses in our portfolio than the commensurate joy when we have profited in the portfolio.

Avoid the mistakes that Ray Dalio warns against. Don’t panic when the markets have come down a lot. This is probably the wrong time to be selling if you are a long-term investor. Similarly, when the markets have risen a lot, don’t be tempted to make a quick buck. Successful investors have a long-term strategy of investing. They allocate an amount to invest every month (debit orders are a great and efficient way to do this). They ignore day-to-day gyrations in the market. They review their asset allocations (i.e. which funds, asset classes, geographies, industries they want to invest in) once or twice a year. They give their investments time to grow.

Don’t let emotions drive your investing behaviour. Buy low, sell high. Not the other way around.

Transact Online

Clients invested in the Lunar BCI Worldwide Fund can obtain statements, tax certificates or transact online at:

Investors considering an investment in the Lunar BCI Worldwide Flexible Fund can obtain more information at and obtain application forms at


Boutique Collective Investments (RF) (Pty) Ltd (“BCI”) is a registered Manager of the Boutique Collective Investments Scheme, approved in terms of the Collective Investments Schemes Control Act, No 45 of 2002 and is a full member of ASISA. Collective Investment Schemes in securities are generally medium to long term investments. The value of participatory interests may go up or down and past performance is not necessarily an indication of future performance. BCI does not guarantee the capital or the return of a portfolio. Collective Investments are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees, charges and maximum commissions is available on request. BCI reserves the right to close the portfolio to new investors and reopen certain portfolios from time to time in order to manage them more efficiently. Additional information, including application forms, annual or quarterly reports can be obtained from BCI, free of charge. Performance fees are calculated and accrued on a daily basis based upon the daily outperformance, in excess of the benchmark, multiplied by the share rate and paid over to the manager monthly. Performance figures quoted for the portfolio are from Morningstar, as at the date of this minimum disclosure document for a lump sum investment, using NAV-NAV with income reinvested and do not take any upfront manager’s charge into account. Income distributions are declared on the ex-dividend date. Actual investment performance will differ based on the initial fees charge applicable, the actual investment date, the date of reinvestment and dividend withholding tax. BCI retains full legal responsibility for the third party named portfolio. Although reasonable steps have been taken to ensure the validity and accuracy of the information in this document, BCI does not accept any responsibility for any claim, damages, loss or expense, however it arises, out of or in connection with the information in this document, whether by a client, investor or intermediary. This document should not be seen as an offer to purchase any specific product and is not to be construed as advice or guidance in any form whatsoever. Investors are encouraged to obtain independent professional investment and taxation advice before investing with or in any of BCI\’s products.

This research report (“report”) is confidential, issued for the information of clients of Lunar Capital (Pty) Ltd (“Lunar”) and may not be issued to members of the, nor published in, public. The information, research and opinions contained herein have been formulated in good faith and where applicable have been derived from published sources generally reliable and believed to be fair, however the information, research and opinions, as the case may be, are not warranted to be complete or accurate. Lunar does not assume liability or responsibility for their form, sufficiency or accuracy. Any person making use of this report does so entirely at his or her own risk. Lunar does not assume liability for any losses arising from any errors or omissions in this report, irrespective of whether there has been any negligence, including gross negligence, by Lunar, its affiliates, officers or employees, and whether such losses are direct, indirect or consequential. This report is neither an offer nor a solicitation to buy or sell, and is not intended to call attention to, or to market, or promote the services of Lunar. Lunar does not have a proprietary interest, other than a possible casual or arbitrage interest, in any of the listed companies referred to herein and no director of Lunar, unless otherwise stated in this report, is a director of the companies referred to herein. Lunar Capital (Pty) Ltd, FSP 46567, Reg No. K2015013022. Collective Investment Schemes in securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from the company/scheme. Commissions and incentives may be paid and if so, would be included in the overall costs. The Unit Trust portfolios are licensed under the Boutique Collective Investments Scheme. Boutique Collective Investments is a full member of the Association for Savings & Investments SA.

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