Sector Rotation

Some top portfolio managers believe that the resources sector is largely overvalued. Investing in commodity funds and Satrix 40 has been a good place to be over the past 7 years yet it is amazing how quickly things can change in our world.

At Silke Financial Services we use the adage that as sure as Summer follows Autumn and then turns to Winter, so investment cycles do eventually rotate. In the first half of this year there were extreme divergences between resources on the one hand and banks and retailers on the other hand.

At the beginning of July 2008, the resources sector was up 7.8% for the year but lost 19.12% for the month of July, with financials and industrials up by about 20%. Even the SA listed property sector is up 18% for the month of July.

The recent swing from resources to financials and industrials shows us how quickly things can change in the investment world. You will remember our Communiqué of 26 June 2008 where we spoke about how the greatest value was to be found in the Investec Value Fund trading at a 22.08% discount over a 1 year period and that you could bet your bottom dollar that once interest rates started falling this fund would again perform superbly. Well, since that time the Investec Value Fund has returned just over 10% for the last month alone.

Silke Financial Services does not believe in chasing sectors. Rather, our skill-set lies in choosing fund managers who are experts in researching sectors showing deep value, which eventually gets unlocked to give investors consistently rewarding performance over time, while at the same time reducing overall market risk.

Contact Silke Financial Services for expert advice on local and offshore investments.