Northstar quarterly market reports
The Northstar Market Report provides powerful empirical evidence as to why we are confident that our investment philosophy and process, closely followed, will deliver market beating returns for our clients over time. This work again points to controllable factors - markets move wildly, falling in and out of love with different sectors and companies, but we have a defined formula that works and we stick to our guns by only owning quality companies when they are incorrectly valued by other investors. We discuss stocks in this report, delving into our investment cases for specific securities which we own.
CURRENT QUARTERLY REPORT
2024 – Quarter 2
-
THE BIG PICTURE
Unlocking value in Woolworths and Richemont
Investors have allowed the management teams of Woolworths and Richemont to continually invest scarce resources (time and effort) into business lines (clothing retail and luxury watches) that not only produce sub-optimal returns, but also cause significant value leakage relative to best-in-class peers (Shoprite and Hermes respectively). BHP’s recent efforts have catalyzed management of Anglo American to divest out of assets with a higher risk premium. What will it take for Woolworths and Richemont managements to do the same? Will Woolworths dispose of its clothing retail business when it contributes 5% of sales? What will the opportunity cost of that be if it is 15yrs down the line? The same for Richemont. What contribution to revenues makes the watch business irrelevant to the group? Woolworths trades at a discount of +20% structurally on a PE multiple basis to Shoprite. Richemont trades at half of Hermes’ PE multiple structurally. Compounding those discounts over long periods of time leads to an opportunity cost so devastatingly large that it is difficult to stomach.
-
FROM THE ANALYSTS
Are SA equities just cheap or is there more to it?
Over the past decade, SA equities have significantly underperformed its global peers, as macro factors have significantly deteriorated in South Africa. The investment case for SA equities, as a result, has centred around a valuation argument rather than that of an improving structural story. In the article, we unpack such dynamics but propose four drivers of return, which we think are likely to fuel a strong cyclical rebound for this asset class.
-
STAFF MEMBER PROFILE
Staff member profile – Refiloe Modise
When did your interests in financial markets start?
My interest in the financial markets was shaped by early exposure to finance through various family members' career choices. This influence laid the foundation for my fascination with the financial world. Participating in job vacation programmes helped refine my interest in finance while revealing my lack of interest in accounting. My curiosity was further ignited by watching movies like "The Big Short" and various financial documentaries that offered a gripping portrayal of the complexities and dynamics of the markets. These experiences collectively fuelled my passion for understanding and navigating the financial landscape.
QUARTERLY REPORTS ARCHIVE
Browse all our quarterly reports available by selecting the period from the dropdowns using year and date.