{"id":1937,"date":"2025-03-18T07:23:59","date_gmt":"2025-03-18T07:23:59","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=1937"},"modified":"2026-03-18T11:46:06","modified_gmt":"2026-03-18T11:46:06","slug":"allan-gray-on-why-sa-inc-shares-are-trading-ahead-of-their-value","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2025\/03\/18\/allan-gray-on-why-sa-inc-shares-are-trading-ahead-of-their-value\/","title":{"rendered":"Allan Gray on why SA Inc shares are trading ahead of their value"},"content":{"rendered":"

The asset manager believes SA Inc stocks face many risks that might not be priced into their share prices.<\/strong><\/p>\n

\"\"<\/p>\n

Investment manager Allan Gray believes the price of many locally focused, so-called SA Inc stocks have exceeded their fundamentals after staging a post-Government of National Unity (GNU) rally last year.<\/p>\n

\u2018A lot of SA Inc stocks seem quite expensive,\u2019 Allan Gray portfolio manager\u00a0Tim Acker\u00a0(pictured above) said during a presentation at the Investment Forum 2025 in Sun City last week. He believes SA Inc stocks are overvalued, making the company cautious.<\/p>\n

\u2018Over the last nine months, since the election, we\u2019ve been selling a lot of our SA Inc stocks, which have done well, and we\u2019ve been rotating that capital into rand hedges,\u2019 he said.<\/p>\n

Acker compared food company\u00a0Tiger Brands, an SA Inc stock, with global multinational beverage and brewing company\u00a0AB InBev, a rand-hedge stock.<\/p>\n

He described Tiger Brands as a \u2018reasonable\u2019 business that is \u2018not particularly high quality\u2019, and AB InBev as the world\u2019s biggest and most efficient beer company and \u2018quite a high-quality business\u2019.<\/figure>\n

\u2018[It has] extremely strong brands,\u2019 he said.<\/p>\n

However, Tiger Brands\u2019 share price trades on a higher multiple than AB InBev, which Acker thinks is \u2018quite strange\u2019.<\/p>\n

\u2018This illustrates my point: many of those SA Inc stocks may have gotten ahead of the fundamentals,\u2019 he said.<\/p>\n

Risk factors<\/h3>\n

Acker said Allan Gray sees SA Inc stocks as expensive and facing key risks.<\/p>\n

\u2018There are still many risks in the SA economy and market. The question is, for the price you pay, are those risks being priced in?\u2019<\/p>\n

Another concern for Acker is the deindustrialisation of South Africa, represented by the decline of Eskom and Transnet.\u00a0He said there was positive sentiment towards Transnet, including talk of private-public partnerships in the local rail sector.<\/p>\n

\u2018But you haven\u2019t seen the volumes turn yet,\u2019 he said.<\/p>\n

State-owned logistics company Transnet\u2019s weak performance mirrors what Allan Gray hears from many local companies.<\/p>\n

\u2018A lot of results from the retailers and consumer-facing companies over the last few weeks [show this]. You had this positive story last year, but it hasn\u2019t translated into positive activity on the ground. That\u2019s something we\u2019re quite concerned about.\u2019<\/p>\n

Acker said last year\u2019s SA Inc rally was driven by the formation of the GNU and the belief that South Africa was heading toward a more favourable political story.<\/p>\n

\u2018However, we\u2019ve seen some cracks in the GNU recently. The Budget is an excellent example. It\u2019s a lot harder to pass the Budget when you have a coalition.\u2019<\/p>\n

Another risk Acker identified is South Africa\u2019s foreign relations.<\/p>\n

\u2018[The] African Growth and Opportunity Act [Agoa] is extremely important to our economy, and we are probably one tweet away from getting kicked out of Agoa. We are busy suing Israel at the International Criminal Court. Trump is not happy about that. What\u2019s that going to mean?\u2019<\/p>\n

In addition, the African National Congress is cosying up to China and announced last year it had established closer relations with Iran.<\/p>\n

\u2018Are we going to sell more weapons to Russia? I\u2019m not saying these things will happen, but they are risks.\u2019<\/p>\n

Macro events<\/h3>\n

Acker said Allan Gray builds portfolios that do well in most scenarios.<\/p>\n

\u2018When it comes to macro events, like elections, we try to position ourselves in the right way, obviously trying to participate in the upside. But we want to build a portfolio that would do reasonably well in most scenarios.\u2019<\/p>\n

Acker used the example of Allan Gray\u2019s positioning ahead of the South African national elections last May. He said it had taken a \u2018middle of the road\u2019 position before the elections, which involved protecting against any downside and a not-too-safe portfolio.<\/p>\n

\u2018We had half-half SA Inc and rand hedges. We thought there were cheap shares in both buckets and the election would be quite close.\u2019<\/p>\n

Acker said Allan Gray takes a capital protection lens regarding significant macro events like elections and does not make \u2018massive binary bets\u2019 or \u2018swinging for the fences\u2019 when making major macro calls.<\/p>\n

\u2018There\u2019s always a risk that might be wrong.\u2019<\/p>\n

Before a significant event, Allan Gray prepares, not least by retaining flexibility in its portfolios.<\/p>\n

\u2018Having flexibility is valuable from the risk management lens.\u2019<\/p>\n

He said Allan Gray built portfolios to do well in up-and-down scenarios.<\/p>\n

\u2018You want to do two things at once: beat the market and avoid drawdowns. A slow and steady approach wins the race.\u2019<\/p>\n

Credit: Justin Brown<\/h6>\n","protected":false},"excerpt":{"rendered":"

The asset manager believes SA Inc stocks face many risks that might not be priced into their share prices. Investment manager Allan Gray believes the…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1937","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1937","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1937"}],"version-history":[{"count":3,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1937\/revisions"}],"predecessor-version":[{"id":1941,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1937\/revisions\/1941"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1937"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1937"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1937"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}