Investment Approach

KÖRNER PERSPECTIVE INVESTMENT APPROACH

Discussed below is a brief overview of the KP investment approach. We haven’t gone into great detail on asset location processes, research methodology, asset selection and portfolio management as we believe it beyond the scope of this write-up. What is given however, is what we believe to be the essence of the KP money management approach.

At its core, KP’s investment approach can be broken down into three simple concepts, namely:

  • Buying the right assets.
  • At the right price, and
  • In the right ratio.

Buying the right assets – This means that we only add assets that we believe are appropriate for the investor (regardless of benchmarks). As an example, we would look to fill growth-oriented portfolios with growth assets (e.g. shares that offer higher growth potential) and more balanced portfolios with assets that offer a balance between growth and predictability or yield.

While simple at first glance, this is slightly more complex than it sounds as companies (for example) are dynamic, meaning that today’s higher growth company may be tomorrows low growth, high yielding company. An example of this would be mobile companies (MTN and Vodacom) that were (until fairly recently) growth assets that have become low growth utilities. It is important to stress that KP is very benchmark agnostic, and will often not hold index constituents, and as such our portfolios often look very different to the underlying index/ benchmark.

Buying at the right price – Although many people maintain that it is “time in the markets” and not “timing the markets”, we believe this view to be overly simplistic. Accordingly, we place considerable emphasis on the price we pay for assets as this is typically a massive contributor to the returns on the medium term. In short, we believe that overpaying even a very good asset may well sterilise the returns that asset can generate on the medium term (e.g. 2 to 3 years). This is very relevant as assets often change quite considerably over the medium term, implying that today’s great buy may well offer a very different outlook in 3 to 5 years.

Buying the right ratio – KP is typically very benchmark agnostic, as we do not model portfolios on benchmarks/ weightings in any index. We also tend to run more equally weighted portfolios, where the average holdings tend to be around 5% to 6%.

Our “obsession” with buying the right assets at the right price often results in KP being very differently positioned than the benchmark/model portfolio. This is particularly true in the early stages (may actually last for years) of a new portfolio, and this tends to be more applicable when markets are turbulent or (in our opinion) illogical and overvalued.

Investment Philosophy

While we fully understand the importance of discipline and diversification when managing money, we consciously chose to avoid the overly standardized approach to money management that has become so pervasive in the industry.

Investment Principles

We set out to systematically chip away at returns, by focusing mainly on what we buy, then on when we buy it (i.e. the price) and finally on when we sell it.