Stocks: some special ones

PICK: PSG ASSET MANAGEMENT IDENTIFIES A FEW FOR YOUR PORTFOLIO

- Adriaan Kruger

Investors who like to invest for themselves and portfolio managers investing client funds all have the challenging task to find shares that will perform well. The pressure is on to outperform a stated benchmark, or at least do better than the other portfolio managers who are looking to get new clients to grow their books.

There are also hordes of speculators with the single aim of choosing a few shares that will run a lot, hopefully soon.

Justin Floor, head of equities at PSG Asset Management, says it has become more difficult to get good returns from investments as most equity markets around the world face severe challenges and a multitude of risks.

"Valuations and company profits are high in the largest parts of the market, in particular the US. This is a headwind to future real returns," he says.

The macro landscape is "deeply uncertain" with an unpredictable global trade environment (geopolitics and erratic tariff policies playing a role), geopolitical tensions and polarization, high and sticky interest rates and the prospect of a slowdown in growth.

"Investors don't have to look far to find sources of anxiety these days."

Local investors realize they face even more risks when investing in SA shares, because there are a magnitude of domestic risks piled on top of the global risks.

There are many examples of this. Most recently, uncertainty about SA's coalition government after the removal of the deputy minister of trade and industry coincided with US President Donald Trump's imposition of tariffs on SA imports to America.

Where to look and how to look

"Special situations hold the ability to deliver uncorrelated returns, given the outcome is wholly dependent on corporate events or transactions and not necessarily tied to the performance of the market as a whole," says Floor.

"Special situations deserve closer attention as they aren't linked to economic growth."