The client gave Vestact R1 million in August 2011, and through inspired stock picks the portfolio grew to R12.7 million in early September 2020.
This represents growth of 1,170% over nine years and a compounded annual growth rate of 32.63%.
To find out how Vestact achieved such an exceptional performance, MyBroadband asked Treherne to shed light on their portfolio.
He said they invested in a few excellent shares from day one – Apple, Amazon, Alphabet (Google), Visa, Johnson & Johnson, and Nike.
While they may look like obvious choices today, a decade ago it was not clear that these companies would show strong growth.
“Buying and holding is not as simple as it sounds though. All these companies have gone through periods where the share prices really struggled,” Treherne said.
“Apple, for example, has been through two periods where it almost halved.”
They did sell a few original stocks along the way, including Monsanto, General Electric, and CAT.
“Thankfully, we made a profit on all of those trades. A stock that we bought in 2015 and then sold in 2017, at a break-even, was Wells Fargo,” he said.
Interestingly this portfolio does not contain Tesla, one of Vestact’s favourite shares over the past few years.
“Some of our clients have been invested in Tesla for a few years. Imagine what the returns would be if we had put a small Tesla position in this account too,” Treherne pointed out.
Vestact’s investment strategy
Treherne explained that Vestact’s investment strategy is to pick companies that are market leaders in sectors that they feel will be tomorrow’s winners.
“As you can see from the portfolio, we held ‘FANG’ stocks before they had a cool acronym,” he said.
“Looking back now, many of our purchases seem obvious but that was not the case when we made the investment.”
The best performing position in this portfolio has been Amazon, but back in 2011, it was not as dominant as it is now.
“When we bought Amazon in 2011, there was a real fear that Walmart could flick a switch and dominate ecommerce, relegating Amazon to irrelevance,” he said.
While most of the portfolio’s performance was based on research and well-informed decisions, Treherne admitted there was some luck involved as well.
“The client made only one deposit – in August 2011 – which meant there was a lot of timing luck involved,” he said.
“Imagine it was sent in August 2008, before the financial crisis, instead of August 2011. They would still have great returns, but probably not as good,” he said.
Treherne said the best advice he can give when it comes to investing is to continually add to your savings pot.
“Regular additions remove the luck factor from the investment process. Ultimately, long term patient capital in the market should give some of the best asset class returns,” he said.
The winning portfolio
The table below provides an overview of the current positions in the client’s portfolio.
|Johnson & Johnson||3.5%|