This is a very important question right now which anyone, who has any money to invest is asking. As a South African, we are taking body blows from all sides.
- Unemployment at over 40%
- An economy that has been floundering for years
- State capture which saw Billions of Rands stolen and squandered by the ANC
- A final downgrade to junk status
- A currency at low levels not seen for decades
This is just a snapshot, there are so many other things which are dragging our economy into the mud (most of them political) yet we still have to invest and we still have to live day to day.
Money martket accounts are not returning what they used to since the interest rates were reduced so that is not even an option as a wait and see place to hold your cash. Unless you have over R250K you will earn less than 6% on you cash. Then there are fixed deposits which some of the newer banks are offering very good interest rates on. African Bank, Tyme Banks and then Discovery bank. Personally, I think African bank and Tyme bank are more likely to have issues with their unsecured debt so Discovery looks the safest.
What companies is Naspers investing in?
Naspers is an incredible company that are at the forefront of using technology in business of all sorts to, not only maximise profitability but take companies into the next millenium. Their most recent investment is in an Agricultural startup in South Africa called “Aerobotics” The company using Artificial intelligence, drone and satellite imagery, and robots to predict yields and manage crop health. Aerobotics is getting a lot of interest in the USA, making it’s future prospects very interesting.
It is no secret that the agricultural sector needs to maximise yields in order to feed the Worlds growing population and Naspers recognises this.
Aerobotics provides the following Solutions to Farmers:
Problem Tree Identification
Pest & Disease Management
Learn more about Aerobotics
Naspers is heavily invested in online services and entertainment and will likely continue to invest in these areasd as innvovation takes a massive surge during difficult times. The Worlds entrepreneurs are incredible innovaters and I think we will see some incredible new services coming out of lockdown. Survival is what the human race do well and South Africa’s entrepreneurs are ahead of the pack when it comes to survival. I can see online travel portals where people take game drives, view the historical sites around the World online being a big thing in the years to come. Here for example is a beautiful Leopard sighting that people who have travelled thousands of miles to see, may not see, but with an online drive, you can watch as many times as you need,l until you see what you need to see.
Naspers launched Naspers Foundry in 2018. The initiative has R1.4-billion to invest into the South African technology sector. Last year, Foundry invested R30-million in online home cleaning services business SweepSouth.
What is Warren Buffet Investing in?
“The World has changed” were the words used by Warren Buffet when he sold Berkhsire Hathaways entire holding in the Aviation Industry. It is very likely that most of the Worlds airlines will never fully recover or will cease to exist as a result of the current and future effects on tourism and travel of Covid-19. At 20 May 2020, the time of writing, we see that Italy is preparing to open it’s economy tro tourists again from June. It will be very interesting to see just how many people start to travel again. This will give us a good idea of how travel will be affected going forward. I personally should be en-route to the airport to spend 3 weeks in Amsterdam, Belgium and the UK. I don’t think that I will be travelling overseas again in the next 12 months, but this remains to be seen.
I think the World will need to spend a lot more time and money enticing people from within their countries or regions to travel locally as the World’s travellers adopt a wait and see attitude towards the spread of the virus.
In Warren Buffets online meeting a few days ago, he does not seem to have invested the money from the sale of the airline stocks or his other sales in banks, travel companies and others earlier this year, saying he has not seen anything of any really exceptional value yet. One thing we can be sure of is that any company that gets the Buffet nod, will firstly have plenty of cash to ride out the storm that is brewing as a result of covid-19 and 2, will have the ability and vision to innovate and survive the crisis.
Here are some of the stocks Warren buffet sold in the first quarter of 2020: Goldman Sachs, Sirius XM, JPMorgan Chase, Synchrony Financial, American Airlines Group, Liberty Global, DaVita, Teva Pharmaceutical Industries, General Motors, Travelers Companies (NYSE:TRV), Liberty Sirius XM Group, Phillips 66 (NYSE:PSX), Axalta Coating Systems, Verisign, Liberty Latin America, Suncor Energy, Southwest Airlines, Biogen, Amazon. Although Berkshire Hathaway divested completely from some companies, other holdings were not sold in their entirety.
Property markets around the World are going to be in a bit of a mess I reckon. The residential property market was fuelled to some extent by Airbnb and other letting websites and apps, so depending on how long the lockdown lasts and peoples movement is restricted, the income required by these property owners to service their mortgages will come into question. Then of course there are job losses to take into account, retrenchements and loss of part of incomes. This will also have an effect on peoples ability to pay mortgages. Are we headed for a sub-prime style correction? Only time will tell.
The commercial property market is also likely to suffer big losses as businesses fail and are unable to pay rent and businesses scale down using less space. I think the full effect of this is yet to reveal itself and property owners are very innovative, resilient and adapt to change, so I think we can expect some very exciting innovation in the commercial property space.
As always, if you have some cash on hand, you are likely to find a bargain or two in either market.