Investment Summary
I constructed a well-diversified portfolio consisting of seven equity stocks listed Johannesburg Stock
Exchange (JSE), the stocks were selected from five best perf-orming sectors, the following is a list of the
different sectors; Financials, Real Estate Investment Trusts, Basic Materials, Telecommunications,
General Retailers. The portfolio is called First Maboyi Fund (FMF), and consists of; Mr Price Group
Limited, Harmony Gold Mining Company Limited, Massmart Holding Limited, Vodacom Group
Limited, GrowthpointProperty Limited, StandardBank Group Limited, ImpalaPlatinum Holdings Limited
then later during the investment period Vodacom Group Limited and Harmony Gold Mining Company
Limited were replaced with MTN Group Limited and BHP Billiton PLC respectively.
Investment Plan and Investment Objectives
Investment objectives and constraints
The objective of the portfolio is to outperform the JSE All Share Index, ALSI Top 40 and 6.2% Inflation;
measure by consumer price index (CPI), for the three month period (Stats SA). A total of R525 000 is
invested into the portfolio, this amount includes transaction costs. Transaction and administration costs
are calculated as 5% of every transaction.
Investment policy statement
First Maboyi Fund has a long term investment time period of two to five years; this means FMF employs
a long term investment strategy. FMF employs value investment according to which stock should be
included in the portfolio. The portfolio is passively managed so that there transaction and administration
cost can be minimized. I bought and held seven stocks to construct the portfolio, this was done based on
the concept that in the long run equity markets give a good rate of return despite period of volatility or
decline. But for the assignment bad performing stock for the three month period will be sold, and replaced
with performing stocks.
Stock picking and trading strategies
FMF follows four valuation criteria (Low P/E ratio, high dividend yield, momentum and present value
discount model) when selecting which stock to invest in;
Low P/E ratio
A low P/E ratio help is differentiate between a less-than-perfect stocks that can be selling at a high price
because it is the latest “hot-pick” on the JSE. A great company that is no longer in favour amongst
investors can be selling for a fraction of what it is truly worth, and hopefully the low P/E ratio will help
me identify these stocks.
High dividend yield
Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an
