Searching for Growth

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We have generally experienced a risk-on environment since December 2018 – an environment that is characterised by increasing risk appetite leading to the outperformance of riskier assets. The JP Morgan Emerging Market Bond Index measures bond performance in emerging markets and is generally regarded as a reflection of global risk appetite. This index has risen by 14% since the coronavirus-induced market crash. The aggressive financial stimulus has successfully stabilised financial markets and limited the funding costs for various entities. This stimulus created a solid footing from which the global economy began its speedy recovery. As a result, following a long period of underperformance, the MSCI SA Value Index has outperformed its Growth counterpart over the past three months. This trend is consistent with our study on global recessions. Global recessions typically last for a year – so investors need to know how different stocks will perform during the subsequent recovery period. Although quality and low volatility stocks provide some level of protection in downturns, these stocks generally underperform during the economic recovery. Value and Momentum stocks tend to perform well during an early expansion period (‘risk-on’) when investors are likely to pay up for riskier assets.


Regardless of the short-term environment, we believe investing in Growth companies is the best way to achieve long term outperformance. We search for high growth, great quality companies that are aggressively reinvesting earnings back into their business models; and are viewed favourably by investors. Although the prospects for global economic growth are much rosier now than at the beginning of the year, SA’s high fiscal debt levels will make it near impossible for the government to position the economy for faster growth over the medium term. Despite this challenging macro outlook on the domestic front, we still think that the market has good Growth investment opportunities.



One such example is Multichoice Group, a business that secures video content rights and delivers this content to customers through satellite technology. The growing adoption of broadband internet in developed markets has allowed operators such as Netflix to lay siege on offerings such as DSTV. Netflix does not need to layout any physical infrastructure to distribute content – companies such as Telkom have done this for them. As a result, Netflix can reach a large number of customers at lower pricing points. On the face of this evidence, it is easy to disregard Multichoice as an investment opportunity. However, using quantitative tools to generate ideas limits the impact of preconceived notions in an investment process. Upon further introspection of Multichoice, it becomes clear that the investment opportunity rests solely on the prospects in the Rest of Africa -

  • Satellite remains the cheapest and most efficient way of distributing long-form video content to the mass market across the African continent and is expected to remain so for some time.
  • Multichoice’s Rest of Africa business generates R15bn in revenue from 11 million active users but has delivered -R11bn cumulative losses over the past three years.
  • Five years ago, management decided to reposition the business to focus on the mass market, resulting in lower pricing points and significant growth in the number of active users.
  • The business has reached scale, and Multichoice can extract significant cost savings by negotiating with content providers.

Netflix, and other similar operators, are expected to continue eating into the subscriber base in SA. But we think that the offsetting profit growth from the Rest of Africa should be more than enough to compensate investors with a three-year investment horizon.


Investing in any company, whether through a value or growth philosophy, is not without risk. The adoption of broadband internet in the Rest of Africa may turn out to be faster than expected. The SA customer base may erode quicker than we expect. The currency translation effects from economies such as Nigeria could also be unfavourable.We believe that it is important to build investment portfolios that are well-diversified to mitigate any macro or stock-specific shocks that may arise unexpectedly. Therefore, we always supplement our fundamental views with a comprehensive, quantitative risk management process to build a risk-controlled portfolio of growth stocks. Firstly, we ensure that no stock contributes a dominant portion of the portfolio’s tracking error. In other words, we diversify the risk we take relative to the benchmark to ensure that we minimise the impact of any one stock on the overall portfolio's performance. Secondly, we ensure that most of the active risk we take in a portfolio is stock-specific and not systematic to minimize macro factors such as currency risk. We expect these risk controls combined with our selection of growth stocks, to increase our probability of outperforming benchmarks over the long run.


We asked Glynnis a few questions:

What do you enjoy about being Head of Business Development?

I enjoy most about my role is engaging with the market and assisting the business in providing solutions for different client needs, considering our capabilities. I also must be strategic in my thinking as I must consider the short-term and the long-term growth needs and opportunities for Lima Mbeu.

What do you like most about working at Lima Mbeu?

Being part of a small company like Lima Mbeu allows me to contribute to the business's growth and direction. Working alongside the investment team pushes me to grow and develop skills within the quantitative and fundamental areas. The inclusive team dynamic, excellent work ethic, and professionalism are refreshing and extremely rewarding too.

We also asked Glynnis what music she is listening to since COVID-19 lockdown:

I must admit that life has been quite busy, so sadly, I do not have time to listen to music. However, I love Gospel music and have recently been listening to Jays of Clay and Lecrae.


Ndina Rabali, Teboho Tsotetsi, and Bhekinkosi Khuzwayo

Lima Mbeu Investment Managers (Pty) Ltd is an authorised financial services provider in terms of section 8 of the Financial Advisory and Intermediary Act, 2002, FSP number 49018, Registration No 2017/399814/07. This document is for information purposes only. Past performance is not indicative of future performance. The information contained herein is derived from sources which are believed to be reliable. Any opinion expressed herein is based on the presenter’s current analysis and is subject to change. This presentation does not constitute an offer to sell or a solicitation to buy any security. Lima Mbeu has a conflict of interest policy which outlines how conflicts of interest are managed. This policy, as well as additional information about Lima Mbeu’s products, is readily available upon request or on our website:

For more information, contact Ndina Rabali: Email:
Tel: 010 023 0113; Address: Fredman Towers, 13 Fredman Drive, Sandton, 2196