The Property Game - Going back to the dogs – a revisit to contrary investing

Investing in property is often compared to investing in stocks on the JSE. In an article last year I published comment on a report by Dr Adrian Saville of Cannon Asset Managers, which approached investing in a contrary manner. The aim of this was to bring your attention to the similarities between these two types of investing. Property investors should take heed from their results and always keep in the back of their mind the 'Dog' investing approach and look for undervalued, under-researched and neglected properties.

In short then, a year ago, Canon Asset Managers published the results of their decade-long study into the merits of investing into the most neglected stocks on the JSE securities Exchange (JSE). The study, which dates back to 1996, powerfully demonstrates the merits of active portfolio management. Their findings, however, caution that not all portfolios are born equal - the chances of beating the market are best where the active investment manager places bets on stocks that are the most depressed, least researched, and ideally, neglected. In short beating the market requires active managers to place their bets on the dogs of the market or, what are more commonly called value stocks.

Their report updates their study by including the returns achieved in 2005. The results reinforce the case for value investing. The dog portfolio returned 55.5 percent last year. By contrast, the diamond portfolio yielded 27.8 percent through its investment in the growth stocks. The benchmark index returned 34.7 percent.

As a consequence of last year's results, the dog portfolio has delivered a cumulative return since 1996 which is four times greater than the market's return and more than five times as great as that generated by the diamond portfolio.

The full documents are available at the Cannon Asset Managers site for your perusal.

Article by: Dave Welmans -