Magnus Heystek versus Piet Viljoen in R1 million investment challenge

Piet Viljoen is leading Magnus Heystek in the BizNews R1 million Investment Challenge, showing that South African stocks can outperform global options.

The investment challenge originated on BizNews following a years-long debate on local versus offshore equities.

Strong proponents on each side argued that their portfolio would outperform the other, and Viljoen and Heystek were in opposite camps.

Viljoen argued that local stocks offered better opportunities, while Heystek was convinced international stocks were the best option.

A BizNews reader created an investment challenge, giving Viljoen and Heystek R500,000 each to invest in funds and equities of their choice to settle the debate.

The five-year investment challenge kicked off in 2021, and after six months, Viljoen’s money had grown to R600,000, and Heystek’s had shrunk to R350,000.

However, Heystek’s investments performed well after the initial slump and made up most of their losses.

Three years have passed since the challenge started, and it is time to assess the performance of the two portfolios.

In a recent BizNews interview, founder Alec Hogg revealed that Viljoen’s portfolio surged to R639,000 and Heystek’s dipped to R502,000.

Viljoen explained that they stuck to their guns. They allocated the full R500,000 to the Merchant West Investments Value Fund and kept it there throughout.

“It started strongly but then went through a flat period of about 18 months. Technical factors were involved, and the market was a bit stagnant during that time,” he said.

“However, about six months ago, just before the election, several stocks in the portfolio began to perform well again.”

“We haven’t made significant changes. The portfolio holds the same stocks as three years ago. What’s happening now is the payoff for holding undervalued assets and sticking with them.”

He said one notable factor has been a reduction in the long-term bond yield from 13% to 11.5%, which led to an increase in the present value of future cash flows.

“While we haven’t yet seen substantial economic growth or confidence, these reductions in the discount rate have already added value.”

Heystek said that when the competition started, from November until May 2022, Viljoen’s portfolio went up 25%, while his dropped 25%.

“I had a lot of catching up to do. Some even said it wouldn’t be possible. I had a great run when Japan performed well earlier this year,” he said.

However, since then, the local market has surged, the rand has strengthened, and Japan has softened.

“I also had limited exposure, around 10%, to technology stocks via Anthony Ginsberg’s fund,” Heystek said.

“Over the past year, if you weren’t heavily invested in the US and particularly in the Magnificent Seven stocks, you likely underperformed.”

He added that he made a mistake during the stock market downturn. “I panicked and moved some assets to cash,” he said.

“Timing the market is tough. You must be right twice – when exiting and re-entering. I wasn’t, and it cost me. Viljoen’s advantage was his consistency.”