It's still a minefield out there — how to thrive in 2025
Five of Foord’s seasoned portfolio managers each pitched an investment scenario that investors may need to navigate in looking to thrive in 2025. From a ‘boring is better’ defensive approach to reasons why hospitals could deliver healthy returns despite NHI concerns, the panel — moderated by LINDA EEDES — offered the following insights to help investors remain resilient amidst global uncertainty.
- US defensives could outperform
Brian Arcese suggested a defensive strategy to invest in regulated utilities, particularly in the electricity transmission and distribution sectors. ‘In an electrification-of-everything world, many regulated utilities will once again become growth engines — albeit modest, but consistent — which is not priced into some stock valuations.’
Regulated utilities may offer the best stability in 2025 amidst global macroeconomic uncertainty. ‘Electricity volumes are expected to rise by 2% annually, reversing decades of stagnation, while costs to consumers are projected to decrease, providing a strong and stable return profile for investors.’ The sector’s appeal offers ‘defensive growth,’ ensuring resilience even in challenging macroeconomic conditions. ‘In a market that continues to perform well, these utilities can still compound at double-digit rates.’
- China may be the best performing global share market
Ishreth Hassen discussed the attractive potential for investment in the Chinese share market in 2025, given its current economic positioning, stimulus support, and valuation advantages. ‘Valuations remain compelling, with Chinese corporates holding cash reserves equivalent to 27% of their total market cap — positioning them to deliver exceptional shareholder return.’
Specific sectors, such as technology and clean energy, present significant opportunities. ‘China is positioned as the world's largest manufacturer of clean energy products, with a dominant share in electric vehicles and batteries. With the government now actively supporting shareholder returns through buybacks and dividends, we expect strong outperformance relative to global peers.’
- Inflation could come roaring back
Rashaad Tayob forecasts a resurgence of inflation, driven by synchronised interest rate cuts, government spending stimulus, and supply-chain constraints. ‘While many people think the inflation dragon has been slayed, the forces that drove it in 2021 — such as supply constraints, lower interest rates and government overspending — are reappearing, albeit in different forms.’
Inflation-linked government bonds offer a good hedge against inflation surprises. ‘In South Africa, inflation-linked bonds offer yields after inflation of about 5%, while in the US, real yields of about 2% are at their highest in two decades. Even if inflation stays subdued, these investments provide excellent real returns. And if inflation surprises to the upside, the returns could be exceptional.’
- It’s still a minefield out there — avoid the landmines
According to Wim Murray, to thrive in 2025 investors in South African equities should avoid companies with weak business models. ‘A big contribution to portfolio performance is simply missing the landmines.’ The risks of capital-intensive businesses include high fixed costs, weak fundamentals, and overstated earnings. ‘The pain is ultimately borne by investors when these businesses fail to deliver.’
To thrive in 2025, Murray advocates investing in resilient, cash-generative companies — especially in defensive industries like food retail. ‘We prefer South African businesses that don’t rely on economic growth to deliver for shareholders. Companies with high free cash flow and strong market positioning can thrive regardless of economic growth.’
- Hospitals could deliver healthy returns despite NHI concerns
Finally, Chief Investment Officer Nick Balkin addressed the uncertainties surrounding South Africa’s proposed National Health Insurance (NHI) scheme, explaining why private hospitals could remain a compelling investment in 2025. ‘NHI is a complex and costly concept, and significant delays are inevitable. Even conservatively, it will be more than six years before NHI is fully established, and that’s assuming that no further legal or logistical challenges arise.’
As such, private hospitals will continue to play a crucial role in healthcare — not only as service providers to government, but also for patients with private medical insurance. ‘Netcare, for example, has invested significantly in IT systems and infrastructure, which is driving cost efficiencies and supporting robust earnings growth. Hospitals are therefore well-positioned to deliver healthy returns in 2025.’
An audience poll revealed strong concurrence with the risk of landmines exploding in the South African share market in 2025 — narrowly edging out the scenario of robust Chinese share market growth, which also resonated with the audience.
To view the How to Thrive in 2025 webinar click here.