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# Flagship Asset Management

## Sitemaps
- [XML Sitemap](https://flagshipsa.com/sitemap_index.xml): Includes all crawlable and indexable pages.

## Posts
- [Looking Beyond Familiar Markets: Why Investors Mistake Familiarity for Safety](https://flagshipsa.com/2026/06/24/looking-beyond-familiar-markets-why-investors-mistake-familiarity-for-safety/): Most investors believe their decisions are rational. Yet decades of behavioural-finance research suggest our choices are often shaped by psychological biases that operate below conscious awareness, and one of the most persistent is our tendency to favour the familiar. Whether choosing where to live, what to eat, or where to invest, people gravitate towards what they know. Familiarity provides comfort, comfort creates confidence, and confidence feels like safety. The challenge is that familiarity and safety are not always the same thing. 
- [Look beyond Nvidia for lucrative investment chances in AI gold rush](https://flagshipsa.com/2025/09/10/look-beyond-nvidia-for-lucrative-investment-chances-in-ai-gold-rush/): Capex boom creates compelling opportunities in power and infrastructure
- [Blue Label market value could double after Cell C spinoff](https://flagshipsa.com/2025/08/13/blue-label-market-value-could-double-after-cell-c-spinoff/): Blue Label Telecoms, whose shares have nearly quadrupled in the past year, is drawing renewed investor interest amid signs that a long-awaited restructuring of its troubled Cell C subsidiary is taking shape.
- [Rolls-Royce: The five-bagger of offshore stocks](https://flagshipsa.com/2025/08/05/rolls-royce-the-five-bagger-of-offshore-stocks/): Flagship Asset Management has seen significant returns after making Rolls-Royce the second-largest holding in its funds after Blue Label Telecoms, just two years after entering the position.

## Pages
- [Monthly Commentary October 2026](https://flagshipsa.com/monthly-commentary-october-2026/): Market Commentary
- [Monthly Commentary September 2026](https://flagshipsa.com/monthly-commentary-september-2026/): Market Commentary
- [Monthly Commentary August 2026](https://flagshipsa.com/monthly-commentary-august-2026/): Most global equity markets finished August in the green. In the US, the S&P 500 ended 2.7% higher, while the Nasdaq Composite gained 4.0%. In the UK, markets were slightly more subdued, with the FTSE 100 ending 0.2% higher, while the Euro Stoxx 50 gained 1.0% in the EU. The picture was mixed in the East, as Japan’s Nikkei 225 gained 3.1%, while Hong Kong’s Hang Seng was a notable laggard, closing 1.0% lower. South Korea’s Kospi index, which has become a barometer of AI buildout volatility, finished the month 3.5% higher.
- [Monthly Commentary July 2026](https://flagshipsa.com/monthly-commentary-july-2026/): The US’s S&P 500 benchmark closed the month unchanged. This was not the case for the tech-heavy Nasdaq, which declined by 3.2%. On a stock level, however, there was some extreme volatility, such as IBM’s single day 26% decline, it's largest since 1968, highlighting the market’s skittishness in the current environment.
- [Monthly Commentary June 2026](https://flagshipsa.com/monthly-commentary-june-2026/): Despite an abundance of activity and news, to close out a volatile quarter, markets were fairly subdued in June. The S&P 500 declined by 0.9%, while the Nasdaq Composite declined by 2.8%, driven mainly by a pullback in semiconductor stocks and the AI trade. However, both recorded their strongest quarters in the last 6 years. The small-cap Russell 2000 was a standout performer, gaining 3.7% during the month. European returns were surprisingly strong, with the Euro Stoxx 50 index ending the month 4.6% higher. Japan’s Nikkei was also strong, gaining 5.7%, while Hong Kong’s Hang Seng was a notable laggard, declining by 8.5% during the quarter. Special mention must be made of the Philadelphia Semiconductor Index, which rose 92% over the past 3 months, to record its best-ever quarter, as investors increasingly bet on positive returns from AI adoption.
- [Meet The Managers](https://flagshipsa.com/mtm-2026/): Global liquidity driving market behaviour.DOWNLOAD PDF
- [Monthly Commentary May 2026](https://flagshipsa.com/monthly-commentary-may-2026/): US markets rallied for yet another strong month. The S&P 500 ended 5.3% higher, while the Nasdaq Composite gained 8.4%. The small-cap Russell 2000 was more subdued, rising by 4.4%. There was no such rally in London, as the FTSE 100 rose by a mere 0.7%. Europe was also strong, with the Euro Stoxx 50 gaining 2.9%. In the East, Hong Kong’s Hang Seng stands out as the lone decliner, ending 1.7% lower, while Japan’s Nikkei 225 was again the standout performer, ending the month 11.9% higher. The Nikkei is now up 32.8% year-to-date. There were also notable moves in the commodity market, as Brent crude declined by 19.3% during the month. Year-to-date, however, oil is still trading 51.3% higher.
- [Monthly Commentary April 2026](https://flagshipsa.com/monthly-commentary-april-2026/): April was another lesson on the importance of “staying invested” during bouts of volatility. After a steep selloff in March, markets roared back to life in April. In the US, the S&P 500 and Nasdaq surged 10.5% and 15.3% respectively, both recording their strongest month since 2020. For the Nasdaq, this included a 13-day winning streak, its longest in more than three decades. In the UK, the FTSE 100 gained 2.3%, while the Euro Stoxx 50 rose 5.6%. In the East, the Hang Seng closed 4.1% higher, while Japan’s Nikkei rose by an eye-watering 16.1%.
- [Monthly Commentary March 2026](https://flagshipsa.com/monthly-commentary-march-2026/): March ‘26 saw a meaningful pullback in equity markets across the globe as the conflict in the Middle East proved to be the main driver of performance. In the US, the S&P 500 was down 5%, while the Nasdaq composite declined by 4.7%. London’s FTSE 100 declined by 6.2% while the Euro Stoxx 50 lost 9.3%. There was plenty of pain in the East as well, as the Nikkei 225 declined by 12.7%, and Hong Kong’s Hang Seng finished the month 6.6% lower. South Korea’s Kospi, one of the world’s best performing markets over the past year, experienced its worst day on record, dropping 12% in a single session.
- [Monthly Commentary February 2026](https://flagshipsa.com/monthly-commentary-february-2026-2/): February delivered a wide variance of results for global equities. In the US, both the S&P 500 and Nasdaq Composite declined, dropping 0.8% and 3.3% respectively. In contrast, the small cap Russell 2000 enjoyed a green month, ending 0.8% higher. London’s FTSE 100 was strong, gaining 7%, while the Euro Stoxx 50 ended 2.4% higher. Japan’s Nikkei 225 had another very strong month, closing 10.4% higher. Hong Kong’s Hang Seng Index was relatively weak, closing 2.8% lower.
- [Monthly Commentary January 2026](https://flagshipsa.com/monthly-commentary-january-2026/): Equity markets started the year strongly. In the US, the S&P 500 and Nasdaq gained 1.4% and 1.0% respectively, while London’s FTSE 100, off to a flyer, gained 3.0% for the month. The strongest performance came from the East, as Japan’s Nikkei 225 rose by 5.9%, while the Hang Seng was up a meaningful 6.9% for the month. The USD was again weak compared to most of its peers, boosting all the above non-US returns, when measured in dollars.
- [Monthly Commentary December 2025](https://flagshipsa.com/monthly-commentary-december-2025/): Equity markets around the world delivered varying performance for the last month of the year. Despite the slightly subdued numbers for December, it was still another very strong year for markets, with most notching double-digit gains. In the US, the S&P was flat for the month, while the Nasdaq composite declined by 0.5%. For 2025, however, they gained 17.9% and 21.2% respectively. This now marks 3 years of back-to-back double-digit gains for the S&P.  London’s FTSE 100 was slightly stronger, gaining 2.3% for the month to close 25.8% higher in 2025. European markets also ended in the green, gaining 2.2% for the month and 22% for the year. In the East, the Nikkei gained 0.3% for the month, and an impressive 28.6% for the year. Hong Kong’s Hang Seng closed December slightly lower but delivered an incredible 32.5% for the year. It is worth noting that the US Dollar depreciated by more than 10% versus the Pound and Euro during the year, greatly increasing those index returns when measured in USD.
- [Monthly Commentary November 2025](https://flagshipsa.com/home-november-2021/monthly-commentary-november-2025-2/): After a couple of blockbuster months, equity markets were more subdued in November, while Asian markets ended mostly in the red. In the US, the S&P 500 gained 0.3%, while the Nasdaq Composite declined by 1.5% as tech stocks retreated from elevated levels. The numbers, above, mask considerable volatility, as the Nasdaq slid 3% during the first week of the month, its worst weekly performance since April’s ‘tariff tantrum’. Across the pond, both London’s FTSE 100 and the Euro Stoxx 50 made slight gains, closing 0.4% and 0.1% higher respectively. Asian markets retreated, with Japan’s Nikkei 225 ending 4.1% lower, while Hong Kong’s Hang Seng declined by 0.1%. The Shanghai composite declined by 1.6%.
- [Monthly Commentary November 2025](https://flagshipsa.com/monthly-commentary-november-2025/): After a couple of blockbuster months, equity markets were more subdued in November, while Asian markets ended mostly in the red. In the US, the S&P 500 gained 0.3%, while the Nasdaq Composite declined by 1.5% as tech stocks retreated from elevated levels. The numbers, above, mask considerable volatility, as the Nasdaq slid 3% during the first week of the month, its worst weekly performance since April’s ‘tariff tantrum’. Across the pond, both London’s FTSE 100 and the Euro Stoxx 50 made slight gains, closing 0.4% and 0.1% higher respectively. Asian markets retreated, with Japan’s Nikkei 225 ending 4.1% lower, while Hong Kong’s Hang Seng declined by 0.1%. The Shanghai composite declined by 1.6%.
- [Monthly Commentary October 2025](https://flagshipsa.com/monthly-commentary-october-2025/): Equity markets continue to defy sky-high valuations, fiscal deficits (now $38 trillion in the US, only 2 months after breaching $37 trillion), and geopolitical and trade uncertainty. During October, most global indices kicked off the 4th quarter in the same fashion they ended the 3rd – up! In the US, the S&P 500 gained 2.3%, while the Nasdaq closed 4.7% higher. This was the 7th straight month of gains for the Nasdaq, its longest monthly winning streak since 2018. Much of this performance was spurred by the seemingly unstoppable “mega caps”, as Nvidia became the first company to reach a market cap of $5 trillion, while both Apple and Microsoft joined the $4 trillion club. The biggest 5 tech companies in the US now have a collective value that exceeds the combined size of the Euro Stoxx 50, the UK, India, Japan, and Canada. The 10 largest US stocks (8 of which are technology-related) account for nearly 25% of the global equity market and are worth almost $25 trillion.
- [Monthly Commentary September 2025](https://flagshipsa.com/monthly-commentary-september-2025/): Equity markets showed no signs of cooling, closing out the 3rd quarter with strong gains. In the US, the S&P 500 gained 3.7% while the Nasdaq gained an impressive 5.7%. This puts their gains for Q3 '25 at 8.1% and 11.4% respectively. Interestingly, these gains were less than the small-cap Russell 2000 index, up 12.4% during the quarter. London’s FTSE also experienced a positive month, ending 1.8% higher. European stocks, too, were stronger, up 3.3%. Performance was particularly strong in the East, with Japan’s Nikkei gaining 5.8% while the Hang Seng gained 7.6%. The MSCI All Country Index ended 3.7% higher, while the Emerging Markets index was even stronger, gaining 7.2%.  All these indices, strong as they were, paled in comparison to gold and silver. The price of gold bullion rose 12% during the month, while silver a massive 17% higher.
- [Monthly Commentary August 2025](https://flagshipsa.com/monthly-commentary-august-2025/): Equity markets around the globe marched onwards and upwards during August. In the US, the benchmark S&P 500 was up 2.0%, while the Nasdaq gained 1.7%. The standout was the small-cap Russell 2000 index, which gained 7%. Markets in the UK and Europe also ended in the green. London’s FTSE 100 gained 1.2%, while the Euro Stoxx 50 gained 0.6%. Looking East, there was, again, strong performance. Japan’s Nikkei 225 rose by 4.1%, while Hong Kong’s Hang Seng Index climbed 1.3%. The strongest performer was in mainland China, where the Shanghai Composite Index ended up 8.1%. Shanghai stocks are trading near their highest level in close to a decade as cash-rich local investors increase allocation to equities while rotating out of bonds.
- [Monthly Commentary July 2025](https://flagshipsa.com/monthly-commentary-july-2025/): Most global indices started Q3 in the same way they ended Q2 – in the green. In the US, the S&P gained 2.2%, while the Nasdaq improved by 3.7%. London’s FTSE 100 rallied 4.3%, while the Euro Stoxx 50 only managed to eke out a 0.3% gain. In the East, Japan’s Nikkei rose 1.4%, while Hong Kong’s Hang Seng Index ended the month 3.1% higher.
- [Monthly Commentary June 2025](https://flagshipsa.com/monthly-commentary-june-2025/): US equity indices followed on from strong performances in May to close the 2nd quarter well in the green. The S&P 500 closed 5.1% higher for a total gain of 10.9% during the quarter. The Nasdaq rose by 6.6% and is up an impressive 17.9% during the quarter – its best quarterly performance in the last 5 years. Notably, the S&P 500 closed the quarter at a new all-time high. The sharp rally this quarter marks the index’s swiftest ever recovery back to all-time highs following a decline of at least 15% (post-Trump tariffs).
- [Monthly Commentary May 2025](https://flagshipsa.com/monthly-commentary-may-2025/): Market volatility continues, but at least it was to the upside during May. US markets rallied this month, with the S&P 500 gaining 6.3%, while the Nasdaq was up 9.7%. It was the S&P’s strongest month since 2023. In the UK, the FTSE 100 gained 3.8%, while Europe’s Stoxx 50 rose by 4%. In the East, Japan’s Nikkei ended 5.3% higher, while the Hang Seng rallied nearly 6%.
- [Monthly Commentary April 2025](https://flagshipsa.com/monthly-commentary-april-2025/): Investors who thought the first quarter was volatile were in for a nasty surprise at the start of the second quarter. April started with one of the steepest two-day declines in market history as the S&P 500 plunged 10%, on par with Black Monday in 1987, the Lehman Brothers rout in 2008, and the Covid plunge in 2020. Both the Nasdaq and S&P 500 briefly flirted with bear markets. The S&P went on to record its worst four-day loss since the 1950’s to start off the month. During the latter half of the month, markets recovered much of the losses suffered during the first few days.
- [Monthly Commentary March 2025](https://flagshipsa.com/monthly-commentary-march-2025/): Global equity markets experienced a torrid month to close the 1st quarter of 2025. In the US, the S&P 500 was down 5.6%, while the Nasdaq and Russell 2000 declined by 8.1 and 6.8% respectively. European markets fared slightly better, with London’s FTSE declining by 2%, and the EuroStoxx 50 by 3.9%. In the East, Tokyo’s Nikkei 225 declined by 3.4%. Hong Kong’s Hang Seng index was one of the few to end the month in the green, gaining 1.1%.
- [Monthly Commentary February 2025](https://flagshipsa.com/monthly-commentary-february-2025/): After a strong start to the year, US markets pulled back in February. The S&P 500 declined by 1.3%, while the tech-heavy Nasdaq declined by 3.9%, as growth stocks retreated from their highs after Nvidia results failed to impress the market. The small cap Russell 2000 had a particularly bad month, declining by 5.4%. UK and European markets continued their strong performance for the year. London’s FTSE 100 was up 2%, while the Euro Stoxx 50 increased by 3.3%. Asian markets experienced very different outcomes, as Japan’s Nikkei 225 decreased by 6%, while Hong Kong’s Hang Seng gained an enormous 13.4% during the month.
- [Monthly Commentary January 2025](https://flagshipsa.com/monthly-commentary-january-2025/): Equity markets across the globe enjoyed a strong start to the new year. In the US, the benchmark S&P 500 increased by 2.8%, while the Nasdaq and small-cap Russell 2000 indices rose by 1.7% and 2.6% respectively. The UK and European markets were particularly strong, with London’s FTSE 100 returning 6.2% and the Euro Stoxx 50 returning 8% for the month. In the East, Hong Kong’s Hang Seng index climbed by 1.2%, while Japan’s Nikkei 225 was one of the few to close the month in the red, declining by 0.8%.
- [Monthly Commentary December 2024](https://flagshipsa.com/monthly-commentary-december-2024/): 2024 proved to be another blockbuster year for US markets, but the absence of a December Santa rally to cap it all off, left investors slightly disappointed. The benchmark S&P 500 declined by 2.4% during the month, while the small-cap Russell 2000 declined by more than 8%. The tech-heavy Nasdaq held up surprisingly well, ending 0.6% higher. Elsewhere, London’s FTSE 100 lost 1.3%, the Euro Stoxx 50 increased by 1.9%, Japan’s Nikkei 225 increased by 4.5%, while the Hang Seng also ended 3.3% higher.  When looking at annual returns for the S&P 500, this was the best two-year stretch in a quarter century, setting 57 new all-time highs during 2024 alone.The last time the S&P delivered two consecutive years of 20%+ returns was all the way back in 1997 and 1998, in the lead up to the dot.com crash. There were several reasons that led to the strong 2024 performance, primarily inflation in the US easing to around 3%.  The US job market once again proved to be remarkably strong. The most recent print of 256,000 new jobs was much stronger than the 155,000 expected by the market. This was the 48th consecutive month of net hiring, tied for the second longest streak on record. The last time the US economy experienced a loss of jobs was all the way back in December 2020. However, the latest US inflation print was slightly less rosy, and improvement appears to have stalled as the numbers continue to be above the Fed’s 2% target. This, along with the blowout jobs report, gave the Fed all the data it needed to change their interest rate outlook for the year ahead.
- [Monthly Commentary November 2024](https://flagshipsa.com/monthly-commentary-november-2024/): Buoyed by the Trump trade, US market delivered strong returns during the month, notching a number of all-time highs along the way. The S&P 500 and Nasdaq Composite were up 5.9% and 6.3% respectively, while the small-cap Russel 2000 jumped 11.0%. Year-to-date (YTD), these indices have now all gained more than 20%, with the S&P and Nasdaq within touching distance of 30%. London’s FTSE 100 also had a green month, gaining 2.6%, but indices across Europe and Asia ended in the red. Japan’s Nikkei and Hong Kong’s Hang Seng indices lost 2.2% and 4.2% respectively, as tariff-related fears weighed on Chinese stocks.
- [Flagship Social Outreach Program](https://flagshipsa.com/flagship-social-outreach-program/): Being a boutique asset manager, Flagship is all about people. We operate as a partnership, a collection of ethical individuals, embracing the principles of simplicity and efficiency. We believe the most effective way to uplift our communities, with a vision for the future, is to invest in the youth of South Africa. This is why we have chosen to partner with the Pebbles Project in providing support to an early care and education creche as our social outreach program.Pebbles are a non-profit organisation, passionate about supporting children and their families in farming communities in the Western Cape region of South Africa. Their aim is to enable children and young adults from agricultural communities to reach their full potential through education, health, and nutritional services. Pebbles value compassion, commitment, courage, and integrity. These values align closely with Flagship’s culture, and it for this reason that we have chosen Pebbles as our social partner, in supporting the Nuwedrift Edu-Centre Creche.Nuwedrift is situated in the agricultural town of Paarl in the Western Cape region. Via the Pebbles Project, the Nuwedrift Edu-Centre has been specifically equipped to educate and enrich learners as well as address various challenges that may arise. This initiative is realised by providing resources, training and enrichment to learners and practitioners alike.The Early Care and Education Program is comprised of two initiatives: the First Thousand Days (FTD), and the Early Childhood Development (ECD) phase. Both the FTD, 0-3 years, and ECD, 3-6 years, are focussed on providing education, nutrition, and support to learners. The program also provides training sessions to practitioners who are equipped to teach the necessary and appropriate skills to learners, enabling them to achieve their particular milestones and reach their developmental goals. These training sessions share valuable tools in the art of illustrated storytelling, using resources and apparatus, music, one-on-one sessions, structural playtime, and assessments. These techniques assist significantly with literacy, early vocabulary building skills and overall enrichment of the learner.During the earlier part of the year, practitioners engaged in a wellness session where the focus was on self-love and essential self-care skills. Enriching and empowering practitioners in turn benefits the learners who are in the care of committed and dedicated role-models.This year sees The Pebbles Project celebrate 20 years of providing services and support to agricultural communities. The highlights for Nuwedrift Edu-Centre Creche included a successful athletics day, a Mother’s Day tea and festivities, dental care for children, special education needs provided to learners with developmental delays, toys and resources donations, a presentation on child protection and safety hosted by ACVV and each child receiving a beanie and a blanket for winter.Flagship Asset Management has been a proud advocator and financial supporter of these life-changing initiatives for the past five years.
- [Monthly Commentary October 2024](https://flagshipsa.com/monthly-commentary-october-2024/): Equity markets gave up some recent gains with the US's S&P 500, Nasdaq and small-cap Russell 2000 index declining by 0.9%, 0.5% and 1.4% respectively. UK and Europe fared worse with London’s FTSE falling 1.5% and the Euro Stoxx losing 3.5%. One of the lone indices ending the month in the green was Japan’s Nikkei 225, gaining 3.1%, however this gain was eroded when measured in USD, as the Yen declined by nearly 6% against the greenback.
- [Monthly Commentary September 2024](https://flagshipsa.com/monthly-commentary-september-2024/): The September effect refers to equity markets historically delivering weak returns during September. Not this time. The S&P 500 hit its 42nd record high of the year, and the Dow Jones Index its 32nd. Performance was mainly driven by the soft-landing narrative continuing to look the most likely, as inflation numbers continued to decline, the Federal Reserve cut interest rates by 50 basis points, and the US economy’s growth numbers remained resilient.
- [Monthly Commentary August 2024](https://flagshipsa.com/monthly-commentary-august-2024/): After a fairly volatile July, the start of August saw more of the same, before relative calm returned to markets late in the month. The US unemployment rate climbing for the 4th month in a row sent markets into freefall over fears that the Fed might have left interest rates too high, for too long – effectively steering the economy into a recession. These fears proved temporary, though, and markets clawed back some of the losses. At month end, the S&P 500 had rallied to gain 2.4% for the month, outpacing its tech-heavy Nasdaq peer, which return 0.7%. The small-cap Russell 2000 declined, giving up 1.5% during the month. In Europe, the Stoxx 50 gained 2.4%, while London’s FTSE 100 advanced by 0.8%. Indices in the East were mixed, with Japan’s Nikkei losing 1.1%, while the Hang Seng index had a strong month, returning 3.9%.
- [Monthly Commentary July 2024](https://flagshipsa.com/monthly-commentary-july-2024/): After months of seemingly plain sailing for US large caps and tech, July saw some volatility being thrown into the mix as earnings season got underway. The S&P 500 dropped 2.3% in a single day, breaking a 365-day streak without a 2% move or greater. Notably, this was the longest such streak since 2007 when the S&P notched a 943-day streak without a >2% move. At month-end, the S&P notched a 1.2% gain, while the Nasdaq declined by 0.7%. July also saw the start of what some are calling “The Great Rotation”. One particular week was the tech-heavy Nasdaq’s worst in 3 months, while the small-cap Russell 2000 simultaneously experienced its best week of the last 3 months, coming roaring back to life with a 10.1% gain. In the UK, the FTSE 100 gained 2.5%, but European shares slipped, with the Euro Stoxx declining by 0.4%. Asian markets struggled, with both Japan’s Nikkei and Hong Kong’s Hang Seng indices closing in the red.July delivered a myriad, and often contradicting, set of data points for the market to digest. The Federal Reserve's Jerome Powell initially indicated that inflation data was improving, but would not commit to September rate cuts. This, coupled with robust jobs data (at the time), and very strong US advance GDP numbers (2.8% vs estimates of 2.0%), hinted that the Fed might have pulled off the ultimate soft-landing. Fast forward two weeks, and cautious commentary on consumer softness, together with weaker than expected US jobs data, threw a spanner in the works of the Fed’s Goldilocks-scenario.
- [Monthly Commentary June 2024](https://flagshipsa.com/monthly-commentary-june-2024-2/): Global equity markets delivered vastly different results to close out the first half of the year. In the US, all rooms were sea-facing as the S&P 500 returned 3.6% for the month, largely driven by constituents that also form part of the tech-heavy Nasdaq composite, which returned 6% for the month. Year-to-date (YTD), the S&P 500 has now returned 15.3%, while the Nasdaq composite returned 18.6%. In the shadow of this tech-driven performance, we find the small cap Russell 2000 index, which was down 0.9% for the month, and is barely in the green YTD. In the UK, the FTSE 100 dropped 1.7% for the month, while the Euro Stoxx 50 declined by almost 3%. YTD, both indices have returned in the region of 7%. In the East, the Hang Seng Index continues to be volatile. After a strong recovery the previous month, June saw it giving back 1.1%, which now puts the YTD performance at 6.2%.
- [Monthly Commentary May 2024](https://flagshipsa.com/monthly-commentary-may-2024/): After a brief respite in April, markets continued their impressive rally in May. In the US, the S&P 500 increased by 4.96%, while the Nasdaq gained nearly 7% during the month as all-things tech continued to shine. In the UK, the FTSE gained 2%, while in the East, the Hang Seng also continued its recovery. It increased by 2.5% during May and has now gained nearly 11% during the last 3 months as the Chinese market reacted positively to the news that Beijing will actively support the stumbling property market.
- [Monthly Commentary April 2024](https://flagshipsa.com/monthly-commentary-april-2024/): After starting the year on the trot, equity markets finally paused for breath in April. In the US, the benchmark S&P 500 gave up 4.1%, while the tech-heavy Nasdaq lost 4.4%, and the small-cap Russell 2000 lost 7.0%. Markets fared better across the pond, with the UK’s FTSE 100 index rising by 2.7%. In the East, there was a large swing in the trend of recent performance, as Japan’s Nikkei declined by 4.9% while Hong Kong’s Hang Seng gained 7.5%, putting it back into green territory for the year.
- [Monthly Commentary March 2024](https://flagshipsa.com/monthly-commentary-march-2024/): Equity markets had another strong run in March – which led to the S&P 500 closing out its best first quarter since 2019 – gaining 3.2% (outperforming the Nasdaq which gained 1.9%). The S&P also outperformed the Nasdaq for the quarter, gaining 10.6% vs the Nasdaq’s 9.3%, as the market’s rally began to broaden in depth. In the UK, the FTSE 100 closed 4.8% higher, but it was up just 4.0% for the quarter. Over in the East, the Nikkei continued its bull run, rising 3.2%, ending the quarter 20.8% higher. The notable underperformer for the quarter was, again, the Hang Seng index, which closed 2.5% lower.
- [Monthly Commentary February 2024](https://flagshipsa.com/monthly-commentary-february-2024/): Global equity markets delivered yet another strong showing during February. In the US, the S&P 500, Russel 2000 and Nasdaq composite all gained more than 5%. UK markets were more muted, with the FTSE 100 returning 0.45%. Performance in the East was strong, with Japan’s Nikkei returning 8%, and even Hong Kong’s Hang Seng Index ending the month almost 7% higher.
- [Monthly Commentary January 2024](https://flagshipsa.com/monthly-commentary-january-2024/): After ending 2023 on a strong note, global equity indices delivered a mixed batch to start off 2024. In the US, both the S&P 500 and Nasdaq improved by 1.68% and 1.04% respectively. The Russel 2000 had a tough start to the year though, dropping by 3.89%. In the UK, the FSTE 100 fell 1.27%, while in the east there were vastly different results on opposite sides of the East China Sea. In Japan, the Nikkei gained 8.4%, while Hong Kong’s Hang Seng Index lost 9.16% in the first month of the year.
- [Monthly Commentary December 2023](https://flagshipsa.com/monthly-commentary-december-2023/): Most global equity markets finished the year on a canter, following strong performance in November. In the US, the S&P 500 improved by 4.5%, while the Nasdaq gained 5.6%. For the quarter, the S&P returned 11.7% and the Nasdaq 13.9%, while for 2023, the S&P returned 26.3% with the Nasdaq gaining an incredible 44.7%. What makes this performance even more staggering is that it occurred in a year where the prevailing narrative was whether the pending recession would be deep or shallow. These numbers again serve to emphasize the importance of staying invested in equity markets.
- [Monthly Commentary November 2023](https://flagshipsa.com/monthly-commentary-november-2023/): Stocks were early to the Santa-rally this year, with most major indices delivering strong returns for the month. In the US, the S&P 500 and Nasdaq returned 9.1% and 10.8% respectively. Across the pond, London’s FTSE 100 returned 2.29% while further East Japan’s Nikkei 225 also had a strong month, returning 8.52%. The notable exception was Hong Kong’s Hang Seng Index, which closed the month marginally in the red. Positive returns were not limited to equities, as US Bond prices also staged a recovery during the month. The yield on 10- and 30-year government bond yields declined by 12.2% and 11.8% respectively, as traders bought up high-yielding bonds in a bet that interest rates will start falling sooner rather than later.
- [Monthly Commentary October 2023](https://flagshipsa.com/monthly-commentary-october-2023/): October was another red month for global equity indices. In the US, the S&P 500 fell 2.1% while the Nasdaq declined by 2.8%. Things did not improve as you look further East. London’s FTSE 100 was down 3.7% while Hong Kong’s Hang Seng Index dropped 3.9%. The MSCI All Country World Index (ACWI) and Emerging Markets Index returned -3% and -3.9% respectively. Commodity indices delivered a mixed bag. Amid global uncertainty, tensions in the Middle East and a rush to safety, gold performed well, increasing by 7.3%. The price of Brent Crude oil declined by 8.3%, as concerns around global demand outweighed fears of oil disruption in the Middle East.
- [Monthly Commentary September 2023](https://flagshipsa.com/monthly-commentary-september-2023/): Most markets experienced another red month to end the 3rd quarter of the year. Globally, the MSCI ACWI lost 4.1%, while in the US, the S&P 500 and Nasdaq indices lost 4.77% and 5.77% respectively. In the East, Japan’s Nikkei lost 1.74%, and Hong Kong’s Hang Seng index dropped by 2.58%. The lone standout this month was London’s FTSE 100 index, which gained 2.4%. Interestingly, September almost exactly mirrors the returns for the 3rd quarter. All major indices, bar the FTSE 100, lost ground during the last 3 months.
- [Monthly Commentary August 2023](https://flagshipsa.com/monthly-commentary-august-2023/): Equity markets experienced a sharp turn-around in August, with most major indices ending deep in the red. In the US, the S&P 500 declined by 1.6%, while the Nasdaq fell by 2%. London’s FTSE 100 fell by 2.6% and in the East, Hong Kong’s Hang Seng Index was down a whopping 8.2%. On a global basis, the MSCI All Country World Index declined by 2.7%, while the MSCI Emerging Markets index fell by 6.1%. On a relative basis, the commodities market was fairly subdued, with Brent Crude oil trading 1.5% higher and gold 1.3% lower. The notable standout here being copper, which fell by 5.8%.
- [Monthly Commentary July 2023](https://flagshipsa.com/monthly-commentary-july-2023/): Equity markets delivered strong performances in July. In the US, the S&P 500 was up 3.2%, while the Nasdaq composite gained 4%. Globally, the MSCI ACWI increased by 3.69%, bolstered by especially strong performance in emerging markets as the MSCI Emerging Market index gained 6.3%. Performance in China was particularly strong, with the Hang Seng index gaining 7.2%. Commodities also had a strong month, with Brent Crude increasing by 14%, and copper by 7%. Natural gas was weak however, declining 5.8%
- [Monthly Commentary June 2023](https://flagshipsa.com/monthly-commentary-june-2023/): Equity markets delivered strong results to end of the 2nd quarter of 2023. The MSCI ACWI returned 5.8%, while in the US both the Nasdaq and S&P 500 were up by 6.6%. Markets in the East also performed well, with Japan’s Nikkei gaining 7.5% and Hong Honk’s Hang Seng Index ending the month 4.5% higher.
- [Monthly Commentary May 2023](https://flagshipsa.com/monthly-commentary-may-2023/): Global equity indices delivered widely varying results during the month of May. In the US, the S&P 500 was up 0.4%, while the Nasdaq gained almost 6%. Across the pond, the London-based FTSE 100 lost 5.04%, and in the East, Hong Kong’s Hang Send index lost nearly 8%, while Japan’s Nikkei 225 gained more than 7%.
- [Monthly Commentary March 2023](https://flagshipsa.com/monthly-commentary-march-2023/): March was a strong month for global equity indices, capping off a quarter where returns were firmly in the green. The MSCI ACWI was up 3.1%, while the S&P 500 and Nasdaq increased by 3.7% and 7.8% respectively. Things were less rosy in the UK, where the FTSE 100 fell by 2.5%. For the quarter, the S&P 500 was up almost 7.5%, while the Nasdaq improved by a whopping 17%. The FTSE 100 had a less eventful quarter, but still ended up 3.5%.
- [Monthly Commentary February 2023](https://flagshipsa.com/monthly-commentary-february-2023/): After starting the year firmly in the green, most global equity indices gave up gains in February. The S&P was down 2.5%, surprisingly more than the techheavy Nasdaq which fell only 1%. Globally, the MSCI ACWI was down 2.8%, while Hong Kong’s Hang Seng index lost more than 12%. Stocks fared better in Europe, with London’s FTSE and the Euro Stoxx both gaining 1.8%.
- [Monthly Commentary January 2023](https://flagshipsa.com/monthly-commentary-january-2023/): After a tough 2022, equity markets started 2023 strongly. The S&P 500 gained 6.3%, with the Nasdaq rising 10.7%. This optimism was evident across most global markets, with the FTSE 100 rising by 4.3%, the Nikkei by 4.7% and the MSCI ACWI increasing by 7.2%.
- [Monthly Commentary April 2023](https://flagshipsa.com/monthly-commentary-april-2023/): There was a wide dispersion in performance amongst Global equity indices in April. The S&P 500 was up 1.6%, but the Russel 2000 was down 1.8%, and the Nasdaq Composite ended the month flat. Outside of the US, the MSCI ACWI was up 1.5%, but this stood in stark contrast with certain regional indices, amongst them Hong Kong’s Hang Seng, which fell almost 2.5%.
- [Monthly Commentary](https://flagshipsa.com/monthly-commentary/): October was another volatile month for global equity markets. The S&P 500 declined by 0.9%, while the tech-heavy Nasdaq Composite fell 5.3%. London’s FTSE 100 proved more resilient with a 1.3% gain, while the Euro Stoxx 50 declined by 2.2%. In Asia, Japan’s Nikkei 225 and Hong Kong’s Hang Seng both fell 5.2%. Beneath the surface, AI bubble concerns weighed heavily on tech stocks and pushed investors towards US Treasuries, where the 10-year yield peaked above 5.3%. Locally, the JSE slipped 0.4%. Record fuel prices and news that South Africa will be removed from AGOA outweighed positive signals from Moody’s.READ MORE
- [ESG In Action](https://flagshipsa.com/esg-in-action/): Dear Board of Directors, Flagship Asset Management ("Flagship") has, on behalf of its clients, acquired an interest in Ubisoft Entertainment (“Ubisoft” or “the Company”) over the course of the last 12 months. As of November 2021, shares in Ubisoft have dramatically underperformed those of its major peers since 2017, and every period in between. In the past year alone, Ubisoft shares have fallen by nearly 40%, erasing over EUR 4 billion from the Company’s market capitalisation.DOWNLOAD PDF
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- [Quarterly Telescope Q3 2020](https://flagshipsa.com/quarterly-telescope-q3-2020/): Welcome to our latest QUARTERLY TELESCOPE. We hope these quarterlies provide you with greater insight into our thoughts on global assets as well as how your global assets are being managed.
- [All Funds](https://flagshipsa.com/all-funds/): Flagship offers a range of funds which our investors may access locally using South African Rands or offshore using US dollars.Invest in ZAR  Invest in USDPlease note: FundRock Collective Investments (“FR”) was previously known as BCI. Fund names previously containing “BCI” have been updated to “FR” only. There has been no change to the underlying investment strategy, portfolio management, or fund administration.
- [Quarterly Telescope Q2 2020](https://flagshipsa.com/quarterly-telescope-q2-2020/): Welcome to our latest QUARTERLY TELESCOPE. We hope these quarterlies provide you with greater insight into our thoughts on global assets as well as how your global funds are being managed. In this quarter’s Telescope, Pieter Hundersmarck discusses how our portfolios are currently positioned, our asset allocation, as well as our thoughts on the ‘optically cheap’ South African stock market. Finally, we discuss the investment case for Zalando, the leading online apparel retailer in Europe.
- [Quarterly Telescope Q1 2020](https://flagshipsa.com/quarterly-telescope-q1-2020/): Welcome to our latest QUARTERLY TELESCOPE. We hope these quarterlies provide you with greater insight into our thoughts on global assets as well as how our global funds are being managed. In this quarter’s Telescope, Kyle Wales and Pieter Hundersmarck discuss how our portfolios are positioned to weather the COVID-19 crisis, and Kyle Wales discusses the investment case for US retail chain, Dollar Tree, a holding in Flagship’s global funds. Dear Investor, Firstly, it is important that all our investors understand that Flagship is 100% operational and the investment team is actively managing all portfolios during this time. Please feel free to contact us should you wish to discuss your portfolio in greater detail. At Flagship, we have been closely monitoring the economic impact of the Coronavirus since February. On March 2 we wrote about how we were preparing for the impact in our funds here. In that commentary we said: “For the next few months, holidays, conferences, business meetings and trade shows will be cancelled across the globe. Airlines, airports, hotels and related travel industry participants will be impacted. The oil price, which depends on the demand for fuel, will be negatively impacted. Companies with supply chains dependent on China, such as consumer electronics and IT hardware businesses, will struggle to manufacture products and will lose sales. Consumption at restaurants and shopping malls will fall.” Much of this has come to pass. Since we last updated you, countries across the globe have taken unprecedented responses to curb the spread of the virus, with over 3 billion people now subject to some form of lockdown. World leaders have decided that the best approach to combat the spread of the virus is for entire countries to close their borders and shut down all but essential businesses, government, and services. As we enter April, millions of people worldwide have lost their jobs and are dependent on governments for support. Businesses are in cash preservation mode. Coupled with this has been the de facto collapse of the OPEC+ alliance as a result of Saudi Arabia deciding to flood the market with crude to force high cost producers (like the shale producers of North America) out of the market. In ordinary circumstances, this might have been seen as a positive development because it could be construed as a form of “fiscal stimulus” which would support consumption at a time of uncertainty. Coupled with the collapse in demand as a result of the COVID-19 crisis, however, it has only added to the prevailing uncertainty. In response, the US Federal Reserve has cut rates by 150 basis points to near zero and run through its entire 2008 crisis handbook of asset buying programs. Central Bankers around the world have followed suit, ensuring that credit markets continue to function properly. They have learned their lessons from the Great Depression which was made deeper and longer due to the inaction of monetary and fiscal policy at that time. Global stock markets predictably sold off. The MSCI All Country World Index (“MSCI ACWI”) fell 25.1% in a record-breaking 16 trading days (by March 23) before recovering to end the month down 13.7%. If taken from the peak reached on Feb 12, the index fell 33.9% from peak to trough. The oil price also imploded, trading at its lowest level in decades. This is some of the most extreme volatility we’ve seen in 15 years. The selloff has brought an end to the 236% cumulative rise in the MSCI ACWI since March 2009; and today the index is back at a level not seen since April 2017. This is not 2008 As bad as things seemed in the depths of March, this is not 2008. Then, the leverage in the financial system was the main culprit for the stock market crash. Real estate speculators had fuelled the bubble without doing proper due diligence while investment banks (who had leveraged their books about 40 to 1) provided the funding. This created a wave of contagion which caused the entire system to collapse. Leverage in the form of imprudent margin lending against stocks was the cause of the Great Depression. It was also the cause of the emerging markets crises of 1997/8 when over-indebted countries experienced a run on their currencies. In the current selloff, the origin lies on main street, not Wall Street. The steps taken to curb the spread of the coronavirus have caused economies around the world to ‘suddenly stop’, preventing the free flow of trade, people and capital. To be sure, this can and likely will lead to a severe drop off in economic activity for the next year, but the key ingredient to financial institutions failing which is over leverage is missing. In this respect, the base case would be more akin to the short, sharp sell-offs which have accompanied the declaration of war during both World Wars and the Gulf War, or to the Oil Crisis of the 1970’s. What actions have we taken in our global funds? Performance – all figures to March 2020, in ZARIn the Flagship IP Worldwide Flexible Fund (“FWFF”) and the Flagship International Flexible Fund (“FIFF”), we mentioned on March 2 that we had 30% of the fund in gold and cash. The market turbulence provided opportunity, and the global team used March to build positions in existing as well as exciting new stocks that were sold off indiscriminately. The prices we achieved bode well for future returns. As you may recall from our February factsheet, our 10 largest equity holdings in March were:Of these, four experienced no adverse impacts from the COVID-19 crisis at all: Netease (which benefitted from increased propensity to play video games while China was in lockdown), Microsoft, Reckitt Benckiser and British American Tobacco. The remaining six were only mildly impacted by the COVID-19 crisis. Alibaba and Zalando were impacted by reduced consumer discretionary spend but, as e-commerce players, were the least badly affected amongst retailers. Facebook and Google were impacted by the prospect of reduced advertising spend as businesses sought savings to compensate for the reduction in their revenues, but the longer term outlook for online advertising spend still remains robust. Finally, Heineken suffered from the prospect of a decline in on-premises consumption (i.e. consumption in restaurants and bars), while DS Smith has been impacted by reduced demand for paper boxes. We believe both these impacts are short term. The funds diverse geographic and sectoral holdings protected capital during the fall. Diversity, as market parlance goes, is the only ‘free ride’ in investments. Despite holdings in property companies Hammerson and Unibail falling in excess of 70% for the month, these positions were appropriately sized beforehand which has mitigated their impact on portfolio performance. LVMH and Adobe As well as adding to our high quality stocks, we also initiated positions in Adobe, a leading software provider to the creative and marketing industry, and LVMH, the highest quality pure-play luxury business in the world. We are excited to share these investment cases with you in upcoming Quarterly Telescopes. The value of the funds’ gold position stayed constant throughout the month, versus a decline of 13.5% in the MSCI ACWI index (USD). Gold is either loved or hated by the investment community, but in times like these, there are few better ways to hedge the portfolio from downward market volatility. We would reiterate here that risk management in the funds is not a hat we ‘put on’ during times of trouble, but is rather interwoven into the day-to-day review and management of each of the positions and the portfolio as a whole. For the month of March, as well as year to date, the global funds have outperformed the MSCI ACWI as we expected they would. Manager selection and flexibility In our Flagship IP Worldwide Flexible Fund of Fund, we started the month with equity exposure of 73%. We similarly added equity exposure to the portfolio as markets fell, assisting the fund to continue to outperform. The two main reasons for this outperformance are – manager selection and the fund’s flexible mandate. Firstly, five out of our six global managers in the fund outperformed the MSCI ACWI, both YTD and for the month of March. While this outperformance was what we were aiming for, we are nonetheless pleased by this testament to the blend of managers selected, and are satisfied with the styles performing the way they should in a declining market. Secondly, we entered the year with low equity exposure and therefore didn’t participate in the market turbulence as much as a fully invested fund would have. We therefore benefitted on both sides of the coin: low exposure as markets fell, and the exposure we did have performed better than the market. We are pleased to share with you the addition of Guinness Global Innovators to the Fund of Funds. This fund is managed by a capable two man team out of London and we will share more about them in upcoming communication. What is our current view? We are realistic about the effects of the economic stoppages on our portfolios and how this would affect the companies we own, potentially causing their share prices to react negatively. It would be imprudent to expect that any company – no matter its quality – can withstand a standstill to its revenues. Because of this, we hold a balance of defensive and growth orientated businesses. We observe that companies in the defensive sectors of food retail, online gaming, online services, healthcare, and tobacco are performing well. We also hold reasonably priced growth businesses in structurally attractive niches. There are reasons for cautious optimism. We know that, ultimately, the pandemic will end, and the steps taken by governments and central banks will ease the economic pain caused by the quarantines and lockdowns. Despite this, we maintain a cautious stance. We do not know how deep the upcoming weakness will be or how long it will endure. Whatever the future may hold, we view our principal responsibility as preserving and growing our investor’s capital. Although we expect heightened volatility and a weaker economic backdrop, we believe that all of our companies will eventually recover, and create substantial value over the long term.Quick take – Dollar stores play an important part in the US retail landscape as fill-in and variety trade for a cohort of value-focused consumers. – Their scale, footprint and operating metrics make them high quality businesses. – While competitors like Dollar General make higher margins, they also trade on much higher multiples. – The acquisition of Family Dollar has dampened Dollar Tree’s true earning power, and on a normalised basis we believe earnings should  be far higher. – The COVID-19 crisis afforded us an attractive entry point to add to our holdings. An integral part of US culture Dollar Tree is a “dollar store” which is a retail concept unfamiliar to many South Africans. A dollar store can be likened to a “Crazy store” in South Africa but it carries an assortment of consumable items so it’s customers can use it for quick fill-in shops as well. Dollar Tree first listed in 1995. Since then it has delivered 17% total return per annum, meaning that a $10,000 investment at listing would have increased over 50-fold to $506,000. While it has been an incredible performer over long periods of time, it has stumbled over the past 5 years as the table shows.The weak performance over the past 5 years is attributable to the acquisition of Family Dollar, which will be discussed further below. However, on top of this, it too is a consumer discretionary stock and has also been impacted by the fall-out from COVID-19. The current sell-off therefore provides a compelling entry point into the stock. The Business According to its narrowest definition, a dollar store is so named because all the items in the store sell for $1 or less. Over time the original definition of a “dollar store” has expanded to include any small-box retailer which sits within close proximity to its customers and whose value proposition is selling low priced items. Dollar Tree trades under two distinct banners: – Dollar Tree, comprising just over 7,000 stores in the US and Canada. This is its most profitable banner and the one after which it is named, accounting for half its store network and revenue, and; – Family Dollar, comprising over 8,000 stores which it acquired in 2016 and which accounts for the other half of its store network and revenues. The Dollar Tree banner is the only dollar store banner that has stuck to its original pricing policy of selling everything for $1 or less while Family Dollar, its acquired banner, and Dollar General, its largest competitor, have all deviated.What does a dollar store look like? In accordance with the definition above, the following are the most noteworthy characteristics of a dollar store: – Low price points. Whether it is Dollar Tree which is constrained by a $1 price point or Dollar General which isn’t, a defining feature of dollar stores is that they sell items at low price points. They manage to do this by offering non-branded (or white-labelled) products as opposed to branded products. In the case of Dollar Tree where there is a $1 price point constraint, they adjust their pack sizes, if necessary, to ensure all their stock keeping units (“SKUs”) are below the $1 price point. Low price points do not necessarily mean “value for money” as items purchased from dollar stores are often more expensive on a per-kilogram or per-litre basis. – Poorer customers. Because of their focus on lower price points, it comes as no surprise that Dollar Tree and Dollar General focus on less affluent customers. Interestingly, the typical Dollar Tree customer is more affluent than the typical Dollar General customer despite the fact that Dollar Tree is constrained by a $1 price point. The reason for this is that Dollar Tree’s focus is on non-consumable items and therefore attracts suburban middle-income shoppers who are shopping around an occasion (like buying greeting cards for a birthday party, for example) while Dollar General attracts poorer people who are doing their everyday shopping. – Convenience. Dollar Tree and its rival Dollar General each have 15,000 stores on a consolidated basis. By contrast America’s largest retailer by revenue, Walmart, has “only” 4,700 stores. The reason for dollar stores having such large store networks is because a large part of their value proposition is proximity to their customers and this requires them to have denser networks of smaller stores. Dollar Tree stores are typically based in suburban areas and Family Dollar Stores are in rural areas. – Fill-in shops. Both their low price points as well as the smaller size of their stores means that dollar stores offer a more limited assortment of SKUs. The average dollar store carries 10,000 SKUs versus the typical Walmart which carries 90,000 SKUs. They are thus often used for fill-in shops when it is inconvenient for their customers to drive to their closest Walmart. Why are dollar stores good businesses? Regular readers will know that we have a preference for high quality businesses with one attribute of these types of companies being that they are less at risk from competition and disruption. High quality refers to the return on assets, the defensiveness of the business, the profit margin structure as well as the moat around the business. In the case of the dollar stores, we believe the following characteristics make their businesses high quality: – It is hard for new competitors to enter their catchment areas. This is due to the density of their store networks because the profit pool is simply not large enough to support an additional competitor. – Scale and sophisticated global supply chains. This is necessary for them to source all manner of items at the lowest possible prices. These are hard to replicate. – Digital disruption. This seems to be less of a risk for dollar stores than other types of retail businesses. The reason for this is twofold. Firstly, because they are used for fill-in shops they satisfy a need that cannot be anticipated far enough in advance to be addressed by online shopping. Secondly, because their customers are less affluent they are not prepared to pay a premium for the convenience of shopping online. – Free cash flow. In an average year, Dollar Tree manages to convert 81% of its Net Income into Free Cash Flow. The low reinvestment needs of the business as well as supplier terms enable this. – Return on invested capital (ROIC). Prior to the Family Dollar acquisition, Dollar Tree enjoyed ROIC of c.30% annually. Why do we own Dollar Tree but not Dollar General? We are not buyers of assets – even good assets – at any price. The reason why we own Dollar Tree as opposed to Dollar General comes down to price. Dollar Tree and Dollar General trade at multiples of 14.7X and 19.9X respectively on a blended forward basis (as at 31 March 2020). This is despite the fact that Family Dollar, which accounts for roughly half of Dollar Tree’s store base and revenues on a consolidated basis, makes no money. Should Family Dollar earn a fairer margin for a business of this type, Dollar Tree’s multiple would be half of its current multiple. We thus believe we are paying a fair (even a low) price for the Dollar Tree banner only and getting Family Dollar for free. The market is thus taking a very grim view of Family Dollar’s prospects. We are more optimistic. At the time Dollar Tree acquired Family Dollar, the market underestimated the length of time that it would take Dollar Tree management to turn an organization of this scale around. Until now, however, many improvements have been made at Family Dollar but they have yet to bear fruit. Firstly, while the number of Family Dollar stores has remained broadly flat, underlying this has been an elevated number of store closures which has been offset by an elevated number of new store roll-outs because management are trying to increase the number of Family Dollar stores within rural areas and decrease the number of stores within urban areas. Unfortunately, this has been very punitive on margins because store closure costs are expensed up front while new stores are initially margin dilutive because they take a while to reach mature trading densities. Secondly, by the time Dollar Tree reported its 3Q20 results, management had reformatted 1,460 (out of a total of 7,815) of its Family Dollar Stores. Similar to both store roll-out costs and store closure costs, store reformatting costs are also incurred upfront but the benefits take a while to flow. The reformatted stores have seen an increase in same-store sales post-reformatting of 10%, however, and there is no reason why the additional 1,000 stores which management aims to reformat in calendar 2020 should not see a similar uplift in same-store sales. Hindsight is a perfect science and it is easy to forget that Dollar Tree was not alone in thinking that Family Dollar would make a great acquisition even though the reality has not turned out to be so rosy. Dollar General was actually prepared to pay more for Family Dollar than Dollar Tree was, despite the fact that Dollar Tree eventually won out. What are we forecasting for Dollar Tree? For both the Dollar Tree banner as well as the Family Dollar banner we are forecasting low single digit increases in sales per annum. In the case of the Dollar Tree banner, this is primarily led by new store roll-outs. In the case of the Family Dollar banner, it is primarily led by same-store sales growth as there are no net new store additions planned for this banner. From a margin perspective we are forecasting flat margins at the Dollar Tree banner while we are forecasting for margins to expand at Family Dollar. This is due to increasing penetration of non-consumables and private label brands driving gross margin expansion, while increase in trading densities (sales per square metre) results in better absorption of selling, general and administration (“SGA”) costs. Finally, we believe Dollar Tree is a premium business and therefore think it deserves to trade at a higher multiple than the US market average (16X over the last century).Summary For many of you, we are the caretakers of a large portion of your global investments. We would like to use this opportunity to thank you for the trust you place in us, and emphasize how deeply committed we are to the responsibility you have placed in our hands. Despite the uncertainty that the next months will bring, we remain confident that we can achieve the objectives of all our funds and help you navigate through this difficult period, just as we have helped you navigate through the last 18 years. Please contact the team if you have queries regarding your investment in Flagship, or if you would like to speak to one of the portfolio managers. Our (Zoom) ‘door’ is open. We thank you for your continued support.
- [Quarterly Telescope Q4 2019](https://flagshipsa.com/quarterly-telescope-q4-2019/): Welcome to our latest QUARTERLY TELESCOPE. We hope these quarterlies provide you with greater insight into our thoughts on global assets, as well as how our global funds are being managed. In this quarter’s Telescope, Pieter takes us through the investment case for Japanese gaming company SquareEnix, a holding in Flagship’s global funds.
- [Quarterly Telescope Q3 2019](https://flagshipsa.com/quarterly-telescope-q3-2019/): Welcome to our QUARTERLY TELESCOPE. We hope these quarterlies provide you with greater insight into our thoughts on global assets, as well as how our global funds are being managed. In this quarter’s Telescope, Kyle updates us on some of the happenings globally and at Flagship, and also takes us through the investment case for DS Smith, a large holding in the Flagship Global Funds. Dear investor, The 3rd quarter of 2019 brought further excitement and apprehension to an already event-laden 2019. Political tensions continue to dominate the global narrative, reflected in the on-again off-again trade war between China and the US; the increase in the likelihood of a no-deal Brexit; and the continued political protests in Hong Kong. Now entering their seventh month, the protests are taking their toll on the city’s economy, with August retail sales registering a -23% fall – the steepest decline on record. As if all of this wasn’t enough, a Democrat-led process to impeach the US president was initiated on September 24th. Economically, during the 3rd quarter the Fed further eased already accommodative monetary policy and, at Flagship, we continue to scratch our heads at the end-game to miniscule interest rates (discussed in our Q2 ’19 Quarterly Telescope1). In South Africa, relative underperformance of local assets compared to global assets continued, with the JSE gaining 7% YTD versus 17% for the MSCI ACWI. A deteriorating economic and fiscal situation – accompanied by continued government inaction – was largely to blame. A government white paper on ending private healthcare, as well as rising support for the reintroduction of prescribed assets, has raised already high levels of investor concern. As a reminder, should asset prescription become policy, local pension funds will be forced to buy certain types of assets (mostly government and State Owned Enterprise bonds) regardless of their investment merit, allowing government to borrow money at meaningfully lower rates. In our view, reintroducing prescribed assets, last seen under the apartheid government in the 1980’s, will harm the progress that has been made since 1994 in opening up South Africa’s economy. Should the reality of prescription appear on our horizon, you can be certain Flagship’s asset allocation to the South African economy will be tailored accordingly. We are pleased to say that the political and economic ructions of the 3rd quarter have had very little impact on the companies we hold on your behalf. This is largely due to their robust business fundamentals that enable them to outperform through choppy environments; and to our valuation discipline that enables us to buy these businesses at a margin of safety. Due to our fundamental adherence to a long-term investment horizon, the bulk of the short-term news flow, heard or read, should have little or no bearing on our assessment of your investments. At Flagship The 3rd quarter has been a busy one at Flagship. We keenly anticipate the launch of our new fund, the Flagship Global Icon Fund, a global equity fund that will provide clients with 100% exposure to a collection of high quality, undervalued global stocks, many of which we also hold in our Flagship International Flexible and Flagship IP Worldwide Flexible Funds. The Flagship Global Icon Fund will offer both USD and ZAR entry points, easily accessible via Flagship’s office or on local and international investment platforms. We have also implemented strategic changes to the underlying assets of the Flagship IP Worldwide Flexible Fund of Funds. The intention of the change is to include a ‘basket’ of best-in-class, global equity funds, providing our investors with the following fund attributes:
- [Domestic Specialist Mandates](https://flagshipsa.com/domestic-specialist-mandates/): Our Domestic Specialist mandates offer investors two entry points: a Regulation 28 compliant Balanced Fund and a Flexible Value Fund that employs a deep value approach to equities. The Flexible Value Fund offers an actively managed strategy for long-term investors seeking a differentiated perspective.Flagship FR Flexible Value Fund Flagship FR Balanced Fund
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- [Quarterly Telescope Q2 2019](https://flagshipsa.com/quarterly-telescope-q2-2019/): Welcome to the first publication of our QUARTERLY TELESCOPE. We hope these quarterlies provide you with greater insight into our thoughts on global assets, as well as how our global funds are being managed. In this quarter’s brief, Pieter Hundersmarck explains how we use international research trips to source ideas for our funds, as well as outlining the business case for the largest equity holding in Flagship’s global funds: Reckitt Benckiser.
- [Quarterly Telescope](https://flagshipsa.com/quarterly-telescope/): Welcome to our latest QUARTERLY TELESCOPE. We hope these quarterlies provide you with greater insight into our thoughts on global assets as well as how your global assets are being managed.DOWNLOAD PDF
- [Our Investment Philosophy](https://flagshipsa.com/investment-philosophy/): Our goal at Flagship, first and foremost, is the protection of client capital in real terms, followed by generating inflation-beating returns. To achieve these goals, we manage equity-centric portfolios, which, given sufficiently meaningful periods, offer the best opportunity for success. As active managers, we believe that the presence of several behavioural biases, amongst a number of other factors, lead to markets being only semi-efficient. This creates alpha-generating opportunities over both the short and long term.To capitalize on these opportunities, we follow a flexible, unconstrained investment approach, which seeks to identify and take advantage of the best opportunities around the globe. We incorporate both bottom-up and top-down research when making investment decisions. Our style-agnostic approach is based on our belief that different macro environments will favour different investment styles. We utilise an active risk management process, designed to let our winners run for longer, cut our losses sooner and ultimately deliver through-the-cycle outperformance. This leads to well diversified portfolios which will not resemble the indices against which they are benchmarked.
- [Global Equity](https://flagshipsa.com/global-equity/): Our Global Equity strategy offers investors exposure to a diversified selection of high quality global equities. This unconstrained, dynamic strategy seeks to identify the most attractive investment opportunities.
- [Global Fund of Funds](https://flagshipsa.com/global-fund-of-funds/): Our Global Fund of Funds strategy offers investors a selection of curated, best in class global managers. The strategy has the flexibility to adjust equity exposure depending on valuation levels.
- [Global Flexible](https://flagshipsa.com/global-flexible/): Our Global Flexible strategy offers investors balanced exposure to international growth assets. Asset allocation is equity centric and is adjusted depending on valuation levels.
- [About Us](https://flagshipsa.com/about-us/): Flagship is an independently owned boutique asset manager with specialist global investment expertise and more than 25 years of investment heritage. Guided by intellectual humility, we apply a disciplined, repeatable investment process to help clients look beyond uncertainty and achieve superior long-term outcomes.We believe successful investing is about consistently making better investment decisions. By looking beyond short-term market noise, challenging consensus, considering different perspectives and remaining open to new evidence, we continually refine our thinking and work together to improve the probability of superior long-term outcomes for our clients.
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