Australia — or specifically the Australian Securities Exchange (ASX) — has never really blipped on local investors’ radars. Perhaps there is an element of wariness, with so many locally listed companies having headed Down Under with big chequebooks and misplaced enthusiasm — only to retreat several years later, much poorer for the experience.
But reading the Australian papers and talking to investors, it’s apparent how, despite Australia being a world away from South Africa, some things seem universal, such as significant election issues: the cost of living, high interest rates, immigration levels and housing costs. The incumbent Labor Party has been re-elected and, much like Canada the week before, the opposition party has seemingly suffered a Trump-induced backlash to the right side of politics.
After talking to numerous investors, the FM has profiled some ASX stocks South African investors might consider holding in their portfolios.
The first two are similar business models from different industries, with excellent track records. The first is Kelly+Partners Group Holdings (KPG), led by founder Brett Kelly. The business has been buying out accounting firms across Australia and recently expanded into the US. It focuses on servicing SMEs as well as high net worth individuals and families by providing taxation, accounting and audit services. It has also expanded into some additional advisory services. Kelly is a big Warren Buffett fan who drives the business on many Buffett principles, including having an ownership manual for KPG shareholders. Lawrence Cunningham, who has written several books on Buffett and value- and quality-style investing, sits on the KPG board. He is also on the board of Markel and Constellation Software.
The second business is AUB Group, which has been consolidating the retail and wholesale insurance broking market in Australia and New Zealand since the mid-1980s. Today it has almost 600 locations across these two countries, which it owns in various percentages. A key part of the model has been that it has been happy to hold between 51% and 100% of the equity of these businesses. In many cases, it has moved from 51% to 100% over several years as various partners retire or exit — but AUB is in no rush to move to 100% ownership. The group provides centralised support services to the ever-expanding network, allowing partners to focus on running their own businesses. These are 90% focused on commercial insurance, with the remaining 10% on personal lines. The company writes A$10bn in gross written premium annually from across its network.
Washington H Soul Pattinson & Company has never missed a dividend payment to its shareholders since listing in 1903
Speaking of Buffett, he announced at the weekend that he is stepping down as CEO of Berkshire Hathaway and will hand over to Greg Abel at the end of 2025. It would then be remiss not to mention the Australian version of Berkshire in some sense. Washington H Soul Pattinson & Co has evolved from owning and operating pharmacies into a diversified investment house investing across various industries and asset classes, including listed equity, private equity, credit and property.
It takes a long-term approach to investing, delivering superior returns by creating capital growth and paying regular dividends. The company has never missed a dividend payment to its shareholders since listing in 1903. It has delivered increasing dividends annually since 2000, giving shareholders a total return of 13% a year annualised for the past quarter-century, besting the main ASX index by 4.5% a year. The Milner family primarily controls the company.
The JSE is not blessed with exposure to biotech companies, so calling out the world’s second-largest biotech company, CSL, makes sense. The business has had a tough few years since Covid disrupted its blood plasma products business. Concerns over the vaccine policies of Robert F Kennedy Jr and the Trump administration and a misstep with an acquisition a few years ago have combined to see it trade sideways. However, it remains a high-quality business with some world-leading products that it sells and distributes globally; for long-term holders, it is still an attractive proposition.
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The final stock is Catapult Group International (CAT), which has had a somewhat troubled history since listing just more than a decade ago but seems to be finally delivering on the promise it came to market with. CAT is a global sports data and analytics company that provides sporting teams and athletes with detailed, real-time data and analytics to optimise performance, avoid injury and improve return to play.
CAT provides the GPS units you see stuck to the backs of athletes, relaying all sorts of data back to the coaches, who use its platform to analyse the data. Today, CAT’s products and solutions are used by more than 4,000 sports teams and athletes across more than 40 sports and 100 countries.
The ASX offers a vast array of stocks for South African investors, with about 2,000 individual stocks compared with just more than 300 on the JSE. The ASX is also home to a dizzying array of ETFs and their predecessors, listed investment companies, offering a plethora of exchange-listed managed portfolios and products. Combined, they represent more than 400 investment options covering every asset class and investment style you can think of.
Perhaps it’s time for local investors to start researching the sprawling Australian market.
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