Director's Cut: Piet Viljoen — War, Bitcoin and why SA stocks may be the world’s best bargain

High-level thesis

• Don’t try to forecast geopolitical events. Prepare for uncertainty by building a diversified portfolio of assets that respond differently to different shocks.
• Invest primarily on valuation: seek undervalued assets (stocks or asset classes) and expect reversion to normal multiples rather than banking on political or regime change.
• Use small, disciplined allocations to newer or riskier “real/hard” assets (for example, Bitcoin) where the odds of large structural change are non‑negligible.

Assets, sectors and instruments mentioned

• Bitcoin / cryptocurrencies (both technology exposure and a “hard”/transportable asset)
• Energy assets (high exposure in the fund; cited as cheap and protective vs geopolitical risk)
• South African listed equities (JSE; described as under‑owned and deeply undervalued)
• Tel Aviv / Israeli equities (recent market performance cited)
• Gold and other precious metals (hard assets)
• Land (real asset)
• Royalty companies (example: Texas Pacific Land — TPL; favorable operating margins and royalty business model)
• Government bonds and sovereign debt (noted as counterparty liabilities vs hard assets)
• Equities (general)
• Cash (many investors holding elevated cash balances)
• Mentioned fund vehicles: Merchant West Value Fund (manager), a worldwide flexible fund nicknamed “the cockroach”

Methodology / framework

• Start from the assumption you cannot forecast geopolitics; prepare instead.
• Build diversification across asset classes that have different responses to shocks.
• Identify assets that are:
  • Undervalued on fundamentals/valuation multiples
  • Provide protection in particular scenarios (e.g., energy for supply shocks; hard assets for country risk)
  • Uncorrelated or low correlation to global markets
• Allocate a portion of the portfolio to emergent technologies/structures (crypto/blockchain) in line with the perceived probability that they materially change finance.
• Prefer primary sources and deep research:
  • Read annual reports and non‑consensus research (Substack, specialist managers) rather than mainstream sell‑side research.
• Avoid making investment decisions driven by the latest opinions or media narratives.

Key numbers, timelines and metrics

• Bitcoin: reported as up ~7% “last night” (in the context of Iran‑related flows).
• Tel Aviv market: cited as having risen “100% or 175%” (statement from another guest).
• South African valuation example: trading at “PS of 5, 6 and 7” and deserving “PS of 10, 11, 12” (speaker’s shorthand for current vs normal multiples).
• Texas Pacific Land: operating margins cited at ~70–80% (example of a high‑margin royalty/land business).
• Fund activity: manager reported no trades for 10 days; portfolio already had high exposure to energy prior to recent events.
• Political/business event: referenced an incident at a farm/business involving ~50 parliamentarians/police — used to highlight political risk impacting companies.

Macro / thematic points

• Geopolitical unrest (Middle East tensions, Iran) increases demand for transportable hard assets; historically seen in Venezuela, Iran and in South Africa during rand weakness.
• Re‑industrialization and supply‑chain reshoring (for example, US policy) increase long‑term demand for natural resources — a positive structural backdrop for resource‑rich countries like South Africa.
• South Africa is under‑owned by global investors and may offer potentially uncorrelated returns given its resource endowment despite political/governance failures.
• Political risk in South Africa remains high; the manager is not betting on imminent regime change and does not base the valuation thesis on political improvements.

Specific investment ideas / examples

• Continue to find value in South African listed stocks (valuation‑driven).
• Hold energy assets as insurance against geopolitical supply shocks.
• Small, deliberate exposure to Bitcoin/crypto as:
  • a potential long‑term technology play if blockchain changes financial rails, and
  • a hard/transportable asset for capital preservation in crisis countries.
• Consider real‑asset and royalty business models in the US (example: Texas Pacific Land) for uncorrelated returns and high margins.
• Prefer non‑consensus, fundamental research sources (annual reports, specialist funds like Horizon Kinetics) for idea generation.

Risk management / cautions

• Don’t invest based on short‑term opinions, media sensationalism, or geopolitical forecasts.
• Keep crypto allocations modest; do not concentrate portfolio risk there.
• Recognize political and operational risks (for example, state actions against companies) when investing domestically; valuation is the primary margin of safety.
• Diversify across asset classes to prepare for multiple possible outcomes.

Research / information sources referenced

• Horizon Kinetics (source of the idea on Texas Pacific Land)
• Non‑consensus research platforms (Substack)
• Annual reports (preferred primary reading)
• Avoid heavy reliance on sell‑side broker research for contrarian/value ideas

Disclosures / caveats

• Manager explicitly avoids investing based on his or others’ geopolitical opinions.
• He would not put all money into a single country or asset class even if he believes assets are cheap (diversification and position sizing).
• No explicit “not financial advice” line in the transcript, but there are repeated cautions about not acting on opinions/forecasts.

Presenters / people referenced

• Piet Viljoen (“Pete”) — founder of ReCM and portfolio manager of Merchant West Value Fund
• Alec Hogg — interviewer (BusinessLIVE / businessnews)
• S. Jacobs — comment cited on Tel Aviv market
• Neil Ferguson — historian referenced re: Bitcoin comment
• Enoch Godongwana — referenced in discussion on South African politics
• Sean Hudson — interview referenced about the farm incident
• Horizon Kinetics — investment firm cited as a research source

Notable quoted shorthands from the discussion: - “PS of 5, 6 and 7” vs “PS of 10, 11, 12” (valuation shorthand) - Bitcoin “up ~7% last night” - Fund nicknamed “the cockroach”