Many South Africans find it hard to believe that South Africa may have finally turned the corner after a decade of flatlining growth.
Marius Hugo, an economist by training and a director at MH Capital, is not one of those.
“We’ve been underweight offshore investments and will continue backing our local companies,” he says. “The ZAR has strengthened impressively over the last year, so this was the right call. We remain bullish about SA.”
It’s not that the economy is blowing the lights out just yet, but there are some encouraging signs of growth ahead.
“The economy is coming off a low base, and some of the key bottlenecks on growth – such as Transnet and Eskom – are on the mend. We must acknowledge that. Gold and platinum prices are doing spectacularly, and there are improvements on the political front with better governance and political cooperation.”
SA companies have amassed a huge pile of cash over the last decade and paid down debt, so they are perfectly poised to benefit from any uptick in growth.
Hugo co-manages MH Capital’s JSE-listed Actively Managed Certificate (AMC) alongside Sebastian van Wyk, with a focus on relatively small, well-managed companies with little or no debt, and trading below fair value.
These are companies that seldom attract interest from the large investment houses due to their small market caps, but this is where some of the most explosive stocks are to be found.
An AMC is a listed structured investment product that tracks a portfolio of assets, much like an exchange-traded fund (ETF) but with active management.
MH Capital’s AMC (code AMC 018), underwritten by Standard Bank, is administered and priced by the bank, which also acts as the market maker.
This setup offers several advantages over traditional managed share portfolios. Notably, no capital gains tax (CGT) is triggered when shares within the portfolio are sold. CGT only applies when investors sell the AMC itself on the JSE, which leaves more funds available for compounded growth.
Additionally, AMCs have no restrictions on the number of holdings, enabling a focused, high-conviction portfolio that mimics direct share management. Offshore shares can be integrated seamlessly using allocations like Standard Bank’s, and trading is straightforward: all you need is a stockbroker account to buy or sell.
MH Capital’s AMC, capped at R500 million to maintain agility, exemplifies this approach.
Hugo emphasises that smaller funds have an edge in today’s fast-changing investment landscape, where information is readily available to nimble players.
“The investment world is evolving rapidly. We find opportunities in the small and mid-cap space, which are not available to larger funds.”
The portfolio is deliberately concentrated, limited to about 12 companies, with a significant cash allocation of just over 20%. Drawing inspiration from Warren Buffett, Hugo calls cash “oxygen,” providing flexibility to seize opportunities.
Top performers
Among its top performers are Purple Group, Stadio, and Rhodes Food, all small-cap gems that highlight MH Capital’s strategy of backing undervalued, high-growth locals.
Stadio, a private education provider, was acquired from around R4 per share and has surged to R13. Hugo attributes this to growing demand for tertiary education in SA. Despite its current premium valuation, if prices dip he sees potential for further investment.
Hugo says the fund started buying Purple Group at around R1.30 and it has almost doubled in price since then.
What makes Purple interesting is its potential to disrupt financial services in SA. Hugo predicts seismic shifts driven by AI and technology, rendering traditional asset management obsolete. “Managers are doing the same as 20-30 years ago,” he warns.
“Purple has been innovative in the way they have introduced products that democratise access to the JSE, property, and other investments, targeting younger demographics.”
As AI enables self-help financial planning, where retirees could query bots on portfolios and get accurate legal and financial advice, fees will plummet. This benefits disruptors like Purple.
Rhodes Food, recently acquired by Premier, was snapped up by MH Capital at a low multiple around R15 and is now trading at R25. The trigger? Strong brands, an improving balance sheet, and a perfect strategic fit with Premier, says Hugo.
Rhodes was acquired by Premier in October 2025 and is awaiting regulatory clearance by the Competition Tribunal. Rhodes shareholders will receive one Premier ordinary share for every seven RFG ordinary shares held once the deal gets regulatory clearance.
Treading carefully offshore
When it comes to offshore investment, MH Capital treads carefully.
Its only direct holding is Berkshire Hathaway, complemented by indirect plays like Richemont and Naspers.
“We’ve been underweight offshore and will continue backing our local companies,” Hugo explains.
“Our high conviction on local shares is driven by attractive pricing as well as a recovery in our economy.”
The rand may overshoot further short term, driven by precious metals, but a good case can be made that it is now relatively overdone and due for correction.
Hugo’s philosophy is simple and aligns with that of Warren Buffett. “Find a good quality company at a good price.” Over three decades, he’s never lost money this way, favouring firms with strong balance sheets and disqualifying many without ample cash.
For investors, MH Capital’s AMC 018 listed vehicle offers an accessible vehicle to ride this wave, blending tax efficiency, focus, and optimism in SA’s revival.
For enquiries, please email info@mhcapital.org.za.
Brought to you by MH Capital.
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