In 1951, a young Warren Buffett asked his girlfriend’s father for permission to marry. Instead of congratulations, he got a lecture. “Warren, you’re going to fail. The Democrats are in. They’re all communists. The country’s economy will collapse.”
Imagine if Buffett had listened to that doom-and-gloom. He might never have bought his first stock. Never built Berkshire Hathaway. Never compounded wealth over seven decades. The lesson Buffett wants investors to learn: Don’t let politics run your portfolio!
South Africa proves the Buffett point…
We’ve seen this movie before:
1. 2017 Ramaphoria: When Zuma resigned and Ramaphosa took over, the rand rallied from R13.50s to R11.50s. Banks and retailers surged. For a moment, it looked like SA Inc. was back. Within months, growth disappointed and the rand slid back to R13.50. The optimism fizzled.
2. 2024 GNU optimism: The rand strengthened, JSE stocks lifted, confidence soared. But once again, growth and logistics bottlenecks reminded us that political headlines don’t fix fundamentals.
Short bursts of political euphoria rarely last. But in those swings lie the best opportunities for small-cap investors.
Why small cap stocks are different…
Unlike large caps that move with global capital flows and interest from big funds, small caps live in the shadows. They’re ignored when fear dominates, and they get dumped when politics look messy.
That’s where patient investors can step in.
For example, when Ramaphoria fizzled, small developers and retailers that had run hard sold off brutally – yet some of those businesses went on to double earnings and share prices over the next few years.
Small caps swing harder than big names – which means political noise can hand you shares at bargain-bin prices.
Where politics does matter…
Of course, politics and investing are linked, but not always in the way politicians like to claim.
Leaders often take credit for stock market rallies or economic growth, yet markets are usually responding to drivers like interest rates, global demand, and company earnings rather than who sits in office.
Politicians also watch markets closely, hoping for validation of their policies, but the real impact of political decisions often takes years to show. The truth is simple: politics can affect markets, but it’s usually in the long run. That means a new president, cabinet reshuffle, or even a fiery speech shouldn’t be a trigger for you to buy or sell. Reacting to those headlines is just guesswork.
Instead, you should focus on building a long-term picture of government policy – the big changes government is planning, the areas it wants to focus on, and then think about how those decisions filter down into the economy and the different industries we can invest in.
The trick is to watch the bigger structural shifts such as:
• Energy policy – good for construction firms (Aveng, Stefanutti), and component suppliers.
• Infrastructure spending – lifts cement (PPC, Sephaku), logistics (Santova), and engineering companies.
• Housing demand – supports small caps developers like Visual, Calgro and Balwin and security company, Trellidor.
Markets don’t vote
While government policy shapes the environment, great small businesses adapt and thrive regardless. They’re nimble. They don’t wait for politicians.
So, when the headlines scream about a “historic moment” and markets swing wildly, resist the urge to chase the excitement or panic at the fear. Volatility driven by politics is often the moment to act, not retreat. That’s when quality small caps get thrown out with the noise.
Buffett’s lesson still stands. Ignore the politics, focus on the business, buy well and give compounding time to work. Because politics is temporary — but businesses that execute can last a lifetime.
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