The Rules of Investing

A hated sector that Ben Graham would love

Michael Goldberg and the team at Collins St Value Fund know a thing or two about making money off unloved and out of favour stocks and sectors. Their investments in uranium and a then-unloved pharmaceutical stock (among others) have helped them outperform the ASX 200 by over 8% per annum in the 5 years to 30 June.
With both of these investments having seen some outstanding returns in recent years, the obvious question is where to look next? In this episode of The Rules of Investing podcast, he addresses exactly this question. His answer is unlikely to be popular among investors, but isn’t that the point? Tune in below and you’ll also hear about the ‘superinvestors’ he’s learned the most from, and he tells us about a founder-led company with outstanding prospects for growth. 

John Sevior’s simple principles for investment success

The early 90’s was an interesting time. The internet was taking off, Australia was having the ‘recession it had to have’, and Perpetual was a hotbed of Australian investing talent. A host of great investors either started or furthered their careers at the firm around this time, with many of them later launching their own boutiques. Among them was John Sevior, who along with David Cooper, founded Airlie Funds Management in 2012.
John believes the success of the firm was largely due to it being a group of like-minded people who knew the limits of their knowledge. But most of all, they always stuck to a set of simple – but not always easy – investment principles.
In this episode of The Rules of Investing podcast, John explains those simple principles that have guided his investments and how they’ve evolved over the years. He also tells us how investing first piqued his interest, and we take a deep dive into two high quality, underappreciated Australia retailers.

Value, growth... Why not both? An interview with Alex Waislitz.

When Alex Waislitz started his private investment company, Thorney Investment Group, back in 1991, he was a dyed-in-the-wool value investor. Having learned the craft from the legendary entrepreneur Robert Holmes à Court, who was Australia’s first billionaire, his focus was on being a thorn (hence, ‘Thorney’) in the side of “sleepy” management teams. This approach helped him unlock hidden value and underappreciated assets and propelled him to the realms of the AFR Rich List.
But rather than becoming stuck in his ways, in recent years, Waislitz has expanded his range of skills. After developing an interest in innovative growth companies, he launched Thorney Technologies in 2016, which invests in companies across the technology lifecycle. In FY21, it was one of the best performing LICs on the ASX, with share price appreciation north of 65%.
In this special episode of The Rules of Investing, we hear about the formative years of his investment career and how he developed the strategy that's been so successful, how he's taking a 'picks and shovels' approach to investing in digital currencies, and he tells us about two Aussie small caps - an undervalued turnaround, and an innovative company with a large addressable market.

How Harley Grosser turned $100k into $800k in 4 years

At just 23 years’ old, Harley Grosser did what many of us only ever dream of and founded his company, Capital H Management. At the time, he had just $50,000 of his own savings, and $50,000 from his grandparents. Over the next four years, he grew that money to $800,000 – forcing his grandmother off the aged pension in the process!
He achieved these returns through a combination of taking concreated positions, investing in materially undervalued small and microcaps, and looking for catalysts to help realise the value in underappreciated assets.
In this episode, we hear about the beginnings of Capital H Management, he explains how he tracks down microcap opportunities, and he tells us about a company going through significant change that the market has yet to fully appreciate.
 

How to avoid portfolio bombs

The allure of finding a big winner is difficult to resist for most equity investors. After all, we’re doing it to make money! However, there’s just as much (if not more) benefit from avoiding losers as there is from picking winners. Or as Warren Buffett has famously put it: "Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.”
Simple maths supports this hypothesis too – a 50% loss requires a 100% gain just to get back to breakeven.
This is especially true in the world of small caps, where Katie Hudson from Yarra Capital operates.
“When they go wrong in small companies, they go wrong in a big way. It’s not uncommon to see a 50% reduction in the share price on the back of a company having a misstep.”
In this episode of The Rules of Investing podcast, Katie share some strategies for avoiding portfolio bombs. She also tells us how she exploits inefficiencies in the markets to produce outsized returns, and shares an Aussie small cap that markets are underestimating.

Peter Morgan: The best asset I've ever bought

Peter Morgan is one of the most accomplished investors in Australia. While he might not be a 'household name' these days, ask anyone who's been around the industry more than 10 or 15 years and they'll likely tell you how he helped build Perpetual from an obscure company managing $70 million worth of perpetual trusts (hence the name) to a $10 billion giant of the Australian funds management industry. He worked alongside investors like Anton Tagliaferro, John Murray, John Sevior, and Matt Williams as they all made names for themselves in the industry.
After leaving Perpetual in the early 2000s, he founded 452 Capital, which went on to become one of Australia's most successful boutiques. Then in 2009, he abruptly left the industry after being diagnosed with a rare and deadly form of brain cancer - a diagnosis that was later shown to be incorrect, but not before a round of chemo.
This experience left him with an entirely new perspective on life, one that valued experiences and memories over gathering an ever-larger pool of assets. Throughout all this, he says the best thing he's ever bought is his dog, Blaze - $300 well spent indeed!
In this episode of The Rules of Investing podcast, we delve into his incredible story, hear how he manages assets differently now as a private investor, and hear some of his views on markets and stocks today. 

How to lower your risk and maximise returns

Small caps are often thought of as being high risk, but that doesn’t have to be the case. With the right approach, it’s possible to maintain a moderate level of risk, while still producing outstanding returns.
This is exactly the approach that Richard Ivers, Portfolio Manager at Prime Value, takes in managing the Emerging Opportunities Fund. By focusing on high quality businesses with relatively few risks and strong competitive positions, he’s managed to outperform the market in 87% of months that it fell.
“A shorthand method for working out quality is that if you can work out where the earnings will be and have a high level of certainty on where they'll be in three to five years, typically, that means that it's a quality business. Such a business will be able to withstand all the pressures and issues that may come at it.”
In this episode of The Rules of Investing podcast, he explains how his experience in the corporate world helps inform his investment decisions, we discuss a range of Australian companies across the finance, media, and beverage industries, and he details his low-risk approach to Aussie small cap investing.

The big picture view on Aussie equities

In the under-researched and often illiquid world of small and mid-caps, stocks are largely driven by individual factors. If a company’s product or service succeeds and earnings improve, the stock price usually follows. But, as Matthew Haupt, Lead Portfolio Manager at WAM Leaders explains in the latest episode of The Rules of Investing, in the world of large caps, where stocks are heavily researched and traded by professionals, macro factors play a much larger role.
“Given the breadth of the revenues of these bigger companies and the slower growth rates, the macro factors are more of a driver.”
In this episode, he tells us how he uses macro analysis to help inform the stock picking decisions at WAM Leaders, we hear his views on a range of key ASX stocks and sectors, and he share his take on Jeremy Grantham’s prediction of a bubble in US equities.