At Livewire, we’re privileged to have access to some of the best minds in Australia’s funds management industry.
Each year we work with and interview hundreds of fund managers, analysts, brokers and editors to create the highest quality content possible for our readers. We love this job partly because during this process, we get ‘light bulb’ moments where something they say strikes a strong chord with us.
I asked the team to reflect on their conversations with our contributors over 2019 and come up with those dashes of magic, the pearls of wisdom – those few words that summarise a thesis that takes a lifetime to build – from the pros to help all of us become better investors.
So just as legendary American investor Warren Buffett’s saying “be fearful when others are greedy and greedy when others are fearful” has become a universally acclaimed gem, here are a selection of homemade crackers brought to you by the Livewire team and why we loved them.
Top picks from James Marlay
"Investors are very focused at the moment on what can go right, what's the upside, focussed on returns. They're not really focussed on the risks they are taking." - Paul Skamvougeras, Perpetual Investments
In our Fund Manager Q&A Skamvougeras pointed out that equity returns in 2019 are going to be double the long run average, and that's a pretty good result given how long this market has been running. Over the years one observation I've made is that investors extrapolate the current environment into the future. I don't necessarily think markets are about to fall over but I do think that people are skimming over risk and this quote was a good reminder to take some time out and get a sense of how much risk you're taking.
"With the right founders, investors get management teams who are long term thinkers with aligned interests. They establish an authentic corporate culture with lots of integrity, have a nimble decision-making process, and possess the ability to innovate and re-invent their business. We have also observed that founder-led companies tend to manage industry and economic cycles better." - Qiao Ma, Cooper Investors
Revelations around the behaviour of senior management team and boards in some of Australia's largest companies (i.e. the banks) has blown me away. The alignment between the people running these businesses and their customers and shareholders is completely out of whack and it stinks. The quote above by Qiao Ma from ‘The difference between a trader and an investor’ serves as a good reminder of how founder led companies show the way when it comes to long term decision making rather than focussing on short term bonuses that serve the individual.
Top picks from Alex Cowie
“Your assets were growing, and you were living very comfortably, and that's what retirement was and what we grew up probably expecting it to be: that we could at some point have no risk and a decent income. But, of course, what has happened is that income has diminished. The assumption that a millionaire will be able to live off the income they earn on their capital is no longer true. The decades of 5-10% risk-free returns are over." - Marcus Padley, Marcus Today
This bombshell was at the core of our ‘Penniless at 100’ wire by Marcus Padley, the most liked piece of content on Livewire in 2019. The heart of his argument is this: in a zero rate world, retirees would need to explore the concept of selling down their assets to live off the proceeds, given income is fast disappearing.
The concept resonated so strongly with our audience that I got Marcus into our studio to elaborate on this theme in an interview (watch below).
“I'm an investor who does what others don't, won't or can't, I'm the person buying the stocks that will make you feel marginally sick. For our income funds, you should look at them and feel a little bit uncomfortable. For our recovery funds, you should feel really queasy. If I'm not doing that, I'm not making you money. Psychologically, value investing is doing the thing that sucks”. – Nick Kirrage, Schroders Australia
I had simply asked Nick in an interview how he would describe his job to someone at a dinner party, and he gave this absolutely unforgettable response! I remember thinking ‘Wow! What a vivid description... Shame I’ll never be able to publish that’. No one blocked it though, and I’m glad, as the quote speaks frankly to the importance of absolute dedication to the investment process, even when the emotional response it creates is deeply negative. I know most of my best investments were those that started with deep discomfort!
Top picks from Bella Kidman
"In case you didn't know, that was Daft Punk, 'Around the world'" - Matthew Kidman, Centennial Asset Management
A classic Matthew Kidman line. This one was made at Livewire Live 2019 when he interviewed Magellan’s Hamish Douglass and Platinum’s Andrew Clifford, and it spoke to me because investors really do need to look globally for the best investment opportunities.
"I was at this Wesfarmers dinner, this guy sits next to me and I started talking to him. We started talking about politics, we started talking about corporates, and then we started having heated arguments about stocks and I didn't know who it was. But it was Greg Perry… a total master.” - Catherine Allfrey, WaveStone Capital
In ‘Catherine Allfrey: Look over the horizon’, Catherine recalls meeting Greg, who helped turn Colonial First State into one of Australia’s largest fund managers and is regarded as one of the country’s master stock pickers. This quote tells the story of a young investor who is keen and passionate and was in the right place at the right time; after her chance meeting, Catherine was recruited by Greg, who taught her how to find growth stocks at a reasonable price. I like to believe that if you are confident, intelligent and passionate, good things will come your way. For Catherine, this was a formative moment in her career.
Ed's note: And speaking of keen and passionate, Bella managed to score her own interview with Catherine! See 'Catherine Allfrey talks winners, losers and white swans'.
Top picks from Patrick Poke
"It was announced last week that Zip would be going into the ASX300, there will be a lot of passive investors buying next week as we’re selling... I often liken it to the example of being a hunter. The passive investors, they’re like animals. You know they have to come to the waterhole twice a day. We just lie in the bushes and wait for them to come and pick them off when they come.” – Phil King, Regal Funds
When I was asked to pick out a favourite quote of the year, the first thing my mind flashed back to was the ‘The Good, the Bad, and the Ugly’ panel from Livewire Live 2019. Firstly, because it was entertaining; Phil got a good laugh from the entire room at the time when he said it. But it wasn’t just entertaining, it was insightful too. It goes to show that even in a world where algorithms and passive investors are taking over, there are opportunities for shrewd investors to take advantage.
“In matters of finance, one has to be patient. Big money returns on stocks don’t happen quickly. You need to sit and be patient and let a good story unfold. And you shouldn’t be afraid – as your confidence level rises, and so does the stock price – you shouldn’t be afraid to add to that investment.” – Ben Griffiths, Eley Griffiths
This quote really speaks to me personally. Working in financial media, I get bombarded with stock ideas and macro views on a daily basis. It’s important to be patient, stick with your convictions, and not jump on every bandwagon that comes along. His final point was also a good reminder for me as I have a habit of ‘watering my weeds and cutting my flowers’.
Top pick from Tom McKay
"We have a motto at home... ‘Sometimes you win, sometimes you learn.’ I think that’s a really important philosophy to live by whether it’s life generally or investing. You’re not going to be able to get it right all the time, so you’ve really got to learn." - Michelle Lopez , Aberdeen Standard Investments
Most investors talk about how important it is to have a well-defined investment philosophy, plan and process but you don’t hear many talk about the importance of reflection, which Michelle highlights in ‘The five pillars of a quality stock’. In investing mistakes are guaranteed so I think taking the time to consider what went wrong and why is a powerful way to keep evolving.
My top picks
“No-one’s born feeling great jumping out of a plane – you’ve got to train yourself to do that. And the same way to be a great investor - you’ve got to train yourself to be a contrarian and do the opposite of what most of the market is doing,” - Kate Howitt, Fidelity International
We often hear from fund managers that investors should buy quality stocks or companies they have high conviction in on a dip but of course it's easier said than done. When Kate expressed this adage in her way, it hit my head. With that specific point she made – “train yourself” - I realised that you need to proactively commit to a behaviour change if you want to become a certain type of investor. Since then I’ve been practicing and building the courage to buy quality stocks when the market is tanking.
“I believe it’s in Trump’s interest to have an ongoing fight with China leading into the 2020 presidential elections so he can demonstrate to his base of voters that he’s tough on China. So keeping the dispute going but also keeping the economy going is in the President’s interest. He ups the ante on the dispute of being tough on China but when the stock market falls he reels back because the stock market is a barometer of economic performance and typically you only win elections with a strong economy,” - Hamish Douglass, Magellan Asset Management Limited
This is a thought-provoking view from Hamish about the constant seesaw we witness in markets as a result of US-China trade tensions. As Hamish suggests, Trump wants to show voters he’s fighting China to protect U.S. jobs but when trade tension spills over into markets, he’ll concede ground on trade talks to put a floor on volatility.
What was your top quote from 2019?
We hope you enjoyed reading these gems of wisdom the team took out from their conversations, and we'd love to know any great investing quotes you came across over the last year too. Let us know via the comments section below.
The Phil King quote is priceless
The best information I've ever heard or read, and, I've just turned 80, was from Patrick Poke's interview with Robert Milner. An absolute masterpiece. I often quote from it. Cheers, Eric Wells
Phil King quote smashes it for me