When I left my last firm just before the GFC I had a non-compete associated with the sale of the equity as I was a major shareholder. For the first time in my career I took some time off. I travelled overseas and spent some time in Madrid, Spain. I did some work as a bicycle mechanic and found it to be a good break, but soon enough I was itching to get back to Australia and start investing again.
Initially I just invested my own funds along with some family and friends money. In that period post the GFC I made some amazing investments in businesses like Credit Corp (CCP) at 30 cents, Dominos Pizza (DMP), RHG (RHG) and Silver Chef (SIV) to name a few. We made spectacular returns from these investments over the next few years, which was really a once in a lifetime opportunity.
"Things went along well but I came to the realisation that I didn’t want to be a shopkeeper without a shop..."
During that period I also decided I would set up an online business selling bicycle jerseys as I was racing bikes at the time and I thought it would be a good little passive investment I could be involved with. Things went along well but I came to the realisation that I didn’t want to be a shopkeeper without a shop, in an industry with no barriers to entry with a product that was not significantly differentiated from our competitors and which was subject to the whims of fashion.
Having only invested a small amount of capital in building a website and ordering some product from China, I gave my half of the business to my partner in the business. He is still operating that business and has managed to be able to turn from a hobby into a profitable business, but it is a small scale business and probably always will be.
I realised what I had done was to critically assess my own investment as I would for any other investment and came to the conclusion that it was a low-quality business without pricing power, no barriers to entry, without a differentiated product. It was an important lesson, if I had wanted or been passionate about being a retailer I would have chosen a career being a retailer.
I like riding bikes but I’ll keep the bike riding to the weekends and keep it as a hobby and stick to investing in quality businesses with good business models or where the business is significantly undervalued.
Michael has over 17 years experience in financial markets and over 15 years experience as a portfolio manager and director of several boutique investment management firms. As one of Australia’s most experienced small cap fund managers, Michael was...
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