Meet Tom: The farmer reaping the rewards of investing
During the day, Tom is a fifth-generation farmer, working on the land he inherited from his forebears, raising sheep, fat lambs, cattle and tending to a few crops. By night, he's an avid investor.
While others may relax in front of the TV at the end of the day, Tom unwinds by reading about some of his favourite stocks. He scours Livewire's pages every day to see what "the pros" are saying about markets, and follows the activities of company directors and short-sellers as key signs to know when to sell.
But investing is a relatively new pursuit for Tom, having started in 2014 when he was 58 years old. It hasn't all been smooth sailing (and there have been some painful investments along the way - namely, an investment in the now bust Blue Sky). But now he's well on his way to saving a few million so he can step away from the farm and hand it over to the next generation, just like those that came before him.
In this Meet the Investor profile, Tom candidly shares some of the highs and lows of his investment journey. He also gives you access to the top five positions in his portfolio, as well as the stocks that have driven the majority of his returns over the past seven years.
Livewire investor profile
Employment status: Self-employed
Years investing: 7 years
Investment goals: To fund retirement
Products used: Australian shares
Biggest portfolio holding: CSL (ASX: CSL)
How old are you and how long have you been investing?
I just turned 65. I'm a fifth-generation farmer and my wife is a school teacher. Our farm is a fair way out west in New South Wales. We have sheep, fat lambs, some cattle and a little bit of crop. We basically combined money from the farm with my wife's super from teaching to form a self-managed super fund in 2014. I've been managing and running that ever since. Because I run my own business, I've always been aware of business and been interested in the share market. But to be honest, before 2014, I didn't own any shares at all.
What is your objective from your investing? What is your appetite for risk? Are you still working?
We would like to build up our SMSF so that we could be financially independent of the farm and hand it over to the next generation. I take risks now and again, but never too big. I add to my positions if they start to go up, and I sell if they drop 20%, no exceptions (unless the whole market is down).
I turned 65 a couple of days before Christmas. I don't feel 65 and don't want to be 65. But I am. I'm pretty happy with where we are at the moment, I have three kids and six grandkids. I don't really want to have a million-dollar beach house and all that sort of stuff. I'm pretty happy with where I am and with what I do. Farmers don't make great retirees. I have always been active and busy. I want to keep working until I can't.
How would you describe your strategy?
Generally, I buy and hold. I don't like to have more than about 7% of my portfolio in any one share. Growth shares are higher risk, as we all know. I usually start pretty small and if they move up 20%, I'll buy some more and if they keep moving up and I get a good vibe about them, I'll probably keep buying them till I build my position up. An example of that would be Novonix (ASX: NVX). By return, it would be our best share at the moment. And that's one of our biggest holdings, but most of that's from how much it's gone up.
I found selling hard when I first started, but I learned pretty quick. You are better off getting out and moving on and just cop-it than to hang on to something that is falling. If that market is steady and you have a share that has dropped 15-20%, you probably should get out.
Developing my strategy has been a bit of trial and error. I have learnt a few tough lessons along the way. Don't worry. It hasn't all been plain sailing. I invested in Bellamy's (now owned by Chinese dairy group Mengniu). I got into Bellamy's real early in the piece and did really well out of them. And they went to $20 and a couple of directors started selling, and I should have gotten out then. In a pretty short period of time, Bellamy's dropped from $20 to around $6-7. I learnt that was a bit of a red flag.
Now, nearly every day, I look at what directors are selling on Market Index. I also look at who the top 20 shareholders are in a company. For me, it's very positive if big funds like Vanguard, BlackRock etc are on this list.
What products do you use to execute your strategy?
I only invest in ASX shares. Right now there are 31 in my portfolio. I have no exchange-traded funds, although I am interested in them, I don't actually have any at the moment. I am not keen to change my portfolio too much.
What are your top five holdings in percentage terms? Why do you hold each of these positions?
CSL (ASX: CSL) - One of the first shares I bought, I have owned it since 2014. Got in at $85. CSL is a great Aussie company and a world leader in blood and plasma. I have taken profits a few times.
Novonix (ASX: NVX) - Currently my best performing share. I have owned it since January 2021. I got in at $3.09. Novonix operates in the electric vehicle battery space. Electric vehicles are coming, investors need to be in this area. It's very volatile though.
Altium (ASX: ALU) - I first purchased Altium in January 2016 for $4.80. I have added to my position and taken profits along the way. Altium is a software company with global scale. I will stay with this one.
Australian Ethical Investment (ASX: AEF) - I have held AEF since January 2020. I first purchased it at $4.69. AEF only invests in companies that have a positive impact on climate and health. Younger generations are going to be more and more aware of where their money is going.
Wesfarmers (ASX: WES) - I first purchased Wesfarmers in March 2020 for $34. It has a well-diversified business and a good management team. Will be a long-term hold for me.
I only invest in ASX-listed shares. So the best five stocks in terms of return for me have been Novonix, Altium, Fortescue Metals Group (ASX: FMG), Australian Ethical Investments and Pilbara Minerals (ASX: PLS).
Could you tell me about your worst investment?
The main reason I was attracted to Blue Sky initially was that they held a lot of water licences, as in irrigation water licences. But that was only a small part of their business. And in the end, I lost around $20,000. But to be honest, the fact that I got a haircut with Blue Sky has made me a much better investor. Or more careful, at least.
With them, I probably didn't do enough research. Now, unless I feel really good about a stock, I won't invest in them if they have more than 25% debt, or less than 75% equity. So I tend not to own companies that owe a lot of dough. I also check Market Index pretty regularly to see what the most shorted stocks are on the ASX. I definitely wouldn't invest in anything on that list.
How does Livewire help with your investing process and what tips can you share with other investors about using Livewire?
I read Livewire every day. I just like reading about some successful fund managers and people in the game that have done very well. It's good to hear what their take is on the share market and where things are going. But then, by the same token, you can have three or four experts and they'll all say different things.
Do you have a favourite contributor you recommend other investors follow?
Buy Hold Sell is probably my favourite thing about Livewire. It is interesting to see what the pros think about some of the stocks in the portfolio. I like Shane Oliver for the big picture stuff. James Marlay gives a good overall picture of what's happening in the market. And Marcus Padley is also good, he's not frightened to say what he thinks. And I think he talks a lot of sense most of the time.
What can Livewire do better or what do you dislike about Livewire?
I've always said if you don't understand something, don't go near it. It's the same in farming. But just to be honest with you, I don't get government bonds. I read articles about bonds, and it just goes straight over my head. The same with Bitcoin. So I just wouldn't touch that with a bargepole. So maybe more articles on those subjects.
This is not really a criticism, but if people have access to the internet they can just access the website there, without having to get emails. I get too many emails.
Is there a lesson you’ve learned as an investor that could help others?
The market goes up and down. Don't panic. You can't be in and out of the market; you can't time it.
Some people might disagree, but I think the electric car market, lithium and decarbonisation have a fair bit behind them going forward. But then again, you need to be careful about the ones that you invest in. Start small.
Also, I know a lot of fund managers probably would say I need to diversify and invest in global companies like Alphabet, Facebook and Amazon. But I don't want to take on the currency risk. Once you go overseas, you have currency risk as well as share price risk. We have done well in Aussie shares, so we are happy to stick with that.
Can you share a personal passion or ambition you have for your future?
Mainly just my grandkids, and watch them grow up. And stay healthy for as long as I can. I am pretty happy where I am at the moment.
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Ally Selby is a content editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian Group, Your...