RYK VAN NIEKERK: Welcome to this week’s edition of the Be a Better Investor podcast. It’s the podcast where I speak to professional investors about their investment journeys and why they pursued a career in managing other people’s money. We also discuss how they approach the management of their own money, as well as their best and worst investments ever. The idea is to find those golden nuggets from their perspectives and experiences to assist amateur retail investors to become better investors.
And then we also have idiosyncratic opportunities, which means stock-specific stuff, company-specific stuff. It suddenly struck me that I could own a share of the profits of a successful company which somebody else had built. This really intrigued me and I started reading up about it and exploring it and having conversations with my teacher and other professionals.
I remember in the early 2000s the platinum miners at one stage were doing quite well. Some of it was because of the weaker rand and when the rand started strengthening I lost money. When I left PSG after a short stint in private equity – which didn’t work out for me – I started my own firm Capicraft, which I run to this day. At first I started running concentrated equity portfolios and trying typically to follow the Warren Buffett/Benjamin Graham style of investments, [as] a real value investor.
We think that presents a false dichotomy between the different investment styles. And the pigeonholing leads to unnecessary ways of viewing investment opportunities. There’s a narrative which has built with technology shares over the last few years, and that capital cycle also has a down dip – and the capital cycle is typically a decade or longer. So I stick with a long-term view, and we try to avoid timing the business cycle – which is very macro-dependent, and we think, just quite elusive.
But I do have a small amount of money that I put more risk into [that’s] more concentrated. Sometimes I’ll use a little bit of leverage but it’s money that I’m fine going without for a long while. Sometimes some of your best ideas are actually, over the short term, some of your worst performers. Not all clients can stomach that.
DRIKUS COMBRINCK: Well, 60% I think is the number Buffett gave, and if you can get six out of 10 that really perform, that’s great. Sometimes something fundamentally has changed, or you realise that your initial assessment of the company was wrong. Then you need to get out. What is your perception on having done a lot of research on a share? You believe it offers value, you buy it, and it goes down. Does ego play a role?
That was relative to what Mr Price was at that time in the early 2010s, trading at a deep in-the-20s price-earnings ratio. So there was a lot of value there. But the most pronounced one is a small industrial company in the US, below the radar. It’s called Wesco International. Wesco we bought just before the Covid epidemic at about $50. It fell to about $15. We picked up more around $20 and we sold out at about $160 two-and-a-half years later. So just over a short period we had about a 400% return on that single stock.DRIKUS COMBRINCK: Oh, there are so many! The trick, once again, is not to hold on to them, it’s to move along.