RYK VAN NIEKERK: Welcome to this week’s Be a Better Investor podcast. It’s a podcast where I speak to finance and investment professionals about their investment journeys and why they chose a career in managing other people’s money, and their investment decisions before they turned pro. The idea is to find a few tips and tricks to assist amateur retail investors to become better investors.
It kind of was the start of what has become an investment philosophy for me because I was able to sit and grow up and watch my father reinvest the proceeds of the farming activity back into the farm each year. So every year there was a new field that was planted. I don’t remember exactly which was the very first share I bought, but I do remember that Dimension Data, which is no longer listed, was certainly up there among the hot stocks at the time that existed in my small portfolio.
I’d always been interested in investments as an articled clerk, but actually didn’t have any intention of leaving. RYK VAN NIEKERK: Let’s explore your career as a stockbroker, because obviously you need to convince clients to buy and sell certain stocks. It’s a totally different approach to actually managing a portfolio. How did that shape your investment strategy and the way you view investment?
It was my role to come in and, as a fairly junior person, pull together all the research on a daily basis and then make calls – often very early in the morning before people dropped their kids off at school, before they went into their own morning meetings – to explain to them what the Deutsche Bank view was.
Rob had ferreted out that these JSE ‘rights’ as they were called – because it gave you the right to purchase the shares when they listed on their own exchange – were trading very cheaply. BRIAN THOMAS: It could potentially. At the end of the day your investment decision needs to be your own, in my view. And maybe the broker in the past might have tried to influence the decision of the individual one way or another, for whatever reason. So it could lead to mistakes. But you know what, I’d always encourage someone to really think about what you’re investing in, do the work, understand what you’re buying, understand what you’re selling.
That rating can be in the form of a price-earnings multiple, an enterprise value to the Ebitda . There are various ways of looking at the rating of the company – what people are prepared to pay, and what the market is prepared to pay for the earnings of the company.
There are of course a lot of other things that one spends time analysing: the balance sheet of the company, the indebtedness of the company, the ability to convert earnings to cashflow, etc. I often say to my children, I wish that at school, instead of them all sorts of subjects that they are never going to use again, there should be a curriculum subject just on compound interest, because it’s such an important component of one’s investment and one’s life, frankly.
RYK VAN NIEKERK: Now, the biggest asset young people have is time, because the money – even if it’s R500 or a R1 000 a month over a 30-year period – will, through compound interest, really return a significant amount. So more important than my little foray many years ago into the JSE is at Laurium – the things that we’ve got right, and the things that that we’ve got wrong.