RYK VAN NIEKERK: Welcome to this week’s edition of the Be a Better Investor podcast. My name is Ryk van Niekerk and in this podcast series I speak to leading investors in South Africa about their investments. We also try to peek into their personal investment portfolios to see how they put their own views into practice.
VANESSA VAN VUUREN: Thank you, Ryk. It’s lovely to chat with you. Looking far back now, I grew up in Cape Town – actually in the northern suburbs of Cape Town. RYK VAN NIEKERK: When did you buy your very, very first share – and, I must immediately add, with your own money? When did you buy it and what was it?
From that point I’ve always held a candle for small and mid cap investing. I’ve always felt stimulated and excited by it.I think large cap investing is also challenging; you do have the assistance of a lot of research and views out there, which can also challenge you because you can have a herd type of mentality that develops.
So I would say you’ve got to have a long-term horizon, you’ve got to have a stomach for some serious volatility and you’ve got to ride it out. RYK VAN NIEKERK: So if you are a young investor and you would like to build a portfolio, would like to build wealth for [yourself] and maybe your family, when you start to invest and you’ve opened up your account maybe at EasyEquities, should you start to look at small caps immediately as part of your whole investment journey?
But I do think that balancing that with some larger-cap gems – your very traditional compounders, let’s say your old stocks like your Shoprite and your Clicks and those sorts of businesses that sit and compound and have a strong market share – is a balance between the two. Even though those are much bigger businesses to analyse, the idea is that you need to understand what you’re investing in.
You need to immerse yourself in that before you actually bet your personal capital. That would be my advice to any investor starting out there: do some research and understand what you’re buying, definitely. But we are looking for these kinds of investments that are very high quality, have very strong brands. Even though they’re considered small and mid caps, they’re actually very established businesses.
These are the kind of ideas we are looking for in our top five. They must have a quality ring to them, but also have quite a bit of valuation upside for us to take a [substantial] position. You can see a theme around growth that is divorced from the broader economic macros. I will be affected, but you can see that thesis play out.
Again, one must also have the discipline of not being married to one’s ideas. So if, for example, you’ve bought something and you realise you’ve made a mistake, cut your losses, that’s my view.What’s also very important for investors to be aware of is to be pragmatic on what’s happening around you, how things are evolving. If an investment case has died, acknowledge that and sell – even if you’re selling at a loss – and exit. I would say that would be my approach.
But if I look at my own portfolio, I’m sitting on about 18 to 20 shares in my personal portfolio. So it’s broad, it’s a diversified portfolio, and many of my holdings are present across all of the portfolios that I manage. So if you look at annualising sort of a three-year base off the Covid bottom, where small and mid caps were completely hammered, there is still a huge amount of upside. That’s because of the point we were chatting about earlier before we started the call.
RYK VAN NIEKERK: Now let’s talk about the biggest winner you ever bought, and also the biggest dog – the one you are sometimes ashamed to mention; one of the biggest mistakes you’ve made, because every single professional investor has had winners and also losers. So let’s start with your best investment ever. What was it?
RYK VAN NIEKERK: If I remember correctly, there was a lot of management conflict within Advanced Health – and very unhappy shareholders. Does that play a role in the way you value a company? I think that’s very important. Management and corporate governance aspects are very important in the small and mid cap landscape.
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