Top Tips for ASX Share Investors
Richard Hemming
Top Tips for ASX Share Investors
7 Top ASX Fund Managers reveal the best advice for investing. Get the top tips that guides their investment decisions today.
We ask them: What's the best advice you have ever received on investing?
TOBIAS YAO, WILSON ASSET MANAGEMENT:
Invest in competent founders or management teams with significant skin in the game.
ANDY GRACEY, AUSTRALIAN ETHICAL:
Investing is all about backing capable and motivated people and steering clear of commoditised industries.
CHRIS PRUNTY, QVC CAPITAL:
It’s this: the best investment strategy is the one you can stick to. Even the best small companies that deliver the highest returns over time can be hugely volatile. The decisions individuals make in the face of this volatility is often what determines their returns. As the well-known Portfolio Manager Kenny Rogers liked to say “You’ve got to know when to hold ‘em, know when to fold ‘em, know when to walk away, know when to run.”
BEN RUNDLE, HAYBOROUGH INVESTMENT PARTNERS:
Some of the best advice I received was to closely watch how companies allocate their capital. I am consistently amazed at the lack of thought that goes into this from listed company management teams. You tend to see founder-led businesses do a better job of it, as they have their own money on the line. Where it really goes wrong is if you have a CEO or board, with no skin in the game, make multiple acquisitions, simply to create a bigger company, rather than get a decent return on that spend. The same goes for companies raising excess capital. Small amounts of dilution destroy incredibly large amounts of shareholder return over long periods. Companies that consistently raise capital and misallocate their spend, are doomed to fail.
STEVEN MCCARTHY, DMX ASSET MANAGEMENT:
Don’t follow the herd. It can be particularly dangerous buying or chasing a hot stock or thematic without conducting your own due diligence and developing your own thesis. Engaging in thorough research empowers you to develop conviction, especially crucial when navigating the often volatile small-cap market.
RICHARD BAILEY, KUTTABUL CAPITAL MANAGEMENT:
When I was in my teens we had an elderly neighbour who a very good investor and had been at it for decades both personally and through his career in the insurance industry. Two of the things he would say are “a company must have great management” and “never pay (a price earnings multiple) any more than 16x”. You only need to look at what happens when you run into poor management to know how true the first statement is. And in the second statement, I think he was effectively saying not to lose sight of the risk-free rate (government 10-year bond yield) because it matters. Also, you have to consider what you are asking a company to deliver in terms of future earnings when you are thinking of buying it.
A company must have great management” and “never pay (a price earnings multiple) any more than 16x.
THE IDLE SPECULATOR, UNDER THE RADAR REPORT:
We think buy cheap, be patient is up there, but Anthony Bolton (a renowned UK investor) once suggested reading annual reports. At the time, even obtaining a copy of the annual report as a private investor was a laborious process. Now, annual reports are readily available, but three times as long, and contain endless detail about key management pay and ESG, as well as the meat of the fundamentals, the reports of the Chair, CEO and the review of operations, combined with the incredibly useful detailed notes to the accounts. With all the other presentations available now for listed companies, the annual report may seem superfluous reading, but it is always useful to understand how the company recognises revenue and cash flow, and what some of the big numbers on the balance sheet represent. We guarantee that if you read your company’s annual report, you will find out something you didn’t know before.
Read the full 2024 Fund Manager round table in our Small Cap report.
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