Last week, I was invited to guest star on the Twin Petes Investing Podcast Episode 73, starring alongside my good friend Peter Higgins and acting as a temporary stand-in for the missing Pete “WheelieDealer” due to health problems. The episode was an absolute delight to film, and despite having relatively little warning of the invitation, I have been humbled by the warmth of the feedback I have received thus far. When listening to the episode with my wife, I was surprised at how many topics we covered – although the time flew by the final cut ended up at nearly an hour and a half! We covered a few of my favourite investing topics including my perennial obsession with capital protection – yes, I know I’m 29 not 89 but find me an investor that likes losing money and I’ll happily take it from them.
Guest Starring on the Twin Petes Investing Podcast Episode 73
With that in mind, I want to take the opportunity to thank Peter for hosting me on the show – although I’ve had lots of experience in public speaking and am fairly confident, my debut podcast had the potential to be quite nerve-wracking. Despite that, Peter made me feel totally at ease throughout the episode and I can whole-heartedly recommend the experience to anyone he invites onto the show – you’re in safe hands!
I don’t think people truly appreciate how much work goes into producing the show. As a long-standing listener, I’ve always enjoyed being a member of the audience, but Peter pulled back the curtain on the huge amount of organisation and hard work that goes into the production of the podcast. This brings me to my second thank you; to Peter’s sound engineer and producer Dave, who produced the final cut. Peter Higgins negotiated for him to ‘jump in’ in short order (and on a Bank Holiday!) to get the episode ready to be broadcast, so I hope that the rest of his Bank Holiday was considerably more relaxing!
As much as I enjoy investing – talking about it, writing about it, learning about it – it was a new experience to be speaking about it on a podcast. Here on my blog, or in one-to-one interactions, I have the time to consider my thoughts, to edit and phrase things in just the right way. When you’re ‘on the spot’, however, you have to think a little quicker – and make sure you have the words to hand to express what you want to say correctly. Thankfully, I have plenty of experience in public speaking so am used to taking my time and considering my responses, regardless of my audience or any internal pressure I might be feeling.
Despite that, I did make one statement which I would like to clarify and that was the statistic around NHS IT infrastructure. NO, 50% of IT infrastructure in the NHS is not run on Windows 2000 or earlier. As soon as I said it I wanted to withdraw it. Despite this, the underlying point; that a significant proportion of NHS IT assets are run on outdated software is true and I stand by it (https://www.healtheuropa.com/outdated-nhs-communications-technology-to-be-phased-out-by-2021/101982/) – the NHS is currently working to correct this BUT it has been a problem for a very, very long time.
That aside, the podcast gave me the opportunity to expand on a number of topics which I have covered here on the blog over the years, as well as expand on my thoughts on the growth vs. value debate. Since the podcast aired, I have been contacted by a few people wanted to talk about Darktrace and S4 Capital; why I invested in them, why I like them over other companies, have I considered other names?
Investing in Pre-Profit Companies
These conversations threw up a great deal of interesting ideas for me and have given me a lot to consider and to research further. Interestingly, I review my holdings on a quarterly basis – I covered some of my review process in this article – and as part of that review I also review notes I have made of sector-related and company-related news that I have uncovered in the previous weeks. When we invest in a company, our conviction is often at its highest; we are confident in the future performance of the business. Over time, however, the company and economic landscape change and it is imperative that our confidence remains justified by facts rather than feelings.
S4 Capital is a good example of this – I bought the company before they delayed the issue of their accounts. Now, they’ve been delayed twice. The known facts have changed, and the question is, should my conviction change with them?
In this case, I believe there to be a binary option; either Sir Martin has lied about there being no cause for concern, in which case he will likely lose his job, ruin his reputation and lose significant wealth in S4 Capital as the price crashes further. Alternatively, he has told the truth, the company has traded strongly over the last twelve months and the share price will recover accordingly. On balance, I believe the latter to be the more likely outcome but recognise that this determination is based on my own perception of probability more than any measurable indicators.
Avoiding Contracting Businesses
I was also asked about whether I hold any construction-related businesses – I have and I do but I generally don’t like the sector for investment. In the podcast, I explained that this is largely down to risk; construction is a very dispute-oriented business. There are a lot of contractual disputes and many contracts are run on a ‘loss-leader’ model, where margins are deliberately sliced thin, potentially even eliminated, in order for contractors to win work on the theory that they can then claim back extra revenue allowances based on scope changes and disputes as the job progresses.
Aside from the dubious morality of such a strategy, the model can also go horribly wrong when contractors are unable to squeeze the extra money they expected from clients – thin margins become losses and client goodwill is damaged due to the perceived ‘wideboy’ tactics. Even worse, clients can decide that the contractor actually had no idea what they were doing when they were pricing the job, making it up as they went along…hardly a measure on which to award repeat business. I covered some of these issues in an article about contracting businesses that I wrote a few years ago.
Of course, there are other types of businesses in the construction sector – housebuilders, material suppliers, engineers, architects, land developers and I have worked with and invested in a number of these over the years. Ranging from big, FTSE100/250 market leaders to high-end boutique and specialist consultancies, I find it easier to identify businesses with a different model in this space. Fatter margins, more accurate pricing, relationship-focussed and less combative in nature. In short, my preferred ‘end’ of the sector spectrum.
I have generalised a little here – as with all things, there are exceptions – but I have found that when I have dipped a toe in the contracting end I have had it burned and when I have concentrated on the smaller, specialist side of things, I have achieved better investment outcomes.
Conviction Investments
Finally, we touched on some of my highest conviction names. If a reader really wanted to, they would have little problem in identifying these with some work by digging through this blog and social media. Despite this, I don’t tend to write about individual holdings in great detail because I am not a financial advisor; I’m just a guy on the internet that enjoys investing. Although I write about individual names on occasion, my conviction is worthless to you. You have no idea if I’m a brilliant investor, a terrible one or somewhere in-between and wasting your time trying to figure that out is just wasting your time in general.
The truth is, that like most investors – institutional or otherwise, I make some good investments and some bad investments. I try, on balance, to ensure that I make more good investments than bad ones but what that means to me is specific to me! If you want to retire in ten years and live off your investment portfolio then we have totally different goals and ought to have totally different strategies. Likewise, if you don’t care about dividends then my approach will likely not be of interest.
My goals are my own.
- I want to do something I enjoy (learn about companies and invest in the best).
- I want to generate an income from my portfolio.
- I want to protect my wealth against inflation and recessions.
- I want to use my money to support the people I love and care about.
- I want my portfolio to help me sleep at night knowing that it is invested in stable, good quality companies.
- I want my money to help make the world a better place – or at least not make it a worse one!
Ultimately, I write this blog because I love writing and investing, and I find it a wonderful way to attract investors to talk about something I enjoy. I don’t want to sell a course, I don’t want to be told I’m a genius, but I do want to continue to make friends with great people like Peter. If it wasn’t for this blog and my use of Twitter, Peter and I would never have met – and I can say the same for a dozen friends I have had the pleasure of meeting since I started to write.
Thank you to everyone that has supported my work thus far – and that of Peter. Please do subscribe to the Twin Pete’s podcast (it’s really very good) and visit his website. He has also just launched a second podcast in collaboration with London South East called Investing Matters which has had some amazing guests (far beyond my calibre and real expert investors!).
You can also find WheelieDealer’s website here – he runs two sites which are linked through Weebly. I look forward to Wheelie’s return to the podcast soon and hope he recovers in double quick time from his operation. It was a real honour to ‘keep his seat warm’ and I can only say thank you to the audience for such warm and generous feedback on my appearance.
Also, for those of you that haven’t read my previous review of the show, you can find it here.