Tony’s Story (How & Why QAV was invented) (4 mins)

Tony : I had a career in retail for 20 years. I started off after university in the IT department at the Shell Company of Australia. And after a couple of years in IT, I felt like I wasn’t part of the action. So I moved across into the retail side of Shell, which is the section that looks after service stations and distributors and does the actual business of selling petroleum products, and worked my way up from there into general management roles. I started off in the financial planning area. As a result, I got a good overview of how Shell operates in Australia. And then went out into the field in Queensland and looked after the auto care franchises and all the service stations around Queensland, Northern Territory, and the car washes and then became the Central Queensland territory manager. I looked after some big fuel distributorships and some service stations. I was basically the franchise and they were the franchisee. So, lots of discussions around how to price products, going after and winning big contracts, looking after health, safety, and environment.

Cameron : We don’t need to go into that much detail, Tony. You were a corporate executive at Coles and Shell. 

Tony : Oh, okay. 

Cameron : You ran very large companies for 20 years. 

Tony : I did, first at Shell and then at Coles Myer. 

Cameron : And then when did your investing career start?

Tony : Yeah, good question. So, when I was at Shell, it would have been, I’m guessing, the mid-nineties, towards the end of my time there they came up with a way of giving us some extra remuneration by offering us a loan that had to be used for investment purposes. You couldn’t buy a house and live in it with this loan. It was up to the amount of your annual salary. And it was offered at a low-interest rate. The kind of interest rate Shell was getting when they borrowed money, which was less than the market rate. And I thought that was a great idea. 

And a couple of friends and I got together and we said, well, what are we going to do? How are we going to invest it, let’s take Shell up on this offer. And so we did, and we did a bit of investigation and we spoke to a guy who was a property developer about going into partnership with him. We went to some big-name stockbrokers and asked for their advice. And we thought both of those were a bit too pedestrian because we were gung-ho young Masters Of The Universe at Shell. We wanted to invest in things that were going to double our money quickly. And we started doing all the wrong things because we were aggressive. 

So we took tips from people – from stockbrokers, from our colleagues in the upstream side of the business who were involved in startup petroleum drilling companies, and the like. And basically after about a year, I lost half of my capital through mostly penny dreadful investments in the mining sector. And yeah, that was a bit of a wake-up call and I thought, shit, not only have I lost half my capital, but eventually I’ll have to pay it back. And I’ve got to find it from somewhere too. So, that was like a double whammy. And so I started to subscribe to whatever I could find on investing, read any book I could find on investing. 

And one day I happened to be in an airport bookshop and I came across The Making Of An American Capitalist, a book by a guy named Roger Lowenstein. It was a book about Warren Buffett and it really resonated with me, this whole idea of value investing. His story had a much more scientific feel to it than what I’d been used to so far in things I’d read or heard. It also had a very good take on how to take the emotion out of it. And just made common sense and it seemed simple. So I started applying those principles and eventually got my money back and was able to pay Shell back the loan when I left and moved across to Coles Myer and the investment bug bit. And I went from there.

Cameron : So, how long have you been a full-time professional investor, Tony?

Tony : Well, I retired when I was 43, so, about 14 years ago (note: this was in 2020). And the caveat is that my wife has been working, so, we’ve been able to live off her income and then invest all of our capital and let that grow.

Cameron : You decided to be a stay at home dad and just manage the investment portfolio.

Tony : Jenny and I joke about her being P & L and me being balance sheet. So, she’s cash flow and I’m capital. And I had the benefit of raising my daughter, which was fantastic. We have a great relationship because of that.

Cameron : And it’s not because you’re some sort of a misogynist and you sent your wife out to work. We should point out that your wife, Jenny, is a very successful corporate executive and loved her work and didn’t want to retire. So you’ve basically been a professional investor now for several decades and full-time for the last 14 or 15 years.

Tony : Yeah. That’s right. Investing since about, I would say the mid-nineties, so 25 years.

Cameron : And the average return on your portfolio over that 25-year period?

Tony : Nineteen and a half percent. 

Cameron : Now to put that into perspective, because when you first told me that, I mean, it sounded good, but I didn’t really know how good it was. Over the last 50 or 60 years that Warren Buffett has been investing with Berkshire Hathaway, I think he claims that his average annual return is about 19.8%. Does that sound right, 19.7 or 19.8?

Tony : It’s something around that definitely above 19. 

Cameron : So, that means that there are some years when it’s going to be much higher than 19%, some years when it will be lower. Like 2020, for example, when the market tanked due to coronavirus, it is going to be lower. But on average, over 10, 20 years and beyond, it averages out at nineteen and a half percent. So, for people who have been around investing for a while, they will know that the All Ords, the Australian stock exchange, and it’s true of other stock exchanges, like in the US or any other country, if you look at their average growth over decades, it tends to be somewhere around 9, 10, 11%, depending on which exchange you’re looking at. Again, some years it will be higher, some years will be lower, but on average, it’s about 10%. Let’s say that just for a quick heuristic. And you’re basically doubling that – your objective is to basically double the index.

Tony : Correct. Yes. Double the market on the premise that if we can filter out the bad stocks, some of the rest must do better than the index. So it’s not rocket science. And that might be a simple statement, but it’s hard to put into practice because the filter is the key. But yeah, if you think about it, if you take out the rotten apples, the rest should be edible.