Transcript QAV 353 — Richard Ivers

Episode Name: QAV S03E53 — Richard Ivers

File Length: 00:52:58

[00:00:04] Cameron Reil­ly: All right. Well, we’re very excit­ed to have Richard Ivers on the show, Port­fo­lio Man­ag­er at Prime Val­ue Asset Man­age­ment. We’ve been try­ing to get Richard on the show for a while because a cou­ple of months ago I saw an arti­cle about him in the Finan­cial Review which I talked about on the show. We won’t go into the skip­ping, but we will talk about some of the com­ments that he made about his invest­ing phi­los­o­phy which seem to mir­ror what we talk about, look­ing for good qual­i­ty stocks. So wel­come to the show, Richard.

[00:00:38] Richard Ivers: Thanks for hav­ing me guys. Appre­ci­ate it.

[00:00:41] Cameron Reil­ly:  So, Richard, let’s find out a lit­tle bit about you. Do you want to give us your pot­ted his­to­ry before we get into your invest­ing method­ol­o­gy? Tell us a bit about your­self. How did you end up in the invest­ing game?

[00:00:53] Richard:  Sure. Yeah, I mean, I stud­ied busi­ness at uni and I came from a fam­i­ly that did­n’t have a lot of finan­cial back­grounds. My dad was an engi­neer, my mom’s nurse. But I always found it very inter­est­ing the finance game and know a close rel­a­tive of the fam­i­ly who worked in stock­broking. And he got me an ini­tial role, maybe wise it was back then, which sort of had a tumul­tuous peri­od in more recent years. But back then, it was one of the biggest bro­kers in Aus­tralia. And I got a role help­ing ana­lysts out and it was sort of a sec­re­tary, like part-time sec­re­tary and part-time ana­lyst. We were help­ing the ana­lysts. So that was back in the days when research went out on paper ver­sus dig­i­tal. So I worked with them for about a year and then they got me to be an ana­lyst in my own right. That was many years ago.

I’ve worked in the invest­ment indus­try for about 18 years now. So 10 years in broking, cov­er­ing stocks, so stock­broking that is. BBY and Ord Min­nett, [inaudi­ble 00:01:57] small caps and about eight years in funds man­age­ment. So that’s the most recent eight years where I’ve been at three dif­fer­ent funds. So I’m cur­rent­ly at Prime Val­ue Asset Man­age­ment. Before that, I was at a group called Con­tan­go. And before that, I was at a group called Riv­er Cap­i­tal. Riv­er Cap­i­tal is part of this [inaudi­ble 00:02:15] fam­i­ly. Con­tan­go, when I joined them and we did man­age to a buy­out with the James Pack­er went well for a while and then things changed a bit towards the end as being sort of quite wide­ly pub­li­cized. And then after Con­tan­go, I left and joined Prime Val­ue. I’ve been for about, com­ing up three years.

[00:02:33] Cameron Reil­ly:  Start­ed off as a sec­re­tary that pret­ty much sounds like my job. Sec­re­tary and part-time ana­lyst, that’s pret­ty much what I do. So tell us the Prime Val­ue sto­ry. They’ve been around quite a while; I see from their web­site.

[00:02:47] Richard:  Yes. So they were found­ed in 1998, so 22 years now. And it was start­ed as a fam­i­ly office. So it’s quite a wealthy fam­i­ly that invest­ed their own mon­ey and they decid­ed to invite or enable exter­nal mon­ey or exter­nal investors to join them in their invest­ing. And it’s been grow­ing and con­sis­tent since then. So in total, we man­age about just over one and a half bil­lion dol­lars of mon­ey. A large chunk of that is in prop­er­ty. So over a bil­lion dol­lars in prop­er­ty. We man­age about 200 mil­lion inequities. There are a few dif­fer­ent funds with­in the equi­ties part of the busi­ness. So there’s my part, which is the small caps. I only invest in small cap stocks, so I man­age about $70 mil­lion.

And then there’s a cou­ple of oth­er fund man­agers. So one guy does an all-cap fund. So we invest in both large cap and small cap. Then there’s a lady called Leanne who invests in an equi­ty income fund. So we’re a lit­tle bit dif­fer­ent in that we are a fam­i­ly office. So most oth­er fund man­agers out there are either insti­tu­tion­al funds. So they will take on mon­ey for big, big funds, par­tic­u­lar­ly the super funds. You know, a lot of the likes of the indus­try funds will give them big licks of mon­ey to man­age and they have a bit of a dif­fer­ent focus. Because they’re par­tic­u­lar­ly focused on lead­ing index­es, very much index focused. Then there are oth­ers that are, you know, that maybe have LICs, list­ed invest­ment com­pa­nies, or risk invest­ment trusts.

And our­selves, which is a fam­i­ly office, but about the fam­i­ly and myself, I’m not part of the fam­i­ly. So I have my own mon­ey invest­ed in the fund and the fam­i­ly has their mon­ey invest­ed in the fund which gives it a dif­fer­ent approach. Because we are very much about mak­ing an invest­ment return, not just beat­ing an index. And that phi­los­o­phy focus­es all the way through to our bench­marks for the most part that’s small cap funds. Pret­ty much every small cap fund out there has a bench­mark, which is the small cap index, which is small loans. Our index is 8% absolute, which is a long-term, the 40 year his­tor­i­cal small loans return. So it’s in line with the his­tor­i­cal returns, which are con­sid­ered fair. But what it does is, it incen­tivizes us to gen­er­ate a pos­i­tive invest­ment return, not just beat an index. We believe fun­da­men­tal­ly that the index is not nec­es­sar­i­ly an effi­cient or an appro­pri­ate way to invest.

It’s filled with stocks which are the com­po­si­tion of the largest busi­ness­es with­in that index, a busi­ness that we might not be inter­est­ed in invest­ing in. When you’re bench­marked against an index is a temp­ta­tion to man­age your risk by invest­ing in those busi­ness­es, just to ensure that you don’t under­per­form. Where­as we throw the index out, we’re not inter­est­ed in, I don’t even look at the com­po­si­tion of the index. I’m inter­est­ed in bring­ing or gen­er­at­ing a return and beat­ing that in our bench­mark of 8%. And we typ­i­cal­ly tar­get 10 to 15% per annum. That’s what we think about when we invest at a stock lev­el. So a lit­tle bit unusu­al in the way that we’re struc­tured and the way that we invest.

[00:06:09] Tony Kynas­ton: Yeah. Inter­est­ing. Hi, Richard inter­est­ing that you do that way and I guess what you’re say­ing is that’s because you’re part of a fam­i­ly office or your ori­gins run a fam­i­ly office. Can you maybe just for our lis­ten­ers who may not know what some of these terms mean, can you just expand a bit on what a fam­i­ly office does and who they might employ, and what their objec­tives might be?

[00:06:36] Richard:  Yeah, so a fam­i­ly office means that it’s essen­tial­ly a wealthy fam­i­ly that’s set up. They have their own mon­ey. And some fam­i­ly offices just pure­ly invest their own mon­ey and don’t allow exter­nal mon­ey to be invest­ed. But Prime Val­ue and a few oth­ers like Riv­er Cap­i­tal, where I pre­vi­ous­ly worked as well, allow exter­nal investors to come in and invest along­side them. So effec­tive­ly invest­ing in the same invest­ments that the fam­i­ly is invest­ing in and get­ting the same returns as the fam­i­ly. Some peo­ple find it appeal­ing because they think, well, these peo­ple have got their own cap­i­tal at risk and they’re proven suc­cess­ful clear­ly over a long peri­od of time. And so there’s a lot more skin in the game with a fam­i­ly office like ours and with the port­fo­lio man­ag­er myself, he’s also per­son­al­ly invest­ed a sig­nif­i­cant amount of my cap­i­tal in the fund.

And it also [inaudi­ble 00:07:34]. So I’ve worked in insti­tu­tion­al fund man­agers and also, you know, I’ve had a lot of friends in the indus­try that worked in them as well. And often the way when you are an insti­tu­tion­al fund man­ag­er you have to tick a lot of box­es. And typ­i­cal­ly they look at things like the size of the teams. They have very big teams which means when you sit around the table and you’re try­ing to work out what to invest in, it can take a com­mit­tee-type approach. Where­by you know, it’s sort of every­body will need to agree on invest­ment, and it tends to move slow­ly. Some­times when you fight to get an invest­ment in the fund, it can be a reluc­tance to let that invest­ment go out. So even though the fun­da­men­tals might change, you might not want your stock to go way out of the port­fo­lio. So these sorts of dynam­ics come into play.

Where­as with us, there’s one key deci­sion-mak­er, which is the port­fo­lio man­ag­er. And in the case of the fund that I run, it’s me. And I’m 100% account­able for the per­for­mance of that fund. So, you know, like this one throat to choke as you might say. Now, if it’s doing well, then, you know, it’s maybe, but if it’s doing bad­ly, then it’s me as well. I’m account­able for that. And you know, there’s a sig­nif­i­cant amount, many, many mil­lions of dol­lars of my boss­es, if you like, mon­ey invest­ed in the fund that I man­aged. So he’s watch­ing that per­for­mance quite close­ly and wants to under­stand what’s going on and you have that real skin in the game.

It also means that you can take a longer-term view. So when you’re an insti­tu­tion­al fund, you can be very much focused on the quar­ter­ly per­for­mance, you answer to the peo­ple who have giv­en you that man­date to man­age the mon­ey. And they very much look at short-term per­for­mance and there can be a ten­den­cy to man­age the funds that way as well. Where­as when you’re a fam­i­ly office or a fund like ours, you very much look­out, we can look longer. We can wear some volatil­i­ty in the short term if you can under­stand why we’re under­per­form­ing in the short term. So the mar­ket, par­tic­u­lar­ly in small caps where I am in, can go through peri­ods where it becomes irra­tional­ly exu­ber­ant in some areas. And if you’re bench­marked against the index or you’re man­ag­ing insti­tu­tion­al mon­ey, you can be tempt­ed to chase that index and keep up with it and take risks that you would­n’t oth­er­wise if it was your own mon­ey.

So it has a dif­fer­ent approach. Like we some­times, in fact, the peri­ods where we have a stark [inaudi­ble 00:10:04] to under­per­form have been when the mar­ket is real­ly fly­ing. And, you know, there’s a lot of risk being tak­en on. Like, there was a peri­od ear­ly in 2019, where we under­per­form. And, you know, it’s that peri­od. But then it turns very sharply. I mean, COVID has shown that as well, right. Things could turn real­ly quick­ly. So when you’ve got that in your port­fo­lio, you can get caught out. And so we’re not tempt­ed to take that risk and we don’t get caught out when things turn quick­ly as they can.

[00:10:35] Tony Kynas­ton: So being held to an absolute num­ber rather than an index, does that mean that if you hap­pen to make, say 15%, nine months into the year, you’d shut up shop for the last three? Or do you wind back a bit, or do you sort of wind back to a nine, nine rather than tak­ing your dri­ve on the next posi­tion? Does that have a dif­fer­ent dynam­ic to it com­pared to a large insti­tu­tion­al fund that was try­ing to out­per­form the index?

[00:11:02] Richard:  No, it does­n’t. We very much just invest and we don’t wor­ry about if we’re doing well or not. We’re focused on the invest­ments and how we’re going. So it’s not about how much we are above the bench­mark or not. It’s real­ly about deliv­er­ing long-term returns, par­tic­u­lar­ly in a fund like mine as well. So even if I want­ed to, I’m not incen­tivized to do that. So now the fund, as I said ear­li­er I man­age about 70 mil­lion. It’s sort of dou­bling every six months at the moment. It’s of course grow­ing very quick­ly. But we’re very much at the ear­ly stages. So we’ve got a lim­it capac­i­ty to around 300 mil­lion. So most com­peti­tors in our space, you know, their capac­i­ty is about 500 mil­lion or bil­lion, so mean­ing we’re much low­er, and we’re in the growth phase.

And you know, I need to keep deliv­er­ing good per­for­mance. And if I don’t deliv­er a good per­for­mance, the mon­ey will flow out again. And we def­i­nite­ly won’t get to that 300 mil­lion capac­i­ty that we hope to get to. And, you know, I’ll be man­ag­ing this for the next 10, 15 years, at least depend­ing on how I hold up phys­i­cal­ly and men­tal­ly and every­thing and also how the per­for­mance goes. So there’s absolute­ly not a temp­ta­tion to do that. It’s very much focused on deliv­er­ing good returns and my boss, he would­n’t do it, he’s more focused on get­ting a return on his cap­i­tal in the fund than know the per­for­mance phase that we [inaudi­ble 00:12:29] on.

[00:12:31] Tony Kynas­ton:   Speak­ing of phase, if you’re using this sort of shared infra­struc­ture or a fam­i­ly office, and you’re not out there chas­ing man­dates from large insti­tu­tions, is that reflect­ed in your fees? How com­pa­ra­ble are they com­pared to an insti­tu­tion­al man­aged fund?

[00:12:47] Richard:  Yeah, so we would charge more for a retail client. So we charge a 1.25% man­age­ment fee, and then we charge a per­for­mance fee of 20% above the bench­mark of 8%. Now those fees that are very stan­dard with­in small caps, the dif­fer­ence is though our bench­mark is 8% absolute, as opposed to an index. If you are an insti­tu­tion­al fund man­ag­er and say your client was Aus­tralian Super, the largest fund man­ag­er of a super fund in Aus­tralia, then they prob­a­bly would­n’t give us less than two or 300 mil­lion. It’s just around the area for them. They think about 150 bil­lion. So when you’re giv­ing some­one two or $300 mil­lion, then obvi­ous­ly you get a big dis­count on the fees. So, you know, the small cap fund might charge 70 or 80 [inaudi­ble 00:13:39] points 0.7 or 0.9% as opposed to 1.25% like we do.

So yeah, but in terms of oth­er, like many oth­er funds take both insti­tu­tion­al mon­ey and retail mon­ey, so you man­age for both. And typ­i­cal­ly the phase will be sim­i­lar to ours about 1.25 or there­abouts. Some up to 1.5. I know some­one who charges 2. But it’s when you can see that through the returns that are being gen­er­at­ed. So in the time I’ve been work­ing, I’ve been man­ag­ing the funds over the last two and a half, com­ing up three years, so the return has been about 15% per annum ver­sus the index of plus two over that time. So, you know, 0.2 or 0.3 is real­ly not a huge amount in the con­text of the return of it.

[00:14:30] Tony Kynas­ton:   Well, thanks for shar­ing that with us. Maybe, can you take us through your process on how you invest? I noticed in read­ing some of the bio on your­self, you talked about hav­ing lots of com­pa­ny meet­ings dur­ing the year. How does actu­al­ly meet­ing face-to-face with man­age­ment add val­ue to your invest­ment process?

[00:14:51] Richard:  Yeah, that’s a core or fun­da­men­tal part of my process. So I may on aver­age or pre-COVID, I was meet­ing two a day on aver­age, so 500 a year. With COVID that’s gone up a lot. So it’s prob­a­bly more like four, I would say. But I haven’t actu­al­ly gone back and looked at the num­bers in [inaudi­ble 00:15:13] and that’s fun­da­men­tal. I mean, there are around 200 or 2000 stocks in the small cap space. There’s about sort of 400 or so 25400 that is, I would con­sid­er in the space where I would invest. So I don’t invest in resource com­pa­nies. I don’t think we invest in com­pa­nies that are los­ing mon­ey. And have you ever heard much about qual­i­ty bias?

So we strip out a lot of com­pa­nies but it’s real­ly about going and meet­ing the com­pa­nies. 

And I think it’s much more impor­tant in the small cap space than it is in the large cap space and the top 100 being the large caps. So man­age­ment is very, very impor­tant in small caps and you need to sit down and talk to them and under­stand how they’re think­ing, what their aims and goals are, to real­ly under­stand how that busi­ness has got to per­form. And you also, I mean, I spend a lot of time just try­ing to get to under­stand the busi­ness. I don’t think you can do that well if you don’t sit and talk to the com­pa­ny and under­stand. You know, are they able to get pric­ing through? What are the risks in the busi­ness? What are the largest cus­tomer con­tracts they might have? When are those con­tracts due to be renewed? All these sorts of things. Are you get­ting to the nit­ty-grit­ty of the account­ing of the busi­ness as well? What you real­ly need to I think talk to the man­age­ment to under­stand?

It also enabled you to tri­an­gu­late the busi­ness. So a big part of what we do is we also talk to the com­peti­tors of the busi­ness. They are the ones who give you the dirt. So when you talk to the com­pa­ny, typ­i­cal­ly they tell you all the pos­i­tives and all the great things about it. And it’s very hard to often get to feel where the neg­a­tives and the risks are, but when you go and talk to the com­peti­tors, the first thing they’ll typ­i­cal­ly do is they’ll tell you the risks and the issues and the weak­ness­es in the busi­ness that you’re think­ing of invest­ing in. We’re very lucky because a lot of the busi­ness­es that are list­ed, we have com­peti­tors who are also list­ed. So we have the abil­i­ty to go and talk to their com­peti­tors, so to get a full under­stand­ing of the busi­ness. And often the cus­tomers are list­ed too, or their sup­pli­ers. So you can get a full sort of cir­cu­lar under­stand­ing of the busi­ness, which is where the real val­ue is added.

[00:17:41] Tony Kynas­ton:   Yeah, it’s inter­est­ing. I mean, I have a dif­fer­ent point of view. I have cer­tain­ly done a lit­tle bit of that and worked in busi­ness­es. But I par­tic­u­lar­ly would find it hard going out and talk­ing to hun­dreds of busi­ness­es. And I think even if I could, I would find it hard to do a deep dive into enough indus­tries to get val­ue from that. I’d prob­a­bly do it in one or two indus­tries, but not across the whole breadth of indus­tries. I know you said before, you don’t go into all indus­tries. So you know, you’re obvi­ous­ly play­ing to your strengths there. Can you give us some exam­ples where meet­ing with man­age­ment has stopped you from invest­ing in some­thing or the reverse has made you invest in some­thing you weren’t going to invest in before?

[00:18:25] Richard:  Yeah, that’s a good ques­tion. I mean, I would say just in terms of me too, I would say that I agree with you Tony about it’s hard to do that. But I guess I’ve been doing it for 18 years and you build up that depth, you know, and you build up the knowl­edge of how the busi­ness oper­ates and you build up the knowl­edge of what the man­age­ment is like. How much they like [inaudi­ble 00:18:52] or not. And so the way they talk, you get an under­stand­ing and you can sort of either…Like, typ­i­cal­ly the inter­est­ing thing too, is you talk to the CEO and they’re typ­i­cal­ly bull­ish. Often they would come up through the sales part of the busi­ness. Talk to the CFO, and they’re often con­ser­v­a­tive and you know, the oppo­site and often the truth is some­where in the mid­dle. I like to talk to the two of them sep­a­rate­ly. And I’m try­ing to get line man­agers as well, and then work out whether they’re all say­ing the same thing or what’s dif­fer­ent. 

But we all work dif­fer­ent­ly. In terms of busi­ness­es where they’ve…I mean, just about all my ideas come through meet­ing the com­pa­ny. I mean, that’s essen­tial­ly what I do and how… I mean, this finan­cials, my back­ground is in. Like when I was at uni, I did account­ing and I skipped ide­al­ly. I did work in some finance and strat­e­gy roles out­side of the invest­ment indus­try. So that finan­cial stuff as well is real­ly impor­tant. So, you know, which you’re going to say exter­nal­ly things like return on equi­ty, return on invest­ed cap­i­tal, all those sorts of things, you know, return on incre­men­tal invest­ment which is real­ly impor­tant.

I’m just try­ing to think, just bear with me. So I’ll give you an exam­ple. One busi­ness that I like at the moment, which we’ve just invest­ed in recent­ly, is a busi­ness called SG Fleet. That’s a busi­ness that I fol­lowed for a long, long peri­od of time. It is a busi­ness that pro­vides vehi­cle leas­ing to large­ly the cor­po­rates in gov­ern­ment. So, you know, they’ll lease a car from SG Fleet and SG Fleet will make an income along the typ­i­cal­ly a three-year lease term and then the car will be hand­ed back at the end. And they’ll make a loss or a gain when they sell that vehi­cle. So SG Fleet has very much had a tough peri­od through COVID. So, you know, the cor­po­rate stops tak­ing on new cars because they did­n’t know the out­look.

When you talk to the man­age­ment and under­stand how that was going recent­ly back in August their results and this was all pub­lic too. So they do a pub­lic con­fer­ence call. They talked about the pipeline of the busi­ness and how that had changed. So through COVID, they had a pipeline that com­plete­ly shrunk. The amount of new busi­ness had just almost evap­o­rat­ed. And in the space of a few months, it had com­plete­ly changed where­by Aus­tralia got on top of the virus. And you know, we felt like we actu­al­ly had the abil­i­ty to deal with it and go back to some sort of nor­mal life. Then their oppor­tu­ni­ty to win new cus­tomers had changed sig­nif­i­cant­ly. And again, this is a busi­ness that I have fol­lowed for a long time. So I know what man­age­ment is like and they’re pret­ty straight, straight down the line. So that changed my per­cep­tion of that busi­ness in a pos­i­tive way.

And the stock was at an all-time low. In terms of share price, the val­u­a­tion mul­ti­ple was at an all-time low as well. It was trad­ing RPA around about eight times, typ­i­cal­ly trades on sort of mid-teens type RPA. So you had those, all those sorts of things lin­ing up. That was one that real­ly changed my view on it recent­ly. I’m just try­ing to think of one where it changed me to sell. Some­times it’s things like, where you might have a major con­tract com­ing up, and we’re very much around that cap­i­tal preser­va­tion focus. So not los­ing mon­ey which I should have men­tioned ear­li­er, but that’s a big part of being a fam­i­ly office as well. 

You know, often the atti­tude of wealthy peo­ple is that you know, I’ve got enough mon­ey, more mon­ey than I can ever spend. Just don’t lose my mon­ey. That’s one of the key focus­es often with very, very wealthy peo­ple, which per­me­ates through our phi­los­o­phy and through that absolute bench­mark as well. And so with busi­ness­es that might have a big con­tract com­ing up or some­thing like that where there is a big risk fac­tor, we might reduce the wait­ing of the stock just to man­age that down­side risk. So that’s per­haps an exam­ple of that.

[00:23:14] Tony Kynas­ton:   Yeah. Kind of the reverse of buy­ing the rumor, sell the fact, isn’t it? If some­thing’s com­ing up, you don’t want to be exposed to it, but you may have to for­go some prof­it, but you also avoid a loss don’t you, if the con­tract does­n’t come off. Good point. So take me…So is meet­ing com­pa­nies the beyond in all of your process, or are there oth­er parts to the process like val­u­a­tion, for exam­ple?

[00:23:38] Richard:  You know, it’s just where my ideas come from. Our ideas come from launch­ing it. But it’s just part of the process. So we have quite a lengthy and in-depth process, which I prob­a­bly won’t bore you with all the details with today. But we go through the process of invest­ing. We fore­cast the earn­ings of busi­ness­es out three to five years. Beyond that, it becomes a lit­tle bit dif­fi­cult to be accu­rate. We think par­tic­u­lar­ly in the cur­rent econ­o­my where there’s dis­rup­tion hap­pen­ing and the econ­o­my’s evolv­ing and chang­ing. And then we would put what we think is a rea­son­able val­u­a­tion mul­ti­ple on those earn­ings. So that might be like we tend to look at either mul­ti­ple sides. That might be either a mul­ti­ple of, I said, 10 or 15 times earn­ings as a rough fig­ure.

So we’re going to say [inaudi­ble 00:24:31] earn­ings inter­est in tax. We could use a PA just to, which is more broad­ly known, a sim­i­lar sort of thing. And then you dis­count it back. So you look at what that val­ue would be and what the div­i­dends stream would be over that three-year peri­od, for exam­ple. And then what’s the inter­nal rate of return, or what’s the invest­ment gain I’m going to get over that three-year peri­od. I’m assum­ing my assump­tions are right. And if that’s in that 10 to 15% return require­ment, then we will typ­i­cal­ly invest. Now that’s a sim­pli­fied way of look­ing at it because we also look at the risks. 

So if a busi­ness is like, our fore­casts require some assump­tions and some have a high­er lev­el of risk than oth­ers. If we have a busi­ness that where you have a high lev­el of cer­tain­ty, typ­i­cal­ly a busi­ness that is not very exposed to the eco­nom­ic cycle and has high bar­ri­ers to entry, so has good sus­tain­able earn­ings dur­ing the cycle. Then there’s a rel­a­tive­ly low lev­el of risk in those fore­casts. And we would have been much more like­ly to invest and put a much big­ger weight in the port­fo­lio for that busi­ness as well.

So some oth­er investors think about weigh ins in terms of what’s the biggest return I can get. When I think about it like that, we think about what’s the risk of that return that we’re going to gen­er­ate. And it’s sort of like a tor­toise and the hare approach, where they’re sort of side with the tor­toise type approach, but try­ing to get good, con­sis­tent returns, not hit it out of the park and take big risks. So I’d prob­a­bly not find out high­light areas of space now that’s real­ly hot and every­body seems to, a lot of the oth­ers seem to love it. I don’t have a sin­gle hold in it. I’ve nev­er had any invest­ment in this space. Now I miss some upside clear­ly after it’s been an absolute crack­ing busi­ness, but that’s just not the way we approach it. And that’s not the way we invest. We’re just look­ing for good con­sis­tent returns over time.

[00:26:35] Cameron Reil­ly:  You don’t get a phone call from the patri­arch of the fam­i­ly office say­ing, “Hey, how come we don’t have any After­pay in our port­fo­lio?”

[00:26:41] Richard:  I do get ques­tions. I do get those ques­tions but he under­stands that as well. So he’s very much…He agrees and accepts that approach, and that’s why I joined. That was very much my phi­los­o­phy of invest­ing. And he employed me on that basis. So we miss out on some of the good ones, but you know, we also missed the errors. You know things turn quick­ly. And in small caps, you think back, I remem­ber a cou­ple of years ago, it was all about med­i­c­i­nal cannabis and these stocks were absolute­ly fly­ing and it was large­ly a con­cept or a promise. And then ear­ly last year it was a real­ly spec­u­la­tive tech. So now tech or soft­ware busi­ness­es can make great busi­ness­es, but these are ones that were a long way from earn­ing a prof­it and, you know, con­cep­tu­al type busi­ness­es, may not fly. And it seems like this year it’s buy now, pay lat­er. Now they could keep going. I don’t know when it’s going to turn, but After­pay is a great busi­ness. But there’s a lot of tier two and tier three play­ers, and you kind of look­out and we think I just, I can’t get any­where near the val­u­a­tion of these busi­ness­es. And I think it’s going to turn, I don’t know when, but I sus­pect it’s going to turn at some point.

[00:27:53] Cameron Reil­ly:  No, I agree. I think they’re one reg­u­la­tion away from turn­ing is how I look at it. But what you were describ­ing is a very Buf­fett Munger approach, isn’t it? It’s an empha­sis on the pre­dictabil­i­ty of earn­ings rather than nec­es­sar­i­ly the upside of the earn­ings. It’s buy­ing a com­pa­ny with bun­dled like qual­i­ties. Some­one wants to… It was either Buf­fett or Munger, but that’s what you were doing basi­cal­ly, which is kind of val­ue invest­ing. And I know you don’t call it that. You call it GARP, I think from mem­o­ry or some­thing sim­i­lar. So maybe we should call this episode, The World accord­ing to GARP, Cameron and we put it out on the pod­cast. But maybe you could explain what GARP is for us. Thanks.

[00:28:33] Richard:  Yeah. So it’s growth at a rea­son­able price. So what we’re real­ly just try­ing to say is that we’re try­ing to buy busi­ness­es that are grow­ing, but that we do have very much val­u­a­tion over­lay on it. So you know, we’re not going to [inaudi­ble 00:28:50]. Like we spoke about After­pay is an exam­ple of a busi­ness that you just kind of say, okay, this thing’s going to grow and I’m just going to look out maybe 10 years or 15 years and say okay, the val­u­a­tion stocks up on that real­ly long term basis. We don’t look out, as I said ear­li­er, we look at more than three to five years. And so we’re try­ing to buy busi­ness­es that are grow­ing. But we are focused on val­u­a­tion and we’re actu­al­ly, strict­ly speak­ing, have a GARP bias where we’re sort of a style like an [inaudi­ble 00:29:18], if you want to be spe­cif­ic and can show that I’m con­sis­tent in the way I com­mu­ni­cate with your lis­ten­ers, as well, as the way we invest. We do have some val­ue and some growth, but we are very much a GARP sort of buy.

[00:29:36] Tony Kynas­ton:   That’s an inter­est­ing dif­fer­ence to a val­ue investor. We’re qual­i­ty val­ue, I guess, is the name of our pod­cast. Let me run some names past you, which are at the top of our val­ue list, and just get your take on them for our lis­ten­ers. So Eclipx ECX, and that’s prob­a­bly a com­peti­tor of SG Fleet what you were talk­ing about before. What’s your take on a stock like Eclipx?

[00:29:57] Richard:  Yeah. We actu­al­ly own a lit­tle bit of Eclipx as well. We’re on both of them in the space. And I think it’s inter­est­ing in that space now. So like Eclipx is about to report their results in tomor­row, actu­al­ly. So they’re very much been a turn­around. So the old man­age­ment went and they did a lot of acqui­si­tions. That did­n’t real­ly play out. The new man­age­ment is com­ing. He is a guy who’s an ex-UBS Invest­ment Banker, actu­al­ly. There is a lot of assets, cleaned it up, and brought it back to its core. Like I men­tioned ear­li­er with SG Fleet, the key dri­ver of this busi­ness is in their fleet busi­ness is essen­tial­ly the cus­tomer con­tracts. So the earn­ings, they get on the rev­enue stream of those vehi­cles over the term of the lease, which is very much improv­ing. Then the oth­er big swing fac­tor is the divest­ment of the vehi­cle at the end of the lease term, which is called the resid­ual val­ue.

And they take a prof­it or loss on the sale of that used car if you like after three or four-year-old car at the end. And that can move earn­ings around. I remem­ber 20 years ago or so, some of these busi­ness­es blew up on the back of used car prices get­ting smashed. Now, where we are right now used car prices are absolute­ly boom­ing. So, peo­ple, new car sales have been weak. They’re start­ing to improve. There has­n’t been a lot of new cars com­ing into the car pack­age, you might say over the last few years. And peo­ple don’t want to catch pub­lic trans­port and they want a hol­i­day local­ly. In fact, many times they should restrict it to hol­i­day­ing local­ly. So they need addi­tion­al cars. There’s more demand and there’s been less sup­ply of cars, which means used car prices are up to 20 or 30% at the moment.

So you’ve got this big tail­wind com­ing through, which is, I think peo­ple are start­ing to under­stand that that’s a real key earn­ings dri­ver for both Eclipx and SG Fleet which should dri­ve earn­ings pret­ty strong­ly over the next cou­ple of years. In both cas­es, their val­u­a­tions have changed, which is prob­a­bly what’s com­ing up on your screen as well. And the oth­er that’s like­ly to hap­pen as well and this is where you get a feel for talk­ing to the par­tic­i­pants in the indus­try is that it’s been a very com­pet­i­tive space for many, many years. There are 10 big play­ers in the space. One of the few indus­tries in Aus­tralia where you have so many play­ers and they all accept that the indus­try needs to con­sol­i­date. It’s too com­pet­i­tive. There are too many play­ers, which means that M&A is like­ly and it almost hap­pened a year or two ago.

There’s been a few bits in the indus­try a year or two ago, and I think it’s like­ly there will be M&A in the space and Eclipx has said pub­licly that they are a will­ing sell­er. So Eclipx is a Prime tent tar­get for a takeover over the next year or two. That has to be at the right price. And, you know, there has to be a bid­der, so it’s not cer­tain, but it’s def­i­nite­ly a ratio­nal thing to hap­pen. And that would be a ratio­nal busi­ness to be tak­en out.

[00:33:11] Tony Kynas­ton:   Yeah. And the deal fell over last year. And it’s my expe­ri­ence, the val­ue end of the mar­ket as the play­er is tak­en out. Like, I’ll agree with you on Eclipx and M&A activ­i­ty. Let me run anoth­er one by you. Michael Hill Jew­ellers, is that some­one that you have met and know?

[00:33:27] Richard:  I have, yeah. I’ve met them a few times. Yeah. It’s an inter­est­ing busi­ness. It’s a retail­er, as we prob­a­bly all know Michael Hill in the jew­el­ry space. Because of their jew­el­ry and the inter­est­ing thing about them, when you look at the bal­ance sheet and it’s got a huge amount of inven­to­ry, and you won­der why. And of course, it’s dia­monds and gold and all that sort of stuff. But it’s very much [inaudi­ble 00:33:46] cheap­ly at the moment. I think it’s on a page around about six times this year’s earn­ings. It’s a busi­ness that about 70% of its earn­ings are com­ing in the sec­ond quar­ter. So this quar­ter at the moment, so obvi­ous­ly the gift-giv­ing for Christ­mas. So it’s very much depen­dent on how this next cou­ple of months buys out.

So you do have that sea­son­al­i­ty or risk to it if you like. And it’s also a busi­ness that’s rel­a­tive­ly mature. So with retail­ers, the way that you can gen­er­ate very, very high invest­ment returns is if you’ve got a good store con­cept. It’s rolling out more stores. So, you have a con­cept, it’s a bit like copy-paste, copy-paste, copy-paste, prof­it stan­dards. Where­as in Michael Hills instance, it’s actu­al­ly rel­a­tive­ly mature, so they don’t have a big store roll-out, which means you real­ly more depen­dent on the sales growth at the store lev­el. Well, the prof­it growth at the store lev­el, which makes it a bit hard­er to grow and also makes the val­u­a­tion mul­ti­ple tends to be restrict­ed because the does­n’t have that growth attached to it. So when you’re buy­ing it, there’s no, as you real­ly hop­ing or expect­ing, a turn­around in prof­it or some­thing that’s going to dri­ve it more. So, you know, there might be a big lev­el of engage­ments and wed­dings, for exam­ple, that could hap­pen in the post COVID. That could pro­vide a big uplift.

So it’s kind of one that it’s def­i­nite­ly inter­est­ing because it’s cheap, but it’s not, it’s a busi­ness that you kind of get an uplift at a cer­tain point because it does­n’t have that roll out when you get the earn­ings growth over a long peri­od of time. It’s pos­si­ble also that it might then go out of [inaudi­ble 00:35:24]. So it’s sort of a busi­ness where you get sort of that wave type pat­tern as opposed to a con­sis­tent growth pat­tern.

[00:35:32] Tony Kynas­ton:   Being an ex-retail­er, I also know that retail­ers love growth and often­times a com­pa­ny in this space, if it’s not rolling out stores, it’s got an eye on an acqui­si­tion some way to get a big store num­ber increased quick­ly. So I don’t know if that’s the case with Michael Hill Jew­ellers. It might be dif­fer­ent because Michael Hill might be like your fam­i­ly patri­arch look­ing after his mon­ey rather than try­ing to nec­es­sar­i­ly grow it dra­mat­i­cal­ly. But that’s always, I guess, the oth­er side of the coin you don’t know about is what they’ve got planned in terms of acqui­si­tions or bolt-on to increase that store foot­print.

[00:36:07] Richard:  Yeah. And a great bal­ance sheet. Doing that cash bal­ance sheet so they’re well-posi­tioned. Yeah. And there was a new guy that came in and man­age the [inaudi­ble 00:36:12]. The guy, his excel­lent. I can’t remem­ber his name is [inaudi­ble 00:36:14]. So he’s run­ning it. So he’s very much got a growth man­date and to get this busi­ness grow­ing again.

[00:36:20] Tony Kynas­ton: Yeah. Watch this space, I think with Michael Hill. And what about The Reject Shop? That’s prob­a­bly the last one I’ll run by you. Anoth­er retail­er.

[0036:27] Richard:  I’ve got a long his­to­ry with The Reject Shop. I used to [inaudi­ble 00:36:28] when I was an ana­lyst at Ord Min­nett. So it’s a busi­ness that we used back in those days. And this would have been sort of like, sort of [inaudi­ble 00:36:37], say 2008, just pre­vi­ous­ly to this, 2006, 2007, 2008. It was absolute­ly fine. And it’s gone through a few trou­bles and now they’ve had a new man­age­ment team that’s com­ing begin­ning of Jan­u­ary and it’s got a lot of things in place where­by it could do real­ly well, but it is a turn­around. So turn­arounds are inher­ent­ly a lit­tle bit risky because they kind of get the busi­ness back on track.

And it takes a lit­tle bit of time as well because one of the issues with The Reject Shop is the mer­chan­dis­ing. So the stock in the stores. So as we all know, you know, it’s a place where you go in and there’s a huge vari­ety of prod­ucts that you can pur­chase from it. And they lost their way a lit­tle bit with that. And it takes around nine months to turn that around, maybe even longer. So they typ­i­cal­ly order out six to nine months, the stock before it actu­al­ly comes and gets into the store because they’re import­ing it. Then you’ve got to remove your old inven­to­ry. So it’s a bit of a big ship to turn around and get the busi­ness on the right track. So it takes a lit­tle bit of time to get to know how they’re per­form­ing. But they cer­tain­ly got the man­age­ment that is in there now, their ex came up in Tar­get. So that’s a tick. That’s def­i­nite­ly a pos­i­tive. Came out to be a fan­tas­tic retail­er over the last few years and has tak­en a sim­i­lar approach.

The way that they are chang­ing The Reject Shop is very much about sim­pli­fi­ca­tion. So reduc­ing the num­ber of prod­ucts or SKUs they have in store. Get­ting the prod­ucts per store, sim­i­lar across most of the dif­fer­ent stores. Refresh­ing the store look and feel. Reduc­ing the num­ber of sup­plies so they get bet­ter terms with their sup­pli­ers. All those things sound real­ly good. They sound pos­i­tive. What you don’t know is how the con­sumers are going to respond to it. And there’s just a lit­tle bit of hes­i­ta­tion with what I’m say­ing not because there’s any­thing wrong, but just because you’re so much need to see it in the num­bers to real­ly know whether it’s tak­ing shape.

Cer­tain­ly from an invest­ment per­spec­tive and putting the num­bers togeth­er, you can def­i­nite­ly get a big return. So you could expect your sales around about $800 mil­lion or so. And they’re tar­get­ing a 5% every­day mar­gin of $40 mil­lion every day. You could eas­i­ly put that on 10 times. If it’s grow­ing and the turn­around gap [inaudi­ble 00:39:03], you have to try it on a high­er mul­ti­ple than that. But let’s just assume it’s on 10 times, they got close to a hun­dred mil­lion of cash as well. You’ve got sort of $400 mil­lion of a busi­ness, and then a hun­dred mil­lion dol­lars of cash gets you to $500 mil­lion val­u­a­tions of the equi­ty, which is about a $15 share price, which is almost dou­ble where it is now. So you can def­i­nite­ly see the upside. There’s no doubt about that. It’s just nature to con­tin­ue to real­ly deliv­er. I think when, if it does deliv­er, it will move very quick­ly the stock. But it has had a cou­ple of hic­cups along the way. It has had a few turn­arounds if you like that did­n’t work out.

There’s a lit­tle bit of trep­i­da­tion out there. It’s a very inter­est­ing one. Because when you’re in turn­ing this busi­ness, they turn quick­ly. There’s a lot of oper­at­ing lever­age. A lot of oper­at­ing fixed cost cov­er, which is a met­ric we use for retail­ers, which is basi­cal­ly the earn­ings, it’s cov­er­age of fixed cost pay­ing inter­est and rent. Because you know there’s a big rental cost for retail­ers and how much of its earn­ings cov­er that. So you know the big ones are like the [inaudi­ble 00:40:13] and the calls can be up to three times the cov­er­age. Reject Shop is more like, sort of one and a half times, which means there’s a lot of oper­at­ing lever­age. So when things are going bad, kind of, you can go down very quick­ly. But when they’re going well, they go up quick­ly as well. So if they can get the top line grow­ing, sales grow­ing, the earn­ings will real­ly accel­er­ate in this busi­ness. And as I’ve out­lined, the val­u­a­tion can real­ly accel­er­ate with it.

[00:40:42] Tony Kynas­ton:   Yeah. Good. Well, we’ll pen­cil in $13 for that one. Hey, lis­ten, I’ve got one more ques­tion before I throw­back to Cameron and this is one we’ve asked about the fund man­agers. What’s your take on the argu­ment that val­ue invest­ing is dead? Is it dead?

[00:40:58] Richard:  No, it’s not dead. Absolute­ly not dead. Some­times, I strug­gle a bit [inaudi­ble 00:41:03] essen­tial­ly a long, long time. And when you ask peo­ple what val­ue is, and there are dif­fer­ent views on it. You know, like I think there’s a broad per­cep­tion out there that val­ue is actu­al­ly beat­ing down struc­tural­ly chal­lenged, cheap stocks. That’s not actu­al­ly true. I think what’s true, I think what you out­lined ear­li­er, Tony, is that you’re buy­ing busi­ness­es that are either intrin­sic val­ue or, you know, you’re buy­ing them on a good qual­i­ty busi­ness. Like the Char­lie Munger and Buf­fett approach, you’re just buy­ing them on the val­ue below what they were. And that’s how I think about it. And that’s def­i­nite­ly not that is the tried and trust­ed way of mak­ing good invest­ment returns.

If you’re think­ing about it, in terms of buy­ing cheap stocks that are struc­tural­ly chal­lenged, then that’s not dead either. But the time in the sun is prob­a­bly short­er than it was in the past because the world is chang­ing and tech­nol­o­gy is hav­ing a big impact. And busi­ness­es that are struc­tural­ly chal­lenged, it can be a lot tougher for them to turn around and improve their busi­ness. You’ve got to make big deci­sions. Stocks that are low P/Es, you need to be care­ful about because of that. They can be val­ue traps. And it just can be that per­haps the struc­tur­al change is not quite evi­dent to you yet when you’re buy­ing it. So you just need to be a lit­tle bit care­ful about low P/E type busi­ness­es. That’s the only thing I’ll say, but def­i­nite­ly, val­ue invest­ment is not dead. Absolute­ly not.

[00:42:36] Tony Kynas­ton:   Well, thank you. Thanks for that Richard, that was a great dis­cus­sion. Cam, we’re going to throw it over to you if you’ve got any ques­tions. Thanks.

[00:42:41] Cameron Reil­ly:  Yeah. A cou­ple of soft­balls. Richard, one thing I did want to call back to some­thing you said at the begin­ning was you don’t invest in resources stocks, is that cor­rect?

[00:42:51] Richard:  That’s right. Yeah.

[00:42:53] Cameron Reil­ly:  And why is that? Is that just a gen­er­al philo­soph­i­cal posi­tion of the firm?

[00:43:00] Richard:  No, it’s not. So, my col­leagues, man­age the oth­er funds. They invest in resources busi­ness­es. That’s not my strength, so I don’t have a resources back­ground. And so I’ve def­i­nite­ly applied to my strengths. Sec­ond­ly, it also comes down to phi­los­o­phy. So I could try and like learn resources and get to under­stand them. But with the phi­los­o­phy is try­ing to invest in busi­ness­es where there’s a pre­dictabil­i­ty to the earn­ings and clear­ings dri­vers. With resources com­pa­nies, look­ing at one of the biggest dri­vers is of course the com­mod­i­ty price and the com­mod­i­ty prices are very, very hard to pre­dict. Think, if you’re look­ing at three to five years, it’s very, very, very hard. So it does­n’t real­ly fit into that style of invest­ing, our style of invest­ing either. My col­leagues have invest­ed, they typ­i­cal­ly invest in the larg­er ones are the BHPs and the RIOs. Well, I mean, I’m small caps, which means I’m not, I can’t, my man­ag­er does­n’t allow me to invest in the top 100. And so on my end of the spec­trum, it tends to be a high-risk resource. So yeah. It does­n’t fit our phi­los­o­phy and our [inaudi­ble 00:44:03].

[00:44:04] Cameron Reil­ly:  Right. Thanks for clar­i­fy­ing that. Okay. Well, I was just going to ask you a cou­ple of rec­om­men­da­tions that you might be able to give our audi­ence. A book, is there a book that you like rec­om­mend­ing in terms of invest­ing?

[00:44:21] Richard:  I think there are the old trustees, like The Intel­li­gent Investor, which is, you know, kind of one of the Bibles in invest­ing but it’s hard, heavy going. I think Snow­ball, which is a book on Buf­fett, I think is a real­ly good book. It shows some of his [inaudi­ble 00:44:41] as well. It’s not just a pure you know, [inaudi­ble 00:44:45] based on him. And it real­ly gives insight into the way he thinks. 

One of the oth­er things I like doing is read­ing month­ly updates from fund man­agers, oth­er fund man­agers. Like glob­al investors as well out­side, which gives you a per­spec­tive. And most fund man­agers, you can just go to their web­site and you get their month­ly update. Like ours is free. You can see who our largest hold­ings are, and what we’re think­ing about the mar­ket at any time. And there’s a lot of good fund man­agers out there and which are giv­ing away infor­ma­tion and insights for free. So you know, if it’s a fund that you’re inter­est­ed in, or you look at who are the best per­form­ing funds over a pro­longed peri­od or when you just look at funds over a short peri­od. But you know, have a look at their web­site and read what they’re say­ing. You can learn a lot.

[00:45:38] Cameron Reil­ly:  What about out­side of invest­ing? What are you read­ing any­thing good recent­ly you can rec­om­mend?

[00:45:47] Richard:  I’m read­ing finance books. How bor­ing is that?

[00:45:52] Cameron Reil­ly:  That’s pret­ty bor­ing.

[00:45:53] Richard:  Yeah, it is. I read books to my son. I’ve got a sev­en-year-old son. So I, every night I read to him, which is a bit more recent. So we’re read­ing Dr. Zeus at the moment.

[00:46:03] Cameron Reil­ly:  Not invest­ing in books? You’re not read­ing Buf­fet­t’s biogra­phies to him?

[00:46:07] Richard: No.

[00:46:07] Cameron Reil­ly:  Not yet?

[00:46:07] Richard:  Yeah. I’m tak­ing some pock­et mon­ey and put it in the fund. I’m try­ing to get him inter­est­ed, but he’s more just spend­ing on toys.

[00:46:15] Cameron Reil­ly:  I’ve got a six-year-old and he is the only investor in the QAV fund at the moment. He gets paid a dol­lar a day inter­est on his invest­ment in the fund. So he does very well.

Music, got any music rec­om­men­da­tions? What are you lis­ten­ing to that’s good?

[00:46:33] Richard:  I actu­al­ly have signed up with, COVID in par­tic­u­lar, you know being stuck at home and not able to go out, more time lis­ten­ing. And I’m a lit­tle bit, well, I like [inaudi­ble 00:46:43]. I’m 47 years old, but this is younger, like Rufus. I think they’re going to lis­ten to a bit of them. Thom Yorke has done some good solo stuff recent­ly. And then a lot of stuff that like, I sort of, you know, all the stuff like The Stones and that sort of stuff, like [inaudi­ble 00:47:07] and all that as well. [inaudi­ble 00:47:09]

[00:47:10] Cameron Reil­ly:  All the stuff that all guys like us with gray hair lis­ten to.

[00:47:16] Tony Kynas­ton:   Yeah.

[00:47:16] Richard:  Qual­i­ty stuff.

[00:47:17] Cameron Reil­ly:  Qual­i­ty stuff. Yeah. What about pod­casts? Do you lis­ten to pod­casts?

[00:47:22] Richard:  Yours, I actu­al­ly did lis­ten to yours on the week­end to get a bit of back­ground infor­ma­tion. And so that was good. Live Wire is an inter­est­ing one. I actu­al­ly you know, you can lis­ten to, you know, a lot of fund man­agers. I’ve just done an inter­view with them in the last week, and we’ll be going on with them. So they do some good stuff. Again, you can lis­ten to in-depth inter­views with fund man­agers which gives you a good under­stand­ing of how they invest.

And then the oth­er one that I’ve lis­tened to recent­ly too, is Build it. They’ll come which has been called [inaudi­ble 00:47:58] invest­ment in Red­bub­ble, and that’s how I came across it. They inter­viewed Mar­tin Hosk­ing and talked a lot about, his expe­ri­ence in build­ing that busi­ness up to be a bil­lion-dol­lar busi­ness now, home­grown and glob­al mar­ket­place out of Mel­bourne here. And they took a lot to entre­pre­neurs and some investors to which is quite good.

[00:48:19] Cameron Reil­ly:  What about film, TV rec­om­men­da­tions? What’s good? What are you watch­ing late­ly?

[00:48:25] Richard:  You weren’t allowed to the cin­e­mas here in Mel­bourne, not even [inaudi­ble 00:48:28] actu­al­ly as of last night. But I’ve been watch­ing on Net­flix, there’s a great show at the moment called The Queen’s Gam­bit, which is about a female chess play­er. [inaudi­ble 00:48:35] fan­tas­tic. I watched that last week and I thought it was bril­liant. Bril­liant shine.

[00:48:39] Richard:  Yeah. I’ve got that in my to watch queue. I’ve heard good things about it. I’m a chess play­er. Are you a chess play­er?

[00:48:45] Richard:  I’m actu­al­ly not very good. My wife is actu­al­ly a very good play­er and she wins me when­ev­er I play. So I don’t play that often.

[00:48:53] Cameron Reil­ly:  I can’t get my wife to watch any­thing that’s chess relat­ed. So I’m hop­ing. I showed her the trail­er for that. I’m like, look, you know, young girl, like with big Ani­me eyes you’d like that. The chess thing, I don’t wor­ry about that. I’m sure that’s a minor sto­ry­line. I’m going to try and trick her into watch­ing it.

Okay, so just to wrap up. So in terms of out­side investors, if any of our lis­ten­ers are inter­est­ed in check­ing out Prime, is there a process, or is there a cer­tain kind of investor that should take a look at your stuff? Give us the pitch.

[00:49:30] Richard:  Yeah, so we’ve got a web­site which is www.primevalue.com.au. And my name is Richard Ivers and I run the Emerg­ing Oppor­tu­ni­ties Fund at Prime Val­ue. So that’s my fund. There’s a lot of infor­ma­tion there. There’s also an abil­i­ty to send an inquiry through. If you’re inter­est­ed in doing that, do that, it’s def­i­nite­ly mon­i­tored. Like it does­n’t go into a [inaudi­ble 00:49:53] file, it’s not answered. You get answered very prompt­ly. There’s a lot of infor­ma­tion on our funds on there as well. All the per­for­mance his­to­ry, there’s the recent arti­cles that we’ve done. And you can also get in con­tact and if you send an inquiry through the web­site, then you’ll come to a Busi­ness Devel­op­ment guy [inaudi­ble 00:50:18] the project man­ag­er typ­i­cal­ly, he’ll talk to you about the fund. And we’ll typ­i­cal­ly talk to investors as well because we’re build­ing a busi­ness and we are invest­ing for the long-term and we want investors to under­stand and know what they’re invest­ing in. Not to come in and in some way be dis­ap­point­ed.

And so we are a lit­tle bit dif­fer­ent in that way as well. We’re bou­tique but we are acces­si­ble. So def­i­nite­ly encour­age peo­ple to have a look. If it suits them, the fund has, as I said is gen­er­al­ly a return of around 15% per annum in the time I’d be man­ag­ing the last two and a half years. Over that peri­od as well, the volatil­i­ty has been low­er than the index. So [inaudi­ble 00:51:01] 15% ver­sus the index return of 2%, but the volatil­i­ty, which is gen­er­al­ly con­sid­ered a way of mea­sur­ing risk is 20% below the index over that time. So I retain a low­er risk. It’s a loan only fund, not our [inaudi­ble 00:51:52]. We man­age every step. So yeah, have a look. And if you’re inter­est­ed, like inquire.

[00:51:23] Cameron Reil­ly:  I see that it was ranked the num­ber one Small Cap Fund in Aus­tralia by Mer­cer for per­for­mance over the 12 months to the 30th of June, 2020. So con­grat­u­la­tions.

[00:51:35] Richard:  Thank you.

[00:51:37] Cameron Reil­ly:  Hope you got a bonus.

[00:51:39] Richard:  It does­n’t work that way. I have to per­form. It’s all about invest­ment with [inaudi­ble 00:51:42]. So yeah.

[00:51:47]  Cameron Reil­ly:  Well, thanks again for tak­ing time out to come on and talk us through some of that stuff, Richard. That was great. We appre­ci­ate it.

[00:51:56]  Richard:  No prob­lem. Thank you for hav­ing me.

[00:51:57] Tony Kynas­ton:   Good. Thanks, Richard. See you.

[00:51:59] Richard:  See you, Tony. See you, Cameron.