Expert Investor: Andrew Page Talks Value Investing & 3 Stocks In His Portfolio

HOSTS Alec Renehan & Bryce Leske|14 May, 2020

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

Andrew Page has worked in the financial markets for over 20 years, with experience as an equities analyst and market commentator, having worked at CommSec, The Motley Fool, and Team Invest. He is a passionate private investor, and the founder and Managing Director of

Andrew is a very disciplined value investor, with a ton of experience, so we asked him to join us to discuss 3 stocks in his portfolio, with a focus on:

  • How he found the company
  • What the company does
  • The key metrics that make the company appealing
  • It’s valuation

We thoroughly enjoyed diving into his three choices, and hearing about his investing approach.

In this episode you will learn:

  • The major lessons Andrew learnt from his first investment
  • The importance of knowing what you are buying, and understanding when your thesis is broken
  • How Andrew founded and what if offers private investors
  • His investing philosophy and how it applies to:
  • Integrated Research Limited (ASX: IRI)
  • Pushpay Holdings Ltd (ASX: PPH)
  • Catapult Group International Ltd (ASX: CAT)


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Alec: [00:00:57] Gday Equity Mates Ren here, no Bryce just recording a quick introduction to today's interview with expert investor and founder of Strawman, Andrew Page. In this interview, Andrew pitches us on three stocks that he has on his watch list or in his portfolio. And we wanted to provide some context because one of the stocks has had a massive jump up since this interview. We recorded this interview on Monday, the 27th of April. And one of the stocks that Andrew spoke to us about was pushpay holdings, which since then has jumped up about 50 percent. So well done, Andrew. Hopefully that convinces you guys that he's an expert worth listening to you. But most of all, we hope you enjoyed this interview. [00:01:40][42.9]

Bryce: [00:01:41] Welcome to another episode of Equity Mates, the podcast, where we help you learn to invest in forty five minutes or less. We break down the world of investing from beginning to dividend so that you can hopefully make some returns. My name's Bryce and as always, I'm joined by my equity buddy Ren. How's it going? Right. [00:01:56][15.1]

Alec: [00:01:57] I'm very good. Bryce very excited for this interview. I'd like to say that, but I am excited for this one. This is a voice that we first heard when we started out listening to finance podcasts a number of years ago now. And then we finally got him on our own. [00:02:12][15.3]

Bryce: [00:02:13] Yes. Expert on many levels we could say, as you are, I'm also excited about this interview. It's another one in our expert investor series and one with a bit of a twist on it. We're going to deep dive into a few specific stocks, which I'm very much looking forward to. But without any further ado, we'll introduce Andrew Page to the podcast. Welcome, Andrew. [00:02:31][18.4]

Andrew: [00:02:32] Hi, guys. Thanks for having me. [00:02:33][1.1]

Bryce: [00:02:34] So Andrew has worked in financial markets now for over 20 years with experience as an equities analyst and market commentator, having worked at CommSec. But as Alex said, also The Motley Fool, which is where we heard his voice on on podcasts and also Thame invest, which if we have some time, would be interesting to unpack as well. He's a passionate private investor and the founder and managing director of Stralman Dotcom, which we will also unpack. But as I just mentioned, private investor and very active on Twitter. And we're very interested to understand Andrew's philosophy of investing and particularly how he goes about finding and then, I guess investing in stocks. So, Andrew, looking forward to it. [00:03:18][44.4]

Andrew: [00:03:18] Really glad to be here, guys. And I've been listening to the podcast for a while. You guys do a great job. So, yeah, super excited to be here. [00:03:24][5.7]

Alec: [00:03:25] So, Andrew, before we before we get stuck into your background and your work at Stralman and as Bryce said, some specific stocks that we want to start with a bit of a game, we call it overrated or underrated, but perhaps it should be called overvalued or undervalued, where we throw out some key investing themes, topics, ideas, and we get your thoughts on whether they're overrated or underrated. Just to get a sense of how you're thinking as an investor. [00:03:49][24.8]

Andrew: [00:03:50] Is that a one word answer or can I [00:03:52][1.9]

Alec: [00:03:52] please to elaborate the one word answers and the silence afterwards sometimes get a little bit awkward. So we wouldn't want to hear the why as well [00:04:00][7.7]

Bryce: [00:04:00] unless your vanguard, who refused to answer with anything other than neutral on all of [00:04:08][7.9]

Alec: [00:04:10] its very own brand for them, the [00:04:11][1.5]

Andrew: [00:04:13] idea that our problems. [00:04:14][0.8]

Alec: [00:04:15] So we'll get stuck in to start at home, overrated or underrated. The ASX 200 index, [00:04:21][5.8]

Andrew: [00:04:22] I'd say underrated as an investment space for private investors. A lot of bosses are very excited about property and that kind of thing, but we actually have a pretty high level of ownership share ownership in this country, I think, if not the highest, one of the highest in the world. But a lot of people don't take advantage of it. So for that reason, I'll say underrated [00:04:42][19.7]

Bryce: [00:04:43] moving overseas, then overrated or underrated, the S&P 500, [00:04:46][3.1]

Andrew: [00:04:47] I'm going to go a bit contentious here and say overrated. It's obviously the world's largest market. It's got some of the best companies on it in the entire world. I've got exposure to it through a number of ETFs. But I think there's a lot of talk you hear from a lot of pundits sort of say you have to have overseas exposure and you should be investing direct in overseas markets. I think for most of us, unless you've got like millions and millions and millions to invest with, you've got to gain plenty of exposure with an ETF and you can focus all the hard work on the local stuff where you have a bit of a home advantage. [00:05:17][29.5]

Alec: [00:05:17] I like that. And I think that's you might you might be one of the first experts we've had on the show that have said the ASX 200 is underrated and the S&P 500 is overrated. So I'm liking this contrarian that you [00:05:29][11.8]

Andrew: [00:05:29] started right at the top. But we thought that with all those caveats underneath, I mean, I think it's a good market, the S&P 500, but I don't know if people who are out there aspiring to be private investors that they need to spend a huge amount of time on it when there's so much great local opportunity. [00:05:45][15.9]

Alec: [00:05:46] So moving to another part of the investing universe, overrated or underrated, investing in emerging markets. [00:05:53][7.2]

Andrew: [00:05:55] Again, from the context of your. Your average Australian private investor, I'd say overrated, very risky in emerging markets. I mean, equity markets in general, a reasonably risky emerging markets even more so. So unless you have some special insight or advantage there, I'd say there's no need to be a direct investor that [00:06:12][17.5]

Bryce: [00:06:13] moving back home then overrated or underrated, the Australian residential property market, [00:06:18][5.0]

Andrew: [00:06:19] overrated, underscore capital letters. But, you know, I think for so long now, I've been pretty negative on Australian property. I always put people off of by saying that. But I would start by saying that property is a fantastic asset, that any asset you can still do bad quality asset if you overpay. And I think the valuation metrics on average and again, like the share market, their individual exceptions to to the wider role. But I'd say on average, Australian property is well overvalued and has been for a while and has a lot of systemic risks for the country. So I'd say the other thing I'd just add to that as well, you've got horrible liquidity, huge transaction costs and almost no capacity to diversify. And again, you're extremely wealthy. So it's, well, overrated. [00:07:09][50.1]

Alec: [00:07:10] That gave me flashbacks to your time on the Motley Fool podcast. I seem to remember a few high horse rants about Australian property then as well. [00:07:18][8.0]

Andrew: [00:07:19] Can I say for the record that I think since then Aussie properties on on an inflation adjusted basis actually gone down a little bit. So I'll take that as a victory. [00:07:30][10.8]

Alec: [00:07:32] Well, you know, part of the reason that we started this podcast was because all of our might seem to have a one track mind to invest in property. So I feel like we're on a similar mission to get people away from property and into equity markets. [00:07:43][11.4]

Andrew: [00:07:44] I just think, again, I wouldn't want to be really careful here. I love it as an asset class. I really do. But there's this narrative here, and I think you need some context. I know you guys don't want to spend the whole podcast talking about property, but you started this, so you can't blame me. But we've had this scenario now really for the better part of 15, almost 20 years. We've had we've had this secular run in the property market that is is literally unprecedented in Australia and in global markets over such a time frame. So there's this idea that it never goes down. It's a it's a sure fire proposition and you hear some wonderful success stories. But in that period, Australia hasn't had a recession in that period. We've had some other structural factors, the rise of the two income family being a very underrated, underappreciated one, but also massively increased lending conditions, lower interest rates and all sort of rationally explain what's happened. But I think the problem here is that people just push and extrapolate that narrative forward to infinity. And so there's a lot of nuance to unpack with all of that. But I think for those reasons, I think Australians have a perverse view of what is, quote unquote, normal. [00:08:51][67.8]

Alec: [00:08:52] So then last one for this game, overrated or underrated Bitcoin? [00:08:56][3.9]

Andrew: [00:08:57] overrated. You're baiting me. Look, because the technology behind Bitcoin is fascinating. I think it's got some really interesting use cases. I think crypto definitely has a spot with so early in the history of this thing that I think it's very a very bold person who says that it's definitely going to be nothing and a waste of time. But at the same time, I just think that even if there's a long term bright future for crypto in general, ninety nine point nine percent of them are going to be worthless. So there's going to be we have to sort of understand this through the potential lens of survivorship bias if and when something emerges out of all of this. And I also think to an I really Deep Dive into this because I was fascinated by it. Any time I speak to a crypto, not no one can really give me a cogent a understanding of exactly how it works. And B, what problem is it trying to solve, I think is a really good value proposition for drug dealers and money holders and things like that. But I think I do wonder what problem is it trying to solve? And I know there are hard core libertarians have a very strong view on all of that. But for the majority of us who sort of believe in, I guess, potential longevity of our society, I, I don't I don't know exactly what problem it's going to solve that we don't have a pretty good solution for that. [00:10:24][87.2]

Bryce: [00:10:25] I don't know if you say the hardcore guys on Twitter at the moment who are suggesting that we're now witnessing the the end of the US dollar and fiat currency and this will be the rise of Bitcoin. [00:10:35][10.0]

Andrew: [00:10:36] I've seen a bit of it. And again, it's such a potential here to go down a rabbit warren, but I'll bite my tongue. Let's move [00:10:44][8.0]

Bryce: [00:10:44] on. So, Andrew, before we jump into strawman and then some specific stocks, we always like to get an understanding of your background and particularly the story behind your first. Investment, there are usually some lessons that you may have taken from that first investment that you sort of carry through to today. So if you don't mind sharing the story of your first investment, that would be great show. [00:11:08][23.8]

Andrew: [00:11:08] So it was in the tech boom of the late 90s. I just got a job at Comsec. I didn't really know what a share was, but apparently they were things that only went up and massively so, especially if there was a dot com or any kind of tech Infernus related to it. So without actually really knowing much, except for that I bought this this company called Liberty One, I did incredibly well on it, like on paper. I can't remember how much it was up, but something ridiculous. And then the tech wreck happened and it went down. So I bought some more. I went down and bought some more thinking that I could average my losses away and it ended at zero. So it was a wonderful I like to think of it as an education or tutorial expense. And I actually think there's a couple of really good licencee. First, these know what you're buying, which I think is the number one mistake that most new investors make. They can tell you what the stock price is done. They can tell you virtually nothing beyond just sort of superficial level as to what the company does. So, you know the company and also understand when your investment thesis is broken, if you can admit that you never had one in the first place. And when that happens, regardless of your loss, get the hell out. Probably the two biggest lessons that [00:12:23][75.3]

Alec: [00:12:24] I'm interested in unpacking that idea of an investment thesis further when we talk about your individual stocks, because I think it's definitely something we've spoken about on the podcast, but I guess it would be interesting to unpack it in very specific examples as we have this conversation today. But before we get there, a couple more questions about your background. So you studied microbiology at university and then ended up in finance. What was the journey and how did that happen? [00:12:49][24.9]

Andrew: [00:12:50] What went wrong? I realised I realised that there was no money in science, that I was a very shallow person who likes money. I, I think I think it was more a stop gap that became permanent. So I graduated. I did not as degree. I was actually applying for a few jobs. Johnson and Johnson was the last application that I made. But there was a long process there and I needed cash. And so there was God's honest truth. We how old I am. So this is this is when there was like job vacancies in the newspaper and there was literally an ad in there that said, do you want to be a broker called Vince? Or maybe it was Vinnie Colvin, so-called Vinnie. I had some number there. And so I did. And it turned out to be some dodgy recruitment agency that CommSec had hired. And Comsec back then was nothing. It was like 50 people. It was a small subsidiary of the Commonwealth Bank. And they were just saying, if this low cost brokerage on line, I get any kind of work. And so there was a I'd like to say it was my associate genius and raw talent, but so let me stay on the field. But the truth of the matter is, it was just, you know, this industry was being formed. Comsec was the clear market leader. It exploded. So just by virtue of being able to not be too terrible, I got carried along with that. And then by the time I sort of blinked, it was sort of I I'd started a career and the field of microbiology had moved on. And that sort of passed me by. And I actually found out that I really liked investing. And so the rest is history. [00:14:22][92.4]

Bryce: [00:14:23] So you've moved through Rose as an equity analyst and as we said, spent some time working at The Motley Fool. And alongside that, you have also pursued some entrepreneurial ideas. I read that you started an espresso and chocolate bar back in the day. Is that [00:14:38][15.2]

Andrew: [00:14:38] true? Yes, it's true. And they have that go look great. OK, well, it could have been worse. We started from scratch. We had to do the fit out. We ran it for a year and we sold it for our total funds invested. So we lost in terms of the opportunity, cost and wages in that kind of stuff. But it wasn't a great experience. And again, I'd put it down as a good education expenses. It was one understanding that as an industry it was just really poor economics as a general rule. And I think anyone who's been in that space knows that even those that have been successful there know it's very hard fought. And. Yeah, and the other thing that was interesting as well is, is that just how massively important, seemingly small influences can have and the role of chance and luck in all of this. Not that I'm trying to blame luck on the fortune there, but it was just it was a very it was a very interesting experience. So I'm glad I did it, but I wouldn't go into that space again. [00:15:41][62.8]

Bryce: [00:15:42] You're now the founder and managing director of Stralman dot com. And for our listeners who haven't heard of it, you must go and check it out. It's an online investment community where really the investors go on and. Their investing ideas, but also, I guess, scrutinise others and I guess give feedback, this peer review, independent research and recommendations from some of Australia's best private investors. It's an awesome platform and it's really now sort of starting to take form and shape. And I guess if we can just hear from you, Andrew, why did you start Stralman? There are a number of other similar communities available to the everyday investor. And what perhaps does it offer that otherwise wouldn't be able to find in competitive platforms? [00:16:29][47.4]

Andrew: [00:16:30] Yeah, I think it strikes me as really odd that 20 20 that if you're a private investor, you really sort of got Twitter and some old school forms to go to. There's not really a great place to collaborate in the places that are that don't have any accountability or structure to it. So plenty of places online you can chat stocks, but I mean, who's the person at the other end? I mean, who are they to say what they saying? What's their track record, what what other people think of their opinion? So I wanted to have a platform where really I mean, getting rid of all the tech lingo. It's really just an investment club, you know, and like the old school investment club where you might gather with your mates around the kitchen table and talk style and share ideas and question each other. I just wanted to do that online. But again, give people sort of the tools so that they could do it in a convivial, yet robust sort of way. It's been a long journey because it's just I'm not a developer and I've had to outsource a lot of the work. So it's it's taken a while to take home, but it's really excited, actually. We just released a new version a couple of weeks ago, which allows people to manage virtual portfolios. And we've got some really cool new features in the works as well. So it's it's come a long way. We've got about seven thousand members on there now, which is great. We've never done any advertising for that. It's all organic. And what I'm really proud of, too, is that of the people that we've had, we launched a public beta and light twenty, seventeen. We sort of progressively expanded it from there. But but since that point in time, we have this thing called the Stralman Index, which tracks the most popular recommendations, and that's done more than 20 per cent per annum since then, even if you include the latest sell off. So it's again, for me that accountability is really important. And there's just a nice bit of social proof in what the index has done and long may continue. [00:18:15][105.4]

Alec: [00:18:16] So should we be expecting a strawman index fund in the coming years? [00:18:20][3.8]

Andrew: [00:18:20] It's always been built with a view for that in mind. I'm very big as an investor on optionality. I mean, just you just don't know what's going to work and what's not what opportunities might present. So so that was one of the things that when we first conceived of it, we would be actually cool if we could put some real money behind that. So it's built in a way that you can front run it. It waits for the market to close before it does its rankings and weightings and all of that kind of stuff. And it's built in such a way that people could follow it in real time as well. So we do a weekly rebalance and I probably shouldn't get into all the maths and algorithms behind it. But but it is it is very much structured in that fashion. And the hope is, is that one day we'll be able to find a fund manager who will see that with a bit of passion and you'll be able to invest directly in the the an index. [00:19:08][47.4]

Bryce: [00:19:08] I notice that one of the stocks that is the second highest holding in the index is Pushpin Holdings, which is one of the ones that we're going to be discussing in a minute. So looking forward to jumping into that. But is Stralman free for its users, Andrew? [00:19:24][15.4]

Andrew: [00:19:24] Yeah, one hundred percent free at this stage. We need to be viable so it won't always be free. But as I said, the big on optionality and not sort of trying to be too rigid in our thinking. But the long term thinking is really what I'd like to do is actually provide a platform for contributors to monetise their IP. So if you're a passionate private investor, why share all your stuff for free on copper or Twitter when you can actually put it up on a platform, attract an audience and monetise that? So we're looking at a model that would allow us to do that. Plus this some other things as well, whether it might be through advertising or the usual kind of speal, those kinds of things. But if and when those things happen, we're always going to have a freemium version where you'll have the vast majority of functionality and content available for free. [00:20:09][44.9]

Bryce: [00:20:10] Yeah, I like that. I like and I have a bunch of secret herbs and spices that we'd like to share with that audience but don't want to give it away for free. So let us know when that forum is [00:20:20][9.7]

Andrew: [00:20:20] up the show. I think that a lot of people in that in that category, and rightly so, I mean, anyone who's a serious investor knows how much work goes into this stuff. And so to sort of just give it away seems a bit unreasonable. And I think also other people recognise the value of good content as well in the more than happy to pay, especially when they know that so many newsletters out there offer such poor advice. You know, if you've got something that has legitimate track record there and it's probably going to only be the cost of a few cups of coffee a month, it's pretty good value. [00:20:48][28.6]

Alec: [00:20:49] So, Andrew, we've teased the idea of stock specific chat, and so I think we should get stuck into that. But before we. I want to introduce the discussion with a more broad and general question, I guess, and that is, do you have an investing philosophy when you invest personally? [00:21:05][15.9]

Andrew: [00:21:06] Yeah, one hundred percent. I mean, what are you doing if you don't? I mean, what is your North Star to guide your decisions? You need a big idea or a big set of ideas, the bones from which to sort of put the meat around, so to speak. So, yeah, I definitely have an investment philosophy and I think it's probably best stated as good businesses at good prices held for the long term. [00:21:28][22.6]

Bryce: [00:21:29] How did you develop that philosophy? [00:21:30][1.5]

Andrew: [00:21:31] Trial and error. And I think having worked in the industry for so long, I don't know what your your language content warning is on the podcast, but there's a lot of shit out there and it was really interesting for me. So I come from a science background where everything absolutely can hypothesise about things. But at the end of the day, you need to sort of test them in good theory was one that was supported by the evidence. And then I came into finance. And there's a you guys know better than anyone. There's a thousand different sort of philosophies and approaches and stuff out there. But but when you actually sort of look for evidence of their success, you don't find a lot of it. I mean, of course, you'll find the thing about the market is you'll be able to prove anything with an example, because there's literally thousands and thousands of stocks and they've got decades and decades of history. So you can make up any bias and then point to an example with that that would have worked. But when you approach that rigorously from a statistical standpoint and Lord knows a bunch of academics have done this over the years, you start to very quickly realise how much crap is out there. And it was always really perplexing to me as well that there's so many people who had cracked the magic formula and we're just happy to sell it to you for a couple hundred bucks. I mean, just if I had the formula that then led into gold, I'm going to use it. Right. I'm not going to I'm not just going to give it away in some crappy subscription. So Dencio questioned the investment philosophy was really just formed through observation and trial and error. And like so many people who I'm sure you've spoken to on the podcast before, you eventually you discover Buffett and Buffett himself borrowed a lot of his ideas from Graham and others and developed by Mongar. And I mean, there's plenty of other really famous and successful quote unquote, value investors that I guess it's just the best. But that set of ideas, that core set of ideas really resonated with me. But more to the point, there's just a lot of demonstrable evidence that that it tends to work very, very well. And so for that reason, I started going more in that direction. And over time, I've just found that it's been validated again and again and again. So we call the website Stralman because I'm a big believer in having your ideas shut down if if they're not good. So I would like to say it's an investment philosophy, not an ideology. If someone can show me a better risk adjusted approach, I'm all ears. But until that happens, this is this is the approach I'm going to stick to. [00:23:56][144.8]

Alec: [00:23:57] I like the fact that you said you want your ideas to be shut down because Bryce has promised me that he's going to shoot down one of these ideas in this interview today [00:24:04][7.7]

Andrew: [00:24:05] with nothing less. [00:24:08][2.6]

Alec: [00:24:10] So I guess as we get stuck into the individual stocks and we've got three to talk about today, so we might go one by one. I guess what we want to do is really understand what the company is, how you found it, because that's a big question in our Equity Mates communities. Just where do you start and then what do you like about it or what's your investment thesis? And then potentially open it out to a bit of a chat around metrics, valuation, all the good stuff. So if we start with the first one, which is Integrated Research Ltd ASX Code I. Ah, I can you tell us a little bit about the company and what it does. [00:24:44][33.9]

Andrew: [00:24:45] Yeah, sure. And apologies in advance to Stralman members and others. I know I tend to go on about the same sort of small set of companies. Having said that though, I've got to just say at the beginning there's no extra points for novelty in investing. Yeah, and there's no extra points for degree of difficulty. So I tend to again, when you study the great investors, I mean, most of their returns come from a small subset of their total selections and they just become super intimate with that stock in terms of understanding it, which gives them a real edge in investing. And that is a source of advantage that I think too many people ignore. So I know back in The Motley Fool, guys, when we're running a newsletter and people just wanted something new all the time, which which always struck me as strange, I would imagine that what you want is the best idea. You know, even if it's the same idea and I forget who said it might have been Peter Lynch, you said that the best stock to buy is probably one that you already own. So with that little disclaimer out of the way and apologies for talking about research again, I do like it for those that aren't familiar. These guys have what they call, quote unquote, experience management solutions. So it's really software that helps you monitor and troubleshoot and optimise system critical. IT infrastructure. So these guys have huge enterprise level clients, so it's something like one hundred and twenty five of the Fortune 500 companies use these guys have for a long time. And this is a tech company, but it's an old school tech company was formed in nineteen eighty eight. So you could have bought this in the first tech boom. I got to check that was listed back then. But anyway, it's been around for a long, long time and it just has characteristics that really appeal to me. The first is that it's got extremely sticky customers. So this current covid-19 selloff that we're saying, I'd be really surprised if they lost too many customers there, because it's not the kind of software that you just say, no, we don't need this to system critical. That's really nice to have a dependable source of income. It's also the leader in its market. So it's an easy company, but this is a global business. Ninety five percent of the revenue comes from overseas. And as I said, some of the biggest companies on the planet, they've got a long track record of really attractive metrics. You said we talk about metrics at the end, so I'll go into some of the more later on. But really high return on equity, the net margins and what they make after tax, after costs, after everything on their revenue has consistently been above 20 percent for a long time. And if there's one thing that you can say is it is a general truism about investing, is that any company that can sustain double digit net margins in that vicinity has got a serious competitive advantage or at least significant pricing power. And I guess the last thing I'd say without going on for too long is that they've got extraordinarily strong balance sheet, no debt, very rarely have any debt, lots and lots and lots of cash aligned management, great track record of shareholder wealth creation. And I think it's a good value at the moment. [00:27:48][183.4]

Alec: [00:27:49] Yeah, it's fascinating. I've been looking at some of those metrics and they're pretty phenomenal. So we will get into that in a little bit. But I guess before we do, how did you find this company? [00:27:59][10.0]

Andrew: [00:28:00] That's actually a good question. I've known for so long I can't really think it might have actually come up when I was working a team invest back in the day. Yeah, I couldn't actually tell you. As I said before, though, once, I think you get a real edge in becoming very familiar with the company and following it for many, many years, it allows you to put new information in context as it's as it's released. So integrated research is very much an example of that. [00:28:25][25.4]

Bryce: [00:28:26] And so you spoke about return on equity. You spoke about net margin, no debt, great cash balance and briefly about management. Are these the sorts of metrics that you plug into a screen if you're to try and find stocks that are similar to this? [00:28:44][18.1]

Andrew: [00:28:44] Yes and no. First thing, I don't actually use a screener. I think there are very rough and ready kind of tool. Like at some point, if you're brand new to the market, you look at it, as I said, 20 companies, that you need something to sort of to whittle it down. And I think that's what screen is can be useful. But frankly, these days, I don't really use it because there's a lot of false negatives and false positives that come up in these screens. But generally speaking, before I even consider a metric, I actually start off on the qualitative factors and what the hell do these guys do? And can can I understand that? And frankly, with most businesses I look at, I can't I can say a sentence as to what they do, what the industry is. But I mean, really understand this business. Could I have an intelligent conversation with the CEO about this business? And there's no shame in not knowing. But if you don't know, then for the love of God, don't invest. So I think I think that's a really handy starting off point. The art of investing is all about trying to, I think, independently appraised value. I mean, to do that, you need to have a pretty good understanding of the business. So the metrics that you're looking at all laid into that, what gives me some kind of visibility, understanding first and then visibility second in terms of what the future for this business looks like, does its history give me some confidence that there's something special here and that that momentum in business activity can continue? And now I've got a bit of a starting point to sort of Thumbsucker valuation and begin the long and never ending process of refinement. [00:30:20][95.8]

Alec: [00:30:21] We touched on a little bit there, but it would be good to get a little bit more specific in regards to this company. So after you did some research, you looked at some of the metrics, you liked it. How did you go about forming an investment thesis? And can you tell us what your thesis is for this company? [00:30:37][15.8]

Andrew: [00:30:38] Yeah, I pretty much gave it to you. The other thing that's important to mention with the time investment thesis, it's coming a bit sexier in recent times because it sounds really technical. But a good investment thesis is something that you could really write on a napkin. I think one page should be able to give you an. Outline. If someone said to you, why are you buying this thing, you need to outline the big picture. Obviously you need to be able to go into detail on some of those points on it. But but the high level one doesn't have to be overly complex. In fact, the more complex it is, I would argue, the greater the risk is there. So, yeah, the investment thesis is that this is a very successful company with a solid pedigree, with a very strong competitive position, with very attractive financials, extremely well managed in an industry that is growing and is likely to keep growing and in which it can at the very least maintain its market share, if not increase its market share over time. And the final part of the thesis is that I believe it's trading at a value which is below its intrinsic value, that its market is offering you a price which is better than fair. [00:31:48][70.0]

Bryce: [00:31:49] So it's currently trading at three dollars and nine cents. At the time of recording, it dropped as low as a dollar seventy towards the end of last year. I'm interested to know how you buy in and out of a stock like this, Andrew. Do you actively buy and sell or you buy five years ago and then that's it. How are you managing that? [00:32:13][24.1]

Andrew: [00:32:14] Excellent question. So part of what we're trying to sort of spotlight on Stralman is what people are doing. So if you go to my profile on Stralman, you'll see exactly what I've done. So my personal account, I've held it for a while, but the straw man, I purchase it in November. Two thousand and eighteen at the Dollars. It's great. It's a twenty seven percent money compound return through Talaal, which is great. Really happy with this stuff. Always makes you look smart in retrospect. And believe you me, there are other examples I could give you which which do anything but. But even in the ones that make you look smart, I mean, I didn't pick the bottom and it didn't start to prove itself for a while. So the best investment I've ever made you end up looking stupid for a long time and you really start to doubt yourself. It's that old saying, you know, the market is away short term. It's a voting machine. Long term, it's a weighing machine. So it's really naive to think that you're going to buy a share. And it's the day after that. Everyone else in the market comes to the conclusion that these things are ridiculously underpriced. It doesn't happen that way. So and when do I sell out? I actually hope to never sell. I think that the real value is in the thing itself. If that thing that you're holding is becoming more and more valuable, why would you want to end that relationship? It seems pretty crazy to me. So there's only two reasons I would sell. The first is that the investment thesis is broken, so I've written it down of articulated what I expect to happen again. There's some detail beyond that sort of higher level periphery. But if the company comes out tomorrow and makes an announcement which fundamentally shows that some important assumptions are wrong, then that thesis is busted and I'm out. You don't even muck around with that. You can always buy back in if you realise you made a mistake. So it's not about timing the market. It's nothing like that is just, hey, I'm buying this share for these reasons, you know, a month or whatever. Later, it's like, oh, that's that's fundamentally flawed. Get the hell out. So that's that's the first reason to sell. The second one is that if the market just offers you a price that is simply too good to be true. So integrated research, a great business. If the market turned around tomorrow and said, I'll give you six bucks a share, I'll take it, you don't want to end the relationship, but that's too good to be true. So when you get a silly price, I don't I don't want to pretend to you that I've got a valuation that's so accurate that gets five or ten percent above I'm out. But when you really tried to do it, sensible, smart, objective way and the market's come at it and and given a valuation that's significantly, significantly above that, there's enough of a margin of safety in that to sort of say, you know what, I'll take the bird in the hand here and I'll sell out. But unless the market is ridiculously overpriced or the thesis is busted, I'll I'll never sell. In fact, I think actually that's another classic mistake. The new investors is that they buy something for whatever reason, whether it's a good reason or bad reason, they buy something. And through lack of skill or whatever it is, let's say a year later, it's gone up 20 percent from market, which tends to give you 10 percent per year. And every year that's a great return. And they'll sell sell because they've anchored on a purchase price market. Doesn't know what you paid for your share, but that's that's all most people tend to care about, like, oh, I've got a twenty percent profit here. And through fear of losing that profit, they will often sell out. Now if you do that, even if you can, to get those kinds of returns pretty regularly, you're never going to build significant wealth. When you look at every successful investor out there long term, the money hasn't come because they managed to lock in ten or twenty percent gains on a regular basis. The money came usually from a small subset of the holdings that just delivered monster returns compounded annually at high double digit rates for a long time. Like that's what you want. And so when you look. Afterpay today or zero today, are you A2 milk, you name your your darling ASX stock? It wasn't the dude that made 30 percent three years ago that's laughing all the way to the bank. It's the person who held on to it all the way. So selling can often selling at a profit, selling at a good profit can often be your biggest regrets in investing. And this certainly my biggest regrets. [00:36:17][243.4]

Bryce: [00:37:40] Are you so, Andrew, I'm looking at some of these metrics and I think now's the time to get stuck in. And I guess I want to pose this question in a roundabout way. If I'm looking at a company that is delivered double digit annual revenue growth for the last ten years, double digit earnings per share growth annually for the last ten years has no debt, delivers return on equity consistently in the high 20s or 30s, and yet is trading at a pretty reasonable price to earnings valuation. I guess my interest is piqued one, because it looks like a good company, but two, it wasn't trading at a premium. [00:38:16][36.0]

Andrew: [00:38:17] You tell me. Yeah. [00:38:19][2.0]

Alec: [00:38:25] So do you have any thoughts on [00:38:26][0.9]

Andrew: [00:38:26] what why that is the case? I can guess. But just that I mean, look, may continue by the way. I mean, I would be the happiest person alive if this thing dropped to a dollar tomorrow on the proviso that there was nothing fundamental behind that. I mean, isn't that wonderful? I've now got an opportunity to buy the same asset, the exact same asset at a significant discount as to what it was yesterday. I mean, that is a good thing to happen again. Very big caveat there. If nothing is changed fundamentally with the business, if they announced that the CFO is run off to Jamaica with all the money, that that's probably a good reason for the shares to fall that much. But look, I don't know. The market does crazy stuff all the time, and I don't wanna get too far into the theory here. But you're either a proponent of what they call the efficient market hypothesis or you're not. And if you are and this is pretty good arguments out there, which suggests that the market tends to be always pretty accurate in pricing things. In other words, the price is always fair relative to the business prospects. Then to do better than that is, except with a bit of luck, virtually impossible. So I think I think you have to fund it. If you're going to be a direct investor, if you're going to be the kind of person that buys and sells individual shares, you have to have that belief that there's a lot of inefficiency in the market, not massive inefficiency all the time, but enough for you to be able to gain an edge and to exploit. And just to go back to an earlier point, because I have followed this company for years, I can tell you it does this all of the time where they actually at such a low level a couple of years ago because they had some problems in the European operations. There's a poor execution and things that were objectively bad. I want to look at it through rose coloured glasses. But again, anyone who's been in business knows that even the best businesses stumble, suffer from bad luck, just make poor executive decisions from time to time. So if you look for perfection, you're never going to get it. But what you need to do is say when something goes wrong, is this a structural issue? Is the hole in the boat so substantial that this thing is sinking? It might take a while, but it's going down, or is this something that that will be fixed and will continue to sail on its merry way? So one of the questions I love to pose to other people when we're talking stocks is if someone's pitching the stock, they love it. Obviously, the question I want to ask is, well, what's the bear case? I'm a big believer in the idea. If you if you can't articulate the bear case and understand it as well as the bears, you shouldn't be buying it. And with integrated. Don't come across anything good other than some ideas that maybe eating the price, so to speak. So what are people looking at the pricing? It's fair to big a company, as you say, it's been around for a while. It's more mature, its growth prospects and what they once were. Trees don't grow to the sky. They're already the largest player in the field. Where is all this extra growth coming from? So it might be a slight valuation sort of bear basis there, but that's a long answer. But to my mind, the bulls have a better idea. [00:41:21][175.4]

Bryce: [00:41:22] Seems a bit too good to be true. I don't want [00:41:24][1.9]

Andrew: [00:41:24] to. I don't want to. I don't want to sell this Bryce. And this isn't a company that you're going to buy and is going to double your money tomorrow. But maybe it will. But it's not because of anything I've outlined. But I'm buying it on the expectation that over the next five, 10 years it can compound with dividends. And by the way, they pay dividends with dividends that this can this can deliver a total shareholder return. That's at least 10 or 12 percent over that period. And frankly, if that's quote unquote all it does, happy days. I mean, in this low interest rate environment, that is that is a wonderful return and it is a wonderful return. When you look at it as you should on a risk adjusted basis. I mean, if I get 10 percent over the next 10 years per annum on Bitcoin versus 10 percent per year on average and integrated research, both the same return, but one was far less of a gamble. [00:42:10][46.3]

Bryce: [00:42:12] So let's move to the second stock that is on your watch list in your portfolio, and that is push pay holdings, ASX Ticker P p h. Again, what is push pay? What do they do and how do you come across it? [00:42:26][13.8]

Andrew: [00:42:26] Push is a business that does payment. It's a payment platform for the five cent. So they tithing and donations for churches, which is a real interesting payment. Platforms are very well established, some very big ones. They're actually the successful ones are absolutely the best businesses you will ever get because you're just clipping the ticket on the way through the Visa MasterCard if you really want the best examples ever of that. But even in more recent times, those are the ones that are really attractive. But none of them have gone into this nation. And I think the mistake people make with push pay is that, you know, it's replacing the sort of old collection plate that you handed around at the end of the service. The customers that these guys are targeting are the megachurches in the US. This is where it's like football stadium kind of things with the rock band up the front and no spotlights and all of this kind of stuff. So the huge organisations, it's like a two billion dollar a year industry. And yet these huge organisations and perhaps it's a bit easy to be cynical on this organisation. Slash profit Profit-Making Enterprises are still running with checks and cash, and churches have special requirements that that necessitates the use of a specific platform. So it's a great company. This is the overnight success story, that sort of 10 years in the making. But they are the largest player in this space and they've only now, I think, got about 10 percent of the market. They're targeting 50 percent of the medium and large church segment in the US. So, again, we're talking about metrics, success. Businesses have all their own unique metrics. So lifetime value retention rate churn, all of these kinds of things. And just to save everyone a hell of a lot of time and just go to the ASX and look at these latest results. In fact, go back for the last three years and look at the presentation decks. And every metric that you want to look at is going bottom left to top right. You know, whether it's retention, whether it's annual recurring revenue, you name it, it's moving in the right direction. And interestingly, they've now gone to cash flow positive. So it was like a lot of tech companies. It was it was losing cash as they were developing the product and capturing market share. But they passed this inflexion point, which are always really interesting, especially for these kinds of companies, which tend to have a great deal of operating leverage in the sense that they can service. I'm going to make this number because I don't know exactly what it is, but they can service 30 percent more clients without a single cent in expenses. So it means that as you pass break, even the growth at the top line is magnified at the bottom line. So you've already got a business here that's growing its its revenue. Twenty percent. It has been for a while. And as they've now tipped into positive on the bottom line, that's going to grow at an even stronger rate, particularly if you've got confidence that they've got some some cost discipline, which I very firmly think that they do. [00:45:20][173.7]

Bryce: [00:45:20] So Andrew, it's only been listed for a few years. And from your point of view, are you in this because it's a growth play or more of a value play? [00:45:29][8.3]

Andrew: [00:45:29] I got to be honest with you, I don't I don't like those times I'm with any sensible investment is a value investment, even if you're going for an unprofitable hypergrowth kind of company. I mean, if you if you're not paying good value, you know what I mean? You still it's still a bad investment. So, yeah, I'm kind of playing with semantics there, but not really. So you're right, it's a growth business. You're not buying it for its dividend. It doesn't have one, but at the same. I think it's a growth business that represents good value relative to the future cash flows of the company. You're right, it hasn't been listed for a long time. But again, you can you can dig into this look at their perspectives. They've been around for longer than that. And it was always struck me as a bit strange that in a market, particularly last year, which was just going nuts for anything that had anything to do with sassed, this was just trading on ratios that were actually bargain basement by comparison. And yet the metrics super attractive. I think a lot of people misunderstand the sector that it's in, but growth business trading at an attractive price. [00:46:29][59.8]

Alec: [00:46:30] So, Andrew, I'm interested in asking you a question around circle of competence. Now, you're obviously tech entrepreneurs we've spoken about with your strawman site, but push pay is SACE business, as we've spoken about. How do you think about the underlying technology and your grasp of, you know, whether they actually have the best technology, whether they're going to be disrupted by a larger incumbent moving into the space or another disruptor in the field? How do you think about assessing that side of it and whether you have the I guess the competence or the knowledge to be able to do that? [00:47:04][33.6]

Andrew: [00:47:04] That is an outstanding question. Well, what's interesting with a lot of these so-called technology companies is that the technology that they're using actually isn't that advanced. I don't know what code it's written. They're not reimagining it. Engineering and development they're using very well. They're on us. They're probably using Ruby on rails or one of the well known coding languages. There is nothing unique about the building blocks and the tools that have been employed here. What's unique about it is how it's being put together. And what gives me confidence in it is that one, there's a very strong, I guess, social proof business proof in the sense that every tech company is going to conquer the world. But when you when you can actually look at a track record over several years where the biggest players in the space are using it and some of the biggest advocates, you know, well, the technology has got to be pretty attractive when you've got nearly one hundred percent customer retention over many, many years. Again, money talks. And so this was crappy one, they might be able to trick a few people into selling it, but they might be getting out of it as soon as possible. But with one hundred percent retention, you know, something good is there. And with the rate of growth, you know that that's being able to be that value actively being able to be communicated. But I think one of the most attractive things about it is and this is true for a lot of tech businesses like to claim it's true. It's legitimately true for some businesses is that they have what's called a network effect. In other words, the product itself becomes more valuable the more people are mentioning Visa and MasterCard. That is that is the best example that you can possibly give there. Better technologies and payment methods out there. Yes, but everywhere accepts fees from MasterCard is so well established, it's so well entrenched. It's very, very hard for people to come in. So what Pushpa is doing is actually building a pretty potent network effect amongst its users. And when you get more and more churches on there and more and more worshippers on there, it becomes more and more powerful. So I think they're in a good position now. But if they manage to go from 10 percent to 20 percent market share, it becomes even stronger. So you and I could invest a bunch of money and come up with a better app. I'm sure we could if we if we had the know how and skill and patience and capital funding. But that's not the challenge, that the challenge is to disrupt the grass that these guys have on the market. So hopefully that answers your question. It's partly about the technology, but it's more and more about that network effect. [00:49:32][148.0]

Bryce: [00:49:32] So we will move to the final one, Andrew, which seems to be another tech company, and that is Catapult Group International Ltd. Correct me, by the way, Tica is CAT. So, again, if you could just give us a brief intro into what this company does. And again, what are some of the key metrics that stand out to you for catapult? [00:49:53][21.1]

Andrew: [00:49:54] Yeah, I thought I saw a bit of a contentious one in here. When you said at the start this one you wanted to challenge me on, I thought [00:49:59][4.9]

Alec: [00:50:02] I'm going to be thrown under the bus, but I'm [00:50:05][2.9]

Bryce: [00:50:08] nothing [00:50:08][0.0]

Andrew: [00:50:09] new would be legitimate in having some criticisms. And this company has attracted a lot of criticism in the past. But I'm getting ahead of myself. I'll come back to that. So so what a catapult to these guys, to sports analytics. They've got little devices. In fact, if you see any of the major teams train, they usually got this little Mandorah thing on with a little square in the back of it. Yeah, that's a catapult device. It's like a tiny little thing that measures velocity, impact, momentum, a million other little things. And it feeds it back to the coach loving little dashboard display, which gives you a whole bunch of analytics. So, you know, it's probably not necessarily something that your local and the 12 team is going to have. But when you're at the elite sports level, when you're putting people in wind tunnels and spending that kind of money on on getting the most out of your assets. And when I say assets, I mean players, of course, and when you're spending 10 million dollars for a player, you really want to get the best out of them. So at this elite level, this is this is big business. But these guys, I think it's actually fair to say, invented the category that came out of the Australian Institute of Sport yonks ago. And it's sort of been commercialised and further developed since then. But it's, again, very high top line growth for a long time. They are the world leaders in their market. They've still got a huge amount of market share to capture. They've got a good part of the revenue generated offshore again. So I'll just touch on that point quickly. So integrated research pushed by and also catapult most of their money comes from the US. I said before, why bother investing in the S&P? Five hundred. It's no accident that a lot of the stocks that I like and hold actually have have a lot of their business over there. So you kind of get that diversification anyway. But what's particularly interesting at this point in time is with the Aussie dollar falling, all of these guys get a massive free kick in that regard to which is a little bit of extra sweetener in these challenging times. But after many years and a lot of stumbles that they had 13 million dollars in free cash flow at the last half. They reported at the start of the year they expect to be free cash flow positive on an ongoing basis for the FBI. Twenty one and going forward. So, again, they're passing this inflexion point of being this loss making. And believe you me, they have really been a loss making operation, bleeding cash for a long, long, long time, tipping into this into this cash flow positive scenario. The reason why so many people love to hate this thing went from 50 cents up to four dollars, actually bought my first postulant five cents. I should just slip that in there because I would not do it again before you think I'm too smart. I didn't sell it for Dollars and I rode it all the way back again. And it got I did sell illogicality Ren to fifty at one stage. But at one point last year it got back to, I want to say, 70 cents or something like that. And more recently it's gone from two Dollars all the way back. And so it's had this thing where it's actually a position that since I bought my first parcel, I've written it sort of from a dollar to two dollars plus on two separate occasions. I'm going for a third person and I'm lucky. Well, I mean, the the compound annual return on the money adjusted money weighted basis, which is which is the right way to do it, has been super attractive since day one. It's just that if I in hindsight, I would have I would have time to look that up. But again, I say that more to make the point that timing is really not an important thing. You've got a good business that eventually does well. It comes out in the wash in the end, even if you have these massive swings. But just to give the concern here, so they they were found a lid for a while and these guys were just, in a word, profligate, that they they had very poor cost discipline. They made a bunch of acquisitions, not necessarily bad acquisitions in total, but certainly a lot of money paid for them. And so even though sales were growing really well, costs were growing even faster. So it's just this perpetual loss making machine. A lot of shareholder advocacy went on, particularly amongst some really good fund managers. I know the board got the message, the CEO resigned. Read into that what you will, maybe something beyond behind the scenes there. And they've got a new guy, we'll Lopez, who has been brought in, who's got a very, very clear focus. So my proposition here is, is that, A, the industry is super exciting, but it's going really, really, really fast. See, it's the market leader in this space day, despite all its troubles throughout all of these these times, the topline sales have been growing at an incredibly strong rate. And I think that's going a long way to run out. And finally, finally, you've got someone in control who it's early days, but seems is a lot more cost focussed, which means that we'll be able to unleash some of this latent operating leverage and finally gets real value created for shareholders. So things took a massive tumble in the wake of the coronavirus scare because a whole bunch of leagues have shut down. But I would posit that, again, this is not something it's like it's like pushpin religion or religions, not that religion is not going to go anywhere. I'd say the same with sport. And I think although they are going to have a tough couple of years with new sales, they'll still have, I think. Seventy five percent of the revenues are based on long term subscription payments. They've got thirty dollars million in liquidity available to them. So they did a raise last year. So they've actually timed that well. So they'll survive. They'll come out the other side. I notice that one of their competitors is in a really tough position at the moment due to balance sheet worries. So I know that there's a lot of hairs on it in the past, but I think it's sort of around the stockmarket right at the moment. I think it's good value. And if you are savvy enough, you actually could have got it around fifty cents a month ago. [00:55:44][335.1]

Alec: [00:55:45] So and I've got to ask you, paint a rosy picture there and you talk about it's got long term contracts with recurring revenue to add some colour to that, it's got. Three thousand clients spread across one hundred and fifty sporting federations worldwide. Names like Real Madrid, AC Milan, the New York Jets in the NFL, the French national soccer team, the Dallas Mavs in the NBA, like NRL, AFL, like its big names and they've got contracts. Why can't they turn a profit with the customer base that they've got? [00:56:15][30.3]

Andrew: [00:56:16] They could have. So if I had a time machine, I would go back five years. They had this really great tech that came out of the Australian Institute of Sport and they wanted to own the text that quote unquote, then wanted to bulk up because they bought S, which is a video analytics business. We've got athlete management systems that they develop. And so they have very, very bold plans. And maybe when we're talking in five, ten years, we'll go. Actually, that wasn't silly. They've actually they've actually spun that into a huge amount of shareholder value. But but to answer your question, they were too ambitious and they were too profligate, so they just couldn't manage it well in terms of costs. So it's one of these things where the top line great, great story at the bottom line, there was nothing left over for shareholders worse than that to stay afloat. They had to do all these capital raise and they did one capital raising after another and ever lower prices to keep the damn thing afloat. And it was frankly, it was just bad management. [00:57:13][57.0]

Alec: [00:57:14] So then if we if we turn to the question of investment thesis, given that these guys have had great top line growth but have struggled with their costs, and you mentioned before that the new CEO is very cost focussed, is your investment thesis quite specific, that they will be able to continue their strength against their competitors, continue growing their top line? But the thesis really comes down to they're going to be able to control their costs better than they have before and become a long term profitable business. [00:57:42][28.1]

Andrew: [00:57:42] That is a key part of it. And for a lot of time, that was really up in the air. So although I'd sort of maintain the holding in this over the years, it was a much smaller holding in the past on the podcast that I did with cold water and that just we don't do it any more. But we had some really good debates over this one. And I even even when it got down to 70 percent last year before then, you see always in place, you just get to a point occasionally you think, oh, man, I know this has got troubles, but it's in the price. And then so there's a huge margin of safety there. So obviously that couldn't be said when it was, again, pre covid-19 when I was up around two Dollars. But that's because I thought what had changed there is that they had gotten the message. And to your exact point, there were going to to approach things in a much more disciplined manner. So since then, in speaking to management and just looking at the materials that they've got, they're talking about I mean, I work thirty million and free cash flow in the half. Just generally I that first four catapult shareholder, I was like, wow, that that's a first. But they've had this target that they've spoken of a lot. They reiterated, I think just a month ago that they're still on track for that. If y twenty one free cash flow positive and then on an ongoing basis as well. So if they don't do that, the next set of results, it looks as though that's much less likely. I would regard my thesis as busted and if I follow my own advice, I'd sell out very publicly. [00:59:01][78.2]

Alec: [00:59:01] That's a good point. And that was something that I wanted to follow up on, because in some ways it's very easy to create a thesis. It's probably a lot harder to track it and have the discipline to actually sell it. So when you're thinking about the idea of your thesis being broken, do you give management a timeline to sort of prove you right and to to manage their costs? Or how do you think about that process of tracking the thesis and making the decision to cut them loose? [00:59:29][27.3]

Andrew: [00:59:29] Yeah, definitely saw big in so many ways. I'm a big believer in you want to be generally and not specifically wrong. So I think a lot of investors, a lot of professional analysts in the industry do this all the time. Well, I'll have like a earnings per share forecast to twelve decimal places for next year. I'm going to say, you know, hey, how can you be that accurate? The CEO can come out with a forecast that that's that accurate. And then is that the reason why you're buying the share? I mean, it's more about when I'm looking at a company, I'm being general in my forecast. So it's not that it's going to be eight point six two percent compound growth in earnings per share over the next three years. It's that I think this company can probably grow its bottom line between seven and 10 percent up a single digit kind of rate. Or these guys can grow their sales in about 20 percent per year for at least the next few years. So I think I think you want to be general. And so when you talk about giving management enough rope, well, one swallow does not a summer make. So if I have a shocking quarter, that's not great. But I think every time in the market, if you jump in every shadow, you're going to do yourself a lot of disservice. I mean, even the best companies have have have shockers from time to time. But once that evidence started to mount and to put a time limit on it, I think investors would have a pretty good read on things over the coming six months next to two quarterly's if if the narrative is changed in any material way. I think it's safe to say that thesis is busted, by the way, doesn't mean you can't reformulate it as long as you're being honest and objective with yourself. And I have actually done that several times of catapult. So the reason I hold it today is very different to what it was a couple of years ago. But you've got to be honest with yourself. The bigger point that I would make here, and this is going to seem to sound like a shameless plug, it's not very much the reason that we designed Stralman the way it was, because I think that the biggest thing that an investor can do to improve their results is to keep an investment diary that is right down your investment thesis, write down what can go wrong, write down the reasons that would cause you to sell because you're going to lie to yourself in six months time or a year's time, or you're going to misremember or you're going to rationalise it. And when you have it in black and white, it just keeps you honest. And so with straw man, it's not just a tipping contest where you get a virtual portfolio and buy and sell on board. So we actually encourage our members to create these company reports. Give us your bull case. What are your risks, that stuff down there? One, it's great value for the rest of the community, but too I mean, for God's sake, do it for yourself. When you commit to doing that in public, it holds you to account again for your own benefit. So much better than even just the process of putting it into writing sharpens your thinking immensely. So you've got this idea in your head. You've got a loose collection of thoughts. You've got a bit of a sentiment as to why you feel about a business. But when you have to put that into a sentence and paragraph and page for someone else to read and understand, you'll find that as you go through that process that you discover the holes in your reasoning. You'll discover the things that actually I don't know enough about this or I really should do that. So you'll start with this process of keeping this diary and writing it all down. Then as you go through, you'll recognise all these holes which will force you to do a bit more due diligence. And by the time you're finished, eh, it's much clearer in your head. Maybe you'll have built your conviction much more seriously, which is important because things are going to be volatile and scary. And if you don't have any conviction, you going to sell out at the first sign of panic and see it gives you something to as a touchstone to look at three, six, twelve, whatever it is, months down the track that you can hold yourself to account. So, yeah, absolutely. Write it down. Write it down. And you still going to do it. I said, [01:03:22][232.7]

Alec: [01:03:23] I think that's a good place to end our discussion of three stocks. If anyone thinks of a question that Bryce and I haven't asked or wants to take up the challenge the Bryce didn't take up to really challenge Andrew on a stock, they can jump onto strawman and attack his thesis on there. [01:03:42][18.4]

Andrew: [01:03:42] Honestly do it, obviously strawman, but I mean, attack me. I'm either right or I'm wrong with these things. And so my goal here isn't to come on and try and encourage people to do things that form a whole bunch of half baked ideas. I mean, I legitimately like these companies. I've got real money invested in all of these companies. If I'm wrong, I'm going to find out one way or the other so I can find out because another engaged investor has pointed out the flaws in my reasoning. And that's going to bruise my ego. And it's not going to be fun, but I'm not going to lose any money or I can wait for the market to show me and I can have my capital wiped out and that's going to be much less fun. So I absolutely challenge, challenge, challenge. And there's always another side to the coin I'd love to hear. [01:04:25][43.1]

Alec: [01:04:26] I love that. So and we've taken a fair bit of your time now, but we do like to finish with a final three questions, so jump into them. But before we do, aside from a straw man, don't come not or are you just straw dot com [01:04:40][14.0]

Andrew: [01:04:41] just OK, well, we've we've got global global ambitions [01:04:43][2.1]

Alec: [01:04:45] online and I like that. Is there is there anywhere else where people can follow you? Like, are you active on Twitter or anything like that. [01:04:52][6.8]

Andrew: [01:04:52] Yeah. I don't mind a bit of Twitter at Sage Underscore Symeon. Don't ask me why I set up an account years ago and that's what I decided. Said, Yeah, you can get me on Twitter. Probably the best place, not one. [01:05:04][11.7]

Alec: [01:05:04] So look, as I said, we, we like to finish those interviews with the final three questions, so we'll jump into those. The first one is, do you have any must read books? [01:05:13][8.6]

Andrew: [01:05:14] Yes, I do. And listen to the podcast and you can ask me these questions. And I think that the answer that I would normally give is almost a bit passé because they so often quoted, which suggests to everyone that you should definitely. Yeah, I'm not saying that it is, but for the sake of the sake of just trying to be a little bit different, there's a great book that Jamaica from Lighthouse Capital. So we work together for ages ago, fantastic investor. He put me on to this book called Gorilla Game, and it's got a technology sort of focus, but it talks about investing in that space. It's a bit hard to find, but you'll be able to order it on Amazon. And that was just such a game changer to my way of thinking. Yeah, particularly if you have to. If you sort of. Trying to chase chase monsters, as they say, I think I think it's a really good insight into that. There's another really great book which is more about business than investing, but it's about business. It is about investing as far as I'm concerned. Let's call Competitive Advantage by Michael Porter. So anyone who reads or follows Buffett will know. Moat's Michael Porter goes into this in a big way with a really great framework. And it's not a lightweight, but you come out of it having a much better appreciation for the types of businesses that you want to own. I mean, there's a reason that Buffett talks about loads all the time, because if you've got a strong competitive position, it's almost everything. Right. And so so this book is going to give you a really good framework for that. You'll be able to spot them. You'll be able to spot when people are claiming them, they have them and they're not there. And you'll make fewer mistakes. You like better returns. Here's one more quick one. Big fan of Fooled by Randomness, too, is wanted to make his first book. So Black Swan and Antifragile get usually all the mentions. But I think fooled by Ren and this is a really good one. It's not about the share market specifically, but when there's so many people out there that, again, there's a lot of false evidence and false examples that you can use in the market. And I think by reading that book, you'll be able to cut through a lot of the B.S. and sort of see things fall apart. The difference between skill and luck, there's a lot of luck out there for some people. [01:07:16][122.6]

Alec: [01:07:17] It's one I like the fact that you win a little bit more obscure. I think there's some good books there that I'm keen to read and I'm sure our listeners are as well. Second question, do we like to finish up with what's your go to source for investing information? [01:07:30][12.5]

Andrew: [01:07:31] I actually well, Stralman, of course. But honestly, I think the best place you can go is the source material. I spend most of my time well over 90 percent when I'm reading stuff on businesses just from the companies on ASX releases. Why go to someone else to unless it's someone you trust a lot to interpret it for you or to give you this? I mean, that's valuable stuff that go to the source material itself. You might find that your interest is piqued by a blog post that you read or an article you read in the affidavit. But go read it. Put it this way. If you've got even ten thousand dollars invested in the market, you can't be bothered to read an annual report that comes out once a year. I mean, you don't deserve to be an investor, to put it bluntly. I mean, buy an ETF and you probably get better returns and a lot of the experts and you'll do no work. But if you're going to be a direct investor, you've got to take the time to read these things, read what's coming out of the horse's mouth, read the source material. You want to do better than that. [01:08:28][56.8]

Alec: [01:08:28] Nice one. And then last question. If you think back to your early days of investing when you were just starting out in the midst of the the tech boom, those glory days where no one could do any wrong. What advice would you give your younger self? [01:08:41][13.2]

Andrew: [01:08:42] Wow. I so much advice that I would give myself a couple of ones quickly would just be read, read, read. Right. There's just so much great thinking has been done already before any of us were born. It's like Charlie Munger says, I mean you don't have to figure everything out yourself from first principles. So just read all the time for the sake of a 20 or 30 dollar book, you're going to get incredible, incredible education value out of that. The second one would be, don't be pig headed. Recognise when you've made a mistake and get out quickly. Don't rush to take profit just for the sake of it. And in the main one, which I mentioned before, so I won't elaborate on his escape. An investment diary. It's the biggest thing that you can do to improve the results. [01:09:21][39.1]

Bryce: [01:09:22] And that is something that we've had a few expert investors also suggest as well. And to be honest, it's something that I've tried to do along the way, but a very inconsistent it. So I might use straw man as the place to do it. [01:09:35][13.1]

Andrew: [01:09:36] But I think a lot of people might make the mistake of thinking that it's it's a huge deal. I mean, really, if you just go to the open up a Google doc, I just type something in. You think that's it doesn't have to be a like an academic thesis, even though it sounds very technical. Just just write anything down. It'll help. [01:09:53][16.7]

Bryce: [01:09:53] Well, thank you for your time today, Andrew. It's been an absolute pleasure talking to you. And we've absolutely got a lot out of digging a bit deeper and understanding what's important to you, I guess, when it comes to looking at stocks. And I know that our audience would have absolutely got a lot of value out of that. So very much appreciate your time. And we wish you all the best with Stralman, Dotcom, and hopefully a number of our audience can swing across and spend some time on there as well, because, as we said, it's a great resource and couldn't thank you enough for coming on. So thank you. [01:10:22][28.7]

Andrew: [01:10:22] I appreciate it, guys. It's been a lot of fun. Thanks for having me. [01:10:25][2.6]

Speaker 4: [01:10:26] Thanks for listening to Equity Mates investing podcast production of Equity Mates Media. Please remember that everything here in Equity Mates investing podcast is general advice. Only the content has been prepared that knowing the personal objectives, specific financial circumstances or goals, the host of Equity Mates investment podcast may maintain positions in the companies discussed before considering any investment. Please read the product disclosure statement and consider speaking to a licenced financial professional. [01:10:26][0.0]


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