Chris Bailey quit his job as a successful fund manager to launch the website www.Financialorbit.com, which he writes as well as covering FTSE 350 stocks on www.ShareProphets.com On December 3rd he will be interviewing Nigel Wray at the next UK Investor City Forum. You can reserve your place HERE. We caught up with Chris this week to ask him 22 questions?
1. Unlike most internet share commentators you did actually work in the City with some success before joining the 4th estate, what was your exact career path?
A strange route involving a really useful Finance & Investment postgraduate course, four years interviewing oh-so-clever hedge fund managers around the world, and then nearly fifteen years as a global equity analyst and fund manager.
2. Why leave the gold paved streets of the City for writing as a journalist? It cannot have been the money?
The seminal day was in early 2013, when I was told by the big bosses that they wanted my fund performance to be ‘more average’…and would I like to join an overarching committee, that would meet multiple times a week, to help make this happen? If you are looking for a way to demotivate a first quartile performing active fund manager…well this is the way. Shockingly, I discovered in chats with other potential employers that such views were progressively mainstream. So I quit to manage my own money and work on a consulting or freelance basis with people I liked. I also find it terribly liberating to write and it helps my investment thinking way more than traditional City routes. And finally…it never should be about the (short-term) money. The intellectual capital I have built up in the last few years by taking away the safety net and thinking more and more for myself, I think will stand me in good stead for the next 40+ years of my life.
3. When did you first gain an interest in shares, how and why?
I blame breakfast TV, specifically TV-AM which had a business rundown every morning which piqued my interest. It sounded exotic, appealed to my instincts about a big/interesting world out there and I quite liked the idea of getting a Filofax (well it was the mid-1980s after all).
4.Would you say that you were a trader or an investor and why?
I think of myself as an active investor. In my last decade or so as an institutional investor, my typical holding period was about 12 months and this remains about the same now. I look for a catalyst and typically it takes this period to work out (or not). This does not stop me having shorter or longer holding periods, but I know I am not a great trader…and I certainly do not want to be regarded as a boring old pension fund style investor.
5. You write about FTSE 350 stocks and also invest in blue chips and mid caps. Why are you not drawn to the exciting world of AIM and small cap shares?
Time. I must cover/follow/muse upon a few hundred global stocks on a regular basis and that requires a lot of discipline, time plus macro and micro work…but it is all worth it to be able to get a set of numbers from a big mega cap and almost know instinctively what the key issue is (and whether there is an investing angle or not). There’s certainly plenty of volatility in the larger cap space to keep me excited, plus the big macro themes and related I like to spend time thinking about too. Give me an extra few hours in the day and I would happily extend this to the smaller cap sphere.
6. What percent of your portfolio is in cash right now? Would you say that was prudent?
15% cash and I have 10% of my portfolio in gold related investments too. It feels right to have a bit of dry powder because markets have had a mega run since 2009, interest rates are going up, world trade angst has built up etc, etc. I see volatility as an opportunity though and during October I invested a net 5% of my portfolio into the markets.
7. Do you take a market view and does that drive you or are you strictly a bottom up investor?
I always think of myself as a thematic investor, so I spend 20% of my time thinking about macro issues, themes and related and the rest of the time doing the whole bottom-up investing thing. Nothing exists in a vacuum, so I think it is sensible to spend some time musing about the wider world.
8. For what it is worth what is your market view: bull or bear and why?
I guess I am an opportunistic bear. The world has too much debt and markets have had a great run…but there are some good investing themes out there and – opportunistically – I do like to get greedy when others are fearful. I see a lot of scope for continued market rotation and hence a need to be a proper, old school active investor. That will give those pension fund investment committees something to think about!
9. Roughly what is your average holding period for any given investment? Do you think short term traders can really hope to make it rich?
Average holding period around 12 months. The shorter the time period you shift to, the higher likelihood that all you are trading is investor psychology…and we all know how both short term momentum or mean-reversion investors can get hurt. I like it when you have an anomaly e.g. sentiment is poor but the numbers are alright, but such a view takes maybe a few earnings updates to work out/through, hence the 12 month average holding period.
10. You often write about your personal experience of a company as a customer. Do you think “kicking the tyres” in this way helps at all?
It always tells you something, even if it’s what the company does! Good companies treat their customers well and have sensible/useful websites that work. Primary research insights like this are always hugely helpful and quite fun to do.
11. Is technical analysis pure cobblers?
Broadly speaking yes. I like the law of round numbers to help me with entrance/exit levels but that is about as far as I go. I really liked the experiment which folded a share price chart in half, gave a bunch of technical analysts the first half only and told them to draw the second half… You can guess the results! The monkey did best!
12. What was your biggest ever winner in percentage terms and what made you invest in it in the first place?
Does anyone remember GEO Interactive Media from the TMT boom days of 1999-2000? In at one Pound, last tranche out at 33 Pounds. 18-bagger overall as I sold tranches at various points. A friend of mine mentioned the company to me and as a callow youth I must have thought it sounded ‘hot’ and ‘next gen’. Suffice to say in the years afterwards it never proved up…and I learnt to do my own research.
13. And what was your most costly stock market mistake?
Quite a few to choose from! Strategically not flipping from bear to bull quickly enough after March 2009. In terms of an individual name, I lost a bunch of money in Standard Chartered buying not once but twice above 1600p near the start of this decade. That wasn’t smart I also sold out a company called As Seen On Screen (ASOS) at 10p a share, feeling very clever with myself after booking a tidy profit. Whatever did happen to them?
14. In terms of how you look at shares, which other investment writers do you rate most highly?
Genuinely I learn a lot from the other ShareProphets writers. Some of the fraud and related stuff really blows my mind. Elsewhere I really wish I could write/think like the guys at www.collaborativefund.com/blog. If I keep working hard…maybe one day.
15. Do you sometime despair at the dishonesty of many involved in the stock market?
Yes. Money and the pursuit of profit is a good and positive thing most of the time but it can warp impressionable minds and I have seen too many people corrupted by the system. The key is putting everything into context…and being able to actually look yourself in the mirror at the end of the day and not feel embarrassed. It always catches up eventually.
16. If you could introduce any one law to make the stock market a cleaner place what would it be?
You have to threaten livelihoods in a credible fashion to get better behaviour. If the FCA said that someone was banned for 20 years from the securities industry for insider dealing or market abuse etc. with no exceptions…watch standards improve. Draconian but it will make people think twice.
17. Do you feel that as you get older you become a better investor?
100% yes. Investing is an experience game, so long as you learn something from your mistakes. I reckon I am 40 years from my peak – and I take great inspiration from those whippersnappers Buffett and Munger.
18. Do you understand bitcoin and or blockchain and have you invested in any plays in this sector?
I sort of get it but I have made no direct investments in the space. It still feels too much hype versus too few fundamentals.
19. Which is the biggest threat to the stock market: Brexit or Jeremy Corbyn? And why?
I have got to go with Brexit on this one because it is a real event, whilst I feel we are past Peak Jezza and he will not be elected PM. We all know trade and business/consumer confidence matters and if enough people are worried about Brexit, cliff edges and the like then in today’s indebted world it can impact. For what it is worth, I am very pragmatic on Brexit – it is the sort of issue where how people react matters much more than anything else. The key question to me is whether any government can inspire an 80s style entrepreneurial culture which would hugely help in pre and post Brexit world.
20. If you had to invest all your money in one share right now what would it be and why?
I had better go with my #1 position in my pension fund: Randgold Resources…or New Barrick as it will be known at the end of the year. Gold is gold is gold and the Randgold/Barrick merger is very exciting: great mines and the right guys (the Randgold management team) running it.
21. Do you have any exposure to gold in any way? And why?
Yes. About 10% of my portfolio and mostly in Randgold (see above).
22. If you had to give one piece of advice to anyone starting in the stock market what would it be?
Write stuff down especially why you bought a share in the first place. The art of writing stuff down links directly with primary research and understanding your errors (and learning from them) is the key. It does not need to be an epic but if you are investing your hard-earned money, then you owe it to yourself at least. Then update your thoughts when the next set of numbers/a big company event hits. You will be amazed at the power of this information over time.