by Ted Richards Click to listen to the latest episode of The Richards Report featuring John Sevior.
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This episode of the Richards Report intentionally went a little longer than normal. It was far too interesting to keep to the usual amount of time, so I’ve split it up over two episodes.
John Sevior is one of the best fund managers in Australia. He has managed billions of dollars through both bull (up) and bear (down) markets. John’s investing style is categorised as a value investor, which is similar to Warren Buffett, but we also touch on other investment styles such as growth and momentum investing during the podcast.
John has been investing for decades and, in the early days, he used to get scared by the numbers that he was investing – understandably, as he often invests tens of millions of dollars in individual companies. However, he says it all comes back to the discipline of the principles that drive his process. John mentions the sporting analogy of focusing on the process rather than outcome, which resonates for me as I used to focus so much of my football career on process. This is relevant to so many other aspects of life too.
Patience versus intelligence
What’s more important to be a good investor: patience or intelligence?
To answer this, John quotes Warren Buffett, who once said that every IQ point over 125 is wasted. What he means by this is that a certain level of intelligence is required to be a good investor, but there are other attributes necessary too (such as patience). Patience is important because “not all the flowers in the flower bed grow at the same time”. Furthermore, you also need the ability to be greedy when others are fearful, and fearful when others are greedy.
I also ask John what hurts more: selling something at a financial loss, or selling something only to see the stock keep going up and up? He says losing money always hurts but states that no-one possesses all the wisdom and no-one gets it right all the time.
John emphasises that you always need to learn from your mistakes. A good fund manager will get 6-7 calls out of 10 correct, which means even when fund managers are going well they’re still get 30-40% of calls wrong. Reflecting and learning why they erred is so important.
John says that the Global Financial Crisis created opportunities and describes it as an easy time to invest but the reality was, at the time, everyone was selling because people thought that banks would all go bust. Most mum and dad investors were selling their investments potentially at a big loss at this time in history. This suggests John has a bit of a contrarian streak, though he says he’s not contrarian just for the sake of it.
Great business versus great stock
A great business has many qualities – and many great businesses dominate market share in their industry, riding close to regulatory limits around competition. However, a great stock takes into account the valuation that you pay for the business so there can be a big difference.
Click here for part 2 of the podcast.