In episode 2 of the Richards Report, I speak with Chris Judd – premiership captain, multiple Brownlow Medallist, now media commentator … and some people may not be aware, but Chris also takes a very active role in how he selects his investment.
Don’t assume that, because he is an ex-footballer, his form of investing is simply deciding which horse to bet on. Chris may surprise you with the level of detail he considers in his sophisticated approach.
Chris says he has never wanted to be a person that relied on other people too much. He never relied on a boot studder during his AFL career and now, with his investments, he wants to oversee where his money goes. I should have asked what other areas of life he takes control of – he probably takes control of his own hair cuts now too!
Some successful high-profile investment methods include:
- Value investing: Warren Buffett’s style (very hard to find value in the market right now)
- Growth investing: Investing in growth companies such as FANG stocks (Facebook, Amazon, Netflix, Google)
- Or then there’s a hybrid of the two that Peter Lynch from Fidelity made famous – GARP (Growth At a Reasonable Price)
However, Chris is no sheep. He has his own way, and invests in small companies that have less than $30 million market capitalisation. $30 million might sound like a large company, but it’s actually considered very small for a publicly listed company.
We touch on the poor stock calls that he made in his early days, most notably investing in an internet advertising company in 2003. But for those of us with a good memory of the early 2000s, he wasn’t the only one who fell for the tech hype back then. Who knows if we’re seeing something similar in the market right now with some tech companies?
By limiting his investments to small cap stocks (with a market cap from $30-50 million) he looks at companies that are so small that most funds won’t invest in them. These companies are usually not covered by industry analysts due to their comparatively small size.
He starts his process with a macro theme (looking at it from the top down) – previous macro themes he likes have included electrified cars and our ageing population. He also deals with 10-11 brokers around Australia to source ideas and reading material.
From there he looks at the quality of the business model for companies within that theme. Following on from the auto example, the batteries in electric cars require a large allocation of cobalt, which is a raw material that can only be mined from certain places around the world. Therefore, following on from this initial macro theme he may then subsequently investigate cobalt miners.
From there he might meet with the company’s managers to determine their track record and get some certainty around the direction of the business. He will also look for 6-12-month milestones that could be the catalyst for a re-rating of the stock. If everything still checks out he may then do some peer analysis to form an opinion on the valuation side of business. Ultimately he then comes to a conclusion as to whether the company is a buy or not.
If his hard work pays off and he gets it right it’s all about trying to capitalise on the wins. However, deciding when to sell can often be harder than knowing when to buy.
I was impressed with the amount of time Chris dedicates to his investments – it’s pretty much a full-time job for him. It’s not a strategy that most people can employ, especially if you’re time poor, but it’s still fascinating to learn how some people choose to invest. It’s also a great reminder that, whether you’re a Brownlow Medallist or a mum and dad investor, taking control of your finances is a great skill. And this doesn’t just have to be about taking control of your investments – it’s equally, if not more, important to take control of your expenses too.
At Six Park we take a different approach to Chris – we invest across seven different asset classes (not just publicly listed small companies) but, just like Chris, we believe that everyone should take a vested interest in how they manage their own money.
Part 2 of The Richards Report Podcast with Chris Judd will be out next week – stay tuned to hear more about Chris Judd’s approach to investment.
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Director of Business Development at Six Park