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Published 01 August 2012 05:27, Updated 02 August 2012 05:02
What investments do you like at the moment?
Some of our favourites include Super Retail Group, Domino’s Pizza, Transpacific, FlexiGroup. We don’t care about the rate of growth of a company per se, what’s of value to us is a combination of growth, the amount of margin that can be generated and how much capital those two cost. So you can have a slow-growing company that uses very little capital, or throws a lot off and they’ll come out of our screening process very well. We like positive cash flows over a medium-term horizon, three or four years.
What are you avoiding or selling?
We’re underweight construction materials, conventional retail – Super Retail is the exception there – and precious metals. That’s not a reflection of what gold may or may not do – the gold price has been strong and a lot of gold companies have emerged and we’re not enamoured of many of them. We own a stake in both Alacer and Regis, whom we regard as producers with good margins, with Regis in particular having a strong management track record of bringing value to shareholders in former investments. But the guys who have set up in West Africa over the past five years, they’re all too risky and all too hard. Imagine having a gold investment in Mali at the moment, where the political situation has gone from being as good as any in Africa, to very confused.
What’s your best ever single investment decision?
Domino’s Pizza. We bought in around 2007-08 – the share price had fallen well below $3; they’d had a few bad misses with some menu changes. They’d expanded into France and Belgium 18 months earlier, which was viewed with a lot of uncertainty. I remember going to a Domino’s presentation at one of the brokers and very few people turned up – the numbers had just disappointed. But we stuck with it, we now rate that management as well as any on the ASX and it’s trading around $10.
Describe the worst one and what you learnt?
Aquarius Platinum. The platinum price has been weaker than we thought and union issues in South Africa were tougher than we expected. We back way more winners than losers but you can’t win them all.
Who is your investment hero and why?
I’m going to have to be boring and say Warren Buffet. Our process is patient, and nobody espouses the importance of patience, cash flow and prudent use of capital like he does.