August 10, 2025 • 34 mins
In this bonus episode of The Money Puzzle, The Australian’s Wealth Editor, Julie-anne Sprague, unpacks what it takes to be a great investor with one of the nation's top stockpickers, Jun Bei Liu. How did Liu learn to invest? What did she learn when things went wrong and what's her advice for everyday investors wanting to build their wealth?
Jun Bei Liu of Ten Cap joins Wealth Editor Julie-anne Sprague in this bonus episode.
See omnystudio.com/listener for privacy information.
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Episode Transcript
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Speaker 1 (00:09):
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. Well. I've mentioned in recent
weeks that we are planning to do some new features
here at the Money Puzzle, and today and over the
next three mondays, we're going to present a short series
to you on how top investors pick their winning investments.
(00:31):
My colleague at The Australian, Julianne Spragg, sat down for
a chat with top stock picker jun Bei Lu, the
co founder of ten Caps. She's more than tripled funds
under management more than one point five billion dollars. How
does she pick a good stock and what's your advice
for everyday investors? Let's find out.
Speaker 2 (00:54):
Gin Bailou, thanks for joining me. I want to have
a chat to you about your journey.
Speaker 3 (00:58):
So you came to.
Speaker 2 (00:59):
Australia as a sixteen year old, got yourself into the
funds management business, initially as an analyst involved in a
fund that I think had around three hundred million dollars
funds under management, and grew that to over a billion
dollars and now out on your own at ten cap.
Speaker 4 (01:12):
It's a pretty extraordinary story.
Speaker 3 (01:14):
Oh, thank you.
Speaker 2 (01:15):
We want to have a chat about that, but also
really keen to learn from you about what you've learned
about investing and get some of your tips for those
of us who just want to get.
Speaker 4 (01:23):
Better at it. Let's maybe just start at the beginning.
Speaker 2 (01:27):
And you came to Australia as a sixteen year old.
What was that like?
Speaker 3 (01:30):
Oh, look, it's quite incredible.
Speaker 5 (01:32):
Actually, I still remember thinking the first day I landed
in Australia, the first thing that struck me is the
sky was so blue. And I come from China at
the time, we don't see blue sky very often. Sky
so blue, and the cloud is so three D, almost
as if you could touch it. It's such a beautiful country.
I just remember thinking that was incredible. Of course, over
the next six month, I think I couldn't understand the
(01:53):
word of English, so it took a little while to
vaguely translate the body language into what people meant.
Speaker 3 (02:00):
We went to read people.
Speaker 5 (02:01):
Yeah, you kind of need to read, and it's incredible
how your our mind adapt them. So our brain sort
of adapt to the situation. I think within three months
I can sort of vaguely understand in the class that
what teachers sort of meant some subject matter like matt
and other things a bit easier, but when you go
into biology and others, becomes a bit harder.
Speaker 3 (02:19):
But still you pick up real quick.
Speaker 5 (02:20):
And I still remember every day when I was on
my way to school, I have to catch the bus
to go to school, and it's about forty minute bus ride,
and I used to take deep breath. I get quite
stressed and take deep breath, keep forcing myself thinking in English.
Because the hardest thing for a migrant is that you
think in your own language. Then you before you speak,
you translate it, and then when you hear it, then
(02:41):
you translate back and then you think again in your
own language. That's why it takes so long for you
to actually speak something. So if you force yourself to
think English, then it much faster, and then you actually
get practice all the time. So I remember that forty
minute bus ride. I used to practice every day and est.
Speaker 4 (02:58):
In your head, you're strying to speak talking to myself.
Speaker 5 (03:01):
Yeah, so I think I still today people catch me
talking to myself all the time, going crazy.
Speaker 2 (03:06):
And your parents what triggered the move? Did they sort
of talk to you at the time about why they
were doing that.
Speaker 3 (03:10):
Yeah.
Speaker 2 (03:11):
Sure.
Speaker 3 (03:11):
Look at the time, so my mother came.
Speaker 5 (03:13):
To Australia as part of that whole relaxation of student
visa posta Tiama Square and Massacre. And at the time,
but in China, China was very poor. Every person in
China really wanted to see what it's like to be
in the foreign country. It's almost it's like a dream
come true. And my mother was very fortunate that she
came through in the visa and then she managed to stay,
worked many jobs and managed to stay. And then I
(03:35):
came and joined her six years later. So we separated
for six years and joined her six years later, and
then my dad came another four years later.
Speaker 4 (03:42):
My goodness, what a journey.
Speaker 3 (03:43):
I know, it's incredible.
Speaker 2 (03:45):
And the attitudes towards money when you were growing up,
did your sort of parents sort of instilled in particular values.
Speaker 5 (03:51):
Yeah, look, I think it just we grew up pretty poor,
so making money is it's probably a big thing.
Speaker 3 (03:56):
But even though we were.
Speaker 5 (03:57):
Poor, But my dad always remember he's I think he's
quite adventures. He was I would say, one of the
earliest investors in share market or bomb market there in China.
This is I think he started in maybe like ninety
nineteen ninety when the capital market was really literally it's
infancy in China and it was more or less just punting, right.
So I remember at home, we don't have computers. He
(04:18):
will print out all these paper and draw all the
lines of where the stock is today, and then draw
all these ratio and everything, and then every day he'll
make a prediction about the stock either going up or
going down.
Speaker 3 (04:30):
He'll never get it wrong.
Speaker 5 (04:31):
And then every day he'll stick up a paper. So
we literally have all these lines of paper because we
don't have computer going across my bedroom, his bedroom, living room,
all the way down downstairs, and they're into the kitchen,
so we just have all these charts everywhere.
Speaker 3 (04:46):
So I grew up with the charters.
Speaker 4 (04:48):
Wow investing you learned by Osmosis oh.
Speaker 5 (04:50):
I reckon, it's exciting. I think what I learned is
that excitement. To me, it's always investing a bit like
treasure hunting. You go and find something before everyone else,
and then you founder you did the work, you found it,
and you know you make the return. So it's very
much like treasure hunting. So at the time I feel
a lot of my dad's excitement and disappointment and then
my at the time, I thought he would never be
(05:12):
wrong because every day he's pretic either up or doubt.
Speaker 3 (05:15):
Sideway will be the wrong day.
Speaker 4 (05:16):
What was treasure hunting?
Speaker 2 (05:18):
Can you remember your very first investment, what it might
have been, and how old you were when you made
your first, like your first investment all on your own?
Speaker 3 (05:26):
Yeah, yeah, that's right.
Speaker 5 (05:27):
So my first investment actually when I already started working,
but very early days.
Speaker 3 (05:32):
I think I put my money in a company.
Speaker 5 (05:35):
Actually I put my money in a company where at
the time I thought, oh, look, I don't really know
how to invest. I just want to invest in something
that I know what it is, which is worth her
and because I go to the store. In fact, I
worked in Woolworth briefly as a checkout chick in high school.
Speaker 1 (05:50):
So you knew it.
Speaker 3 (05:51):
Well, yeah, so it's like that touch and feel. It's
really exciting.
Speaker 4 (05:54):
And I still have my name bad from Coles just quietly, Oh.
Speaker 3 (05:57):
I think I do too, Yeah, I think I do too.
And that was my first experience.
Speaker 5 (06:04):
I didn't know anything about it, and that was at
the time where I just started looking at some of
the financial statements I learned in UNI and then my
first job as a start analyst, also working for morning
Staff for a bit as well.
Speaker 2 (06:14):
So you studied finance to knew you wanted to go
into the finance industry become an analyst. So you've got
a bit of knowledge behind you then, but then you
sort of think you still stick to what you know.
Speaker 5 (06:23):
So you'll buy I tell you what I think that
it's actually less inspirational than often what I portrayed to be.
It's actually, look, I always feel finance. I did finance
because as a Chinese kid, we'll go finance or accounting
definitely will find a job. That's what my mother tells me.
And as I go through finance, and then I kind
of learned the things that I like. I never liked
(06:44):
the accounting part of it. I find a very try
so and.
Speaker 2 (06:48):
People who know me, they'll be having a giggle now
because one of my stories is my dad wanted me
to study accounting.
Speaker 4 (06:54):
You'll get a job. But then I was just delinquent,
going no, I don't want accounting.
Speaker 5 (06:59):
No, yeah, I think the accounting is the thing. Yeah,
Well I think I'm kind of pivoted as well. So
because with accounting, I did a one year of accounting
or that that that's not.
Speaker 4 (07:09):
Me all the accounting.
Speaker 5 (07:10):
Yeah, that's right, and they're too scared to drop the
entire commerce. Then my mother will be hugely disappointed. So
I shifted to finance, and then in finance that you
learn about behavioral finance and economics and a few other things.
And behavioral finance was so fascinating because that's the soft skill.
That's where you do the treasure hunting. You're trying to
think about how everyone else is thinking, what are their biases.
(07:33):
It's almost like a psychology class. I find that very fascinating.
Speaker 2 (07:36):
Is that then how you can work out whether to
go with the herd or not? You know how there's
that herd mentality in markets.
Speaker 5 (07:42):
That's absolutely right. I actually think unlike what many other
people think. Many people think investing about numbers and get
the numbers right and everything. I actually think get the
numbers right is almost a basic and that's a small
component of ultimate what the share price will do. It's
actually get your numbers right and what the share price
will do, especially in the immediate future, in the next
three to six months. Short term is all about sentiment.
(08:04):
Sentiment is behavioral bias, you know, is all about what
would other people pay for those numbers that you just
put together, And that's what share market. That's why these
days you see wild swings.
Speaker 3 (08:15):
It's just that sentiment.
Speaker 5 (08:16):
So it's actually incredibly important because if you can understand
that and then you can sometimes go against the hurd
then you make a lot more return. There's your treasure.
You found that before other people realized it was a treasure.
Speaker 2 (08:27):
So is there something that you look towards to try
and work out that behavioral piece? Like, is there I
don't know if you're reading different aspects of how do
you try and determine what people are going to do?
Speaker 3 (08:38):
Yeah?
Speaker 5 (08:38):
I think firstly you need to and when you start
investing in something, don't start with a preconceived idea of
what it should be, because I find many investors make
this mistake is that they always feel, oh, I think
this is that, and then they when you believe something
firmly without open mind, then you start finding evidence just
to support your own view, our own view sometimes right,
sometimes right. It's very important to when you start looking
(09:01):
at something just keep a complete open mind looking at
as afresh or some of the previous mistakes, many mistakes
made mistake all the time, and one of some of
the biggest mistake is that when we have presecuencive idea,
then we start making pivot to the wrong side. Then
you stop listening to everyone, and then you kind of
just make the wrong bet about a company's future simply
(09:21):
because you just couldn't see what is coming. So yeah,
so I think open mind and curiosity is very important.
Speaker 2 (09:28):
Do you have any rules or structures around how you
go to invest that you're talking about? It sounds like
you do an awful lot of research and you sort
of sounds like you pause and really get to understand
the company before you invest.
Speaker 4 (09:40):
But how long does that take?
Speaker 2 (09:42):
And is that sort of a metric or some sort
of plan that you work to before you actually invest
your money or your client's money.
Speaker 1 (09:49):
Oh.
Speaker 5 (09:50):
Absolutely, so look for a brand new company, it does
take much longer because ultimately we always talk about doing
your homework, is that you do need to understand the business.
So the core understanding of the business is firstly, what's
its customer proposition? What's the proposition? Why does it exist?
So ask this question, why does it exist? How does
it exist? How is it better than others? And how
(10:11):
does it make money and is that how or specialty
going to continue? Are they keep reinvesting what's special about
that business that they can keep going? And then you
can decide, Okay, well it can make this much money
and next share you will make more because I know
all these things they're doing, it's going to drive this
and I know the management execution is very important. They've
(10:32):
done it before and you met the management need. They're
driven because ultimately, especially small business, they run by people
who's creating, innovating an idea, so they've got to be driven.
Speaker 3 (10:42):
So it's them. You kind of follow them when it's
early on.
Speaker 5 (10:46):
So a lot of these when once you're done your homeworld,
you understand, you really understand the driver of the business,
where it's going, You understand the management, you understand in
and out of that business and that industry. And then
this is the first part of it. And then the
next part of it is to actually work out what
you want to pay for it. And that is the
tricky part.
Speaker 4 (11:06):
That is the tricky part.
Speaker 2 (11:07):
When we come back, let's talk about how to know
when a stock is too expensive, And I also want
to know your investing mistakes. What do they teach you
and what's your investing advice for everyday investors. We'll return
to our chat following this small break.
Speaker 4 (11:36):
Jim Bay.
Speaker 2 (11:37):
Before we went to the break, we were talking about
investing in shares, so doing all of the research deciding
which company you'd like to back. The tricky part though,
is working out whether there's value in that company. How
do you go about working out whether a company is
too expensive to buy?
Speaker 5 (11:53):
I think in today's world the expensiveness really come back
down to relative valuation, so you compare it with something else.
So we in Australian market, if something is expensive, it's
not a reason for not buying something or for selling
something because yeah, I tell you why.
Speaker 3 (12:11):
I'll tell you why.
Speaker 5 (12:11):
Because Australian market growth is very hard to come buy.
So and then there's only limited there's only a couple
of companies you can buy that can grow. So there's
an incredible amount of money keeps piling into growth within
our share market and they will keep going to the
same company. So the evaluation today is much much higher
than they were ten years ago.
Speaker 2 (12:30):
Simply because it's just not as many companies, not many compants,
that's right, And there's an awful lot of money that
needs to be funneled.
Speaker 3 (12:36):
Towards amount of money. That's right, Yeah, that's right.
Speaker 5 (12:39):
And everyone wants to growth company to future proof their portfolio. Right,
So your portfolio will have always have bit of everything.
You have, bit of gold, bit of a company that
paid dividend like banks and things give you good income,
and then bit of maybe bit of material, but bit
of a growth company because in five years time, you
want your portfolio to keep growing rather than just paying
out dividend, right, you don't want to then still every
(13:01):
year they say share market should double every seven years,
So you want that growth company to be the core
holding of a portfolio. And then on top of that
you've got some dividend. You've got some ciclical they call
a cicl call ciclicll is like companies do well when
the economy picks up and then do badly when economy
So you buy and sell you much more shorter term
(13:21):
with those ones.
Speaker 3 (13:22):
So that's the portfolio.
Speaker 4 (13:23):
So you think I need to have a bank in
my portfolio.
Speaker 2 (13:26):
We always refer to the Big four and then Commonwealth
Bank has absolutely gone out on its own, like it
is just on a different level. So then how do
you work out then, if I want to have a bank,
does Commonwealth now look so expensive that I'm better off
going with these other three?
Speaker 3 (13:40):
Pick one of them?
Speaker 2 (13:41):
Or do you say, like what we were talking about
before is like the herds obviously going with CBA.
Speaker 4 (13:47):
How do you make that decision? How do you sit
down and assess it?
Speaker 5 (13:50):
Yeah?
Speaker 3 (13:50):
Look a two things I agree with you. I think
banks looks really expensive. Yeah yeah.
Speaker 5 (13:54):
And then the thing is like you don't really want
to As an investor who's not constantly watching the market,
I always have advice to stick with quality, stick with
the best quality company, and because you don't want to
worry about a day to day you've got to day
trade and all of that. Right, So unfortunately, I think
CBA is best position. It's the best bank, most expensive
in the world, I can say that. So when you
(14:14):
pick one, I think NAB looks okay. Relative Again, we're
talking about relative valuation. Things look relatively cheaper. NAP still
looks expensive for a bank on historical terms, but it's
a whole lot cheaper than what CBA is offering. So
I think relatively I would hold NAB instead of CBA.
But nothing will stop CBA from keep rallying away because.
Speaker 4 (14:34):
If anyone listening, if they just put CBA, you.
Speaker 5 (14:36):
Keep up because I tell you what, last three months
at the share price going where it actually six six
months ago a share price was moving higher because of
it's earning was doing a bit better and buy back
and all these great things. But last three months all
because international investor want to put money in Australia and
then what do they do. They kind of just buy
the top companies and they don't want to buy resources,
(14:58):
so they bought banks and then watch banks buy, you
buy the CBA. They don't want the problem with an
they's had a lot of issues and even Westpac is
not doing gray, so they kind of just put money
in the big one.
Speaker 2 (15:09):
We get told a lot that, particularly when markets are volatile,
don't sell, sit tight, hang in there. I think for
investors too, there is an art in knowing when to sell.
How do you work out when it's a great time
to sell?
Speaker 5 (15:24):
Yeah, so to sell is always the hardest question for it. Yeah,
so hardest question. I always believe you find a proper
growth winner. You do not sell right so you can
trim a little bit because you need money to buy
something else.
Speaker 3 (15:37):
That's how we look at it.
Speaker 5 (15:38):
So if I some of our winner like like three sixty,
Promedicus and these one that incredibly well. But the thing is,
if I find something else I think also can do
very well in the next to a month, I might
sell a little bit and put into it, but I
don't completely sell out because winners history have proven that
if you sell it, you'll never buy back in because
they keep going. So a company like that is they
(15:59):
just such a strong driver behind them in terms of
earning's growth. It just we just don't have many of
them around.
Speaker 4 (16:06):
So how do you go about balancing your portfolio?
Speaker 5 (16:08):
Yeah, So the good thing is that when you find
when we have the next opportunity coming out maybe so
I think even with like three sixty, it was a
few years ago, was very cheap. Everyone worried about what's
happening with the US and all that, and then you know,
you sell some of the growth names and funding too.
Those and even early in the year when you talk
about the market volatility, these times are great to picking
up high quality companies because people sell everything, especially people
(16:32):
like to sell winners because they go, oh, I don't
know what tariff is going to do I'm going to
sell my profit my winners because I've done so well
out of them. So people sold out all the growth names.
They're all thirty percent cheaper, literally in three weeks thirty
percent cheaper, and then they all jumped more than thirty percent.
Some of them have gone up thirty percent.
Speaker 4 (16:50):
Behindslight's wonderful, isn't it. So yeah, that's how do you
stay calm in those times it can be turbulent.
Speaker 2 (16:56):
That's got a job where you'll wake up in the
morning or maybe I don't know if you would have
done to go what's my morning going to be? Like,
It's just it's what Deffen is happening on global markets
really does impact what's happening on the local market.
Speaker 5 (17:08):
Absolutely, so I think, look, I've been doing this for
twenty five years, so you kind of get used to
the volatility. Volatility will come, but you know it will
always pass. It will always pass, but you need to
work out what's the new information. So what we didn't
know at the time was really in this particular time
was tariff. We don't know what Trump is going to
do one hundred and forty seven percent on China or
(17:28):
all that. So for companies that potentially get impacted by
that tariff. We just thought that's too hard because I
don't know tomorrow. It could be one hundred percent tomorrow
or zero percent.
Speaker 3 (17:37):
I don't know. That's we don't do.
Speaker 5 (17:39):
But for the company actually doesn't get impacted by tariff,
they are thirty percent lower on no change to earnings.
This way, we know it will come back. So you
buy these businesses same as during pandemic. I remember when
market went free four same thing. Everything fell, especially the winners,
they fell first, and then we just sort of work
out what we do know what we don't know. So
(18:00):
the first thing is that what we do know is
that hard asset will come back. Sit in the airport.
Someone will buy this thing. It was forty percent cheap,
or someone will buy it. So you buy the hard asset,
and then we have the government promised to step in
give stimulus and all of that. Then we'll go, okay,
we can then buy retailers by JP high vibe. So
really need to really understand what information is there and
(18:20):
then based on and see if there's any change to
your investment assumptions of a company.
Speaker 2 (18:25):
Let's dive into some of the mistakes along the way.
We've all made some safe places.
Speaker 3 (18:31):
It's a safe space, that's right.
Speaker 2 (18:34):
But I think to learn and to grow and to
become a better investor, you've had to have made some
clangers along the way. So I don't know if there's
one in particular that you recall what it was and
what it taught you.
Speaker 5 (18:44):
Yeah, look, we make a mistake all the time, that's
what they say. So investing in the share market, right,
you work out your probability, so what they say, but
we do better than that, So we are probability is
about seventy to twenty percent will outperform, and but that
twenty percent time that we're underperforming will pick the company
that in the workhouse. So you always make misspedakes. That's
the key advice. You have to make mistake to learn,
(19:05):
otherwise you never learn. So there's one name always click
with me because that's early days in my career, obviously
feeling fantastic buying Woolworth's.
Speaker 2 (19:13):
Oh this is easy, and so that investment went well,
we meant an So that that was your first investment.
Speaker 4 (19:18):
Can you recall how much you's?
Speaker 5 (19:19):
Can remember, Yeah, I made money and then I sold it. Yeah,
that's right, I made money. I think I made a
thousand dollars. I was so excited and I saw it,
I was like, yes, lock it.
Speaker 3 (19:27):
In, okay.
Speaker 4 (19:28):
So then you feel like, yeah, I know what I'm doing.
Speaker 3 (19:29):
Yeah, that's right. It's way too easy.
Speaker 5 (19:31):
And then that's when and then the I also just
started my celside job where I was the first time
young person being my full lead analysts and initiate on
this company. And I remember at the time JBHIGHI just
listed and it was expensive. I think sixteen times earnings
was very expensive. Then now will be like two hundred times.
But anyway, I was sixteen times earning. And then I thought, oh,
(19:52):
jbhif I sixteen times earning, Strathfield Car Radio, I don't
know if you know that one.
Speaker 3 (19:57):
Oh that's going back. Yeah, yeah, okay, that's it. So
Strathfield Car Radio was trading on twelve times.
Speaker 2 (20:04):
And and so just weren't they They were the company
and you could take out your the car radio and
your existing car and put in like the radis and
city players and stuff.
Speaker 3 (20:13):
That's right.
Speaker 5 (20:13):
And then those days car radio is big thing. So
every people when they buy the car, they go and
change their radio, they upgrade their radio. So JB High
Fi used to have those as well with the car radio.
It was a big credit, big components of that time, right,
that's right. Yeah, So you walk into Strathfield car radio.
They so they got car radio they got back then
they just started selling mobile phone in those things, and
(20:35):
they got a little bit of consumer electronics on the
side as well. So it's like a mini JB high five,
but poor men version JB High.
Speaker 3 (20:41):
Five, okay, And he thought, well, it's cheaper. I was
as much cheaper.
Speaker 5 (20:43):
Why not? They're rolling our stores as well, and JB
High five's rolling our stores.
Speaker 3 (20:47):
Why would not buy this one? It's all great?
Speaker 5 (20:49):
But and then I put on a great strong buy
and everything, and actually share price did well for about
three months. And then Richard Utriz was running JB High
five at the time. He came omember and saw for me.
Speaker 3 (21:00):
He's like, you bad.
Speaker 5 (21:02):
Have you been to the Strathfield store. That's the question
to me. He's like, have you actually been to the store.
I was like, no, I've seen pictures. It looks fine.
Speaker 3 (21:12):
He's like, you should go and have a look.
Speaker 4 (21:14):
And was he there to chat to you about trying
to invest in it? You never sell one jock.
Speaker 5 (21:20):
I didn't have cell but they just just essentially he's
educating in the market, just listed yeah, doing a kind
of road show, and he's like, have you been to
the store. I've seen the pictures and everything. And then
I thought, oh damn, I probably should go and see
the store. And I did go see the store, was saying,
oh god, this is not like JB High Fi. A
majority of the store was designated to the car radio.
(21:40):
And then there's a couple of I think they have
a big contract where the Optus or Telstra, they're like
Telstra Optus love us, gave us all these big trailing revenue.
We sell one mobile phone, we'll get paid so much
and all that, and then tiny bit income stroom electronics,
completely different, very old school, very dated. They're not in
the shopping center, they're outside on those Paramatta roads, and
very different vibe between the stores. And then it's not
(22:02):
efficient every category and jbhihid back then only just started
selling a few category. They haven't started selling game yet,
they haven't started selling PC. There were so many new
categories to come, completely different, and I came back thinking
this is not good. But anyway, I wasn't experienced that
I thought, look, I could write it because.
Speaker 4 (22:19):
You've made your decision right, and so I'm going to
back yourself in.
Speaker 3 (22:21):
So every fritten it's great.
Speaker 5 (22:22):
Yeah, and invested and I said it's great, buy and
then trying to convince everyone to buy. And six months later,
retail condition got a bit tougher, so consumer become tightened
their pockets and everything else. Immediately, Stratfield, they're like for
like started going negative.
Speaker 4 (22:38):
Can you what year are we talking?
Speaker 5 (22:39):
Maybe it was two thousand and five. There was one
year many retailer had downgrades. I think maybe it was
May two thousand and five or two thousand and four.
Winter was too hot as well, everyone downgraded because it
was two hot jackets won't selling A just group was
listed at the time as well. Remember but yeah, so
just retailer when things got a little bit tougher, retailer
don't have strong business model.
Speaker 3 (23:00):
They just don't do it as well. People don't need
to go to.
Speaker 5 (23:02):
Stratfield, whereas JB High Fire because they have a strong
busin models, but they pull people in. People want to
go and see what's going on or the excited excitement.
So things started going backwards and the minute staff for
retailers when things going backwards, going negative, it's heavily leveraged
because they don't have much debt, but the lease.
Speaker 3 (23:19):
They have to pay a lot on the lease, so
there's not much room to move for retailers.
Speaker 2 (23:22):
Start to see it turn negative, but you realize, as
we spoke about earlier, it's like you've made a decision
and you don't.
Speaker 4 (23:28):
You don't sell out when things get volatile.
Speaker 3 (23:30):
So did you stay? Oh no, no, no, So I
got this one wrong.
Speaker 5 (23:33):
Yeah, because I realized how quickly things can back can
get bad, and so the minute it turns negative, I
think I sat there for six months, longer than I
should six months. So when it started turning, I didn't
move straight away because I thought it will get better.
Maybe just patch your consumer, Maybe they just unlucky. Management
always find the best excuses. Oh this thing happened, too
much rain or something.
Speaker 3 (23:53):
Always this.
Speaker 5 (23:54):
So at the end, so and they're six month later,
I realized that the operating d leverage is very significant
for a retil and for a retailer. By then, I
have realized that there is something that whatever I thought
it was special about the company, it was not there.
I should have really visited the store. Really see what
was the value driver why people walk into that store?
Speaker 3 (24:14):
There was no reason. That's why when things are tough,
people don't walk in.
Speaker 4 (24:17):
Do you remember how much money you might have lost
with that investment?
Speaker 1 (24:20):
Oh?
Speaker 3 (24:20):
I think I lost like twenty thirty percent of the investment.
Speaker 5 (24:23):
Yeah, okay, all right, but it stuck with you all
this time. Mistake forever. It's just to do the homework right.
It's about really truly understand the business instead of what
management tell you.
Speaker 2 (24:33):
Seeing as we're going down back to two thousand and five,
maybe if you could go back sort of twenty years
or so, if there was a financial habit that you
could have picked up back then, do you know what
that would have been?
Speaker 4 (24:44):
Just layering a good.
Speaker 3 (24:46):
Habit, financial habit.
Speaker 5 (24:48):
I think it's probably back then I was at the
early stage of I do think reading financial publication is
very important.
Speaker 4 (24:54):
Excellent, you can all read this.
Speaker 3 (24:56):
The Australia is the best. Well, that's right, that's right.
Speaker 5 (24:59):
I actually it's really important. And these days that's where
we read about the mergers and acquisitions, the rumored deal
that's coming through. We'll get it from the paper. And
in those days, still early days, a scheme through every
now and then, but then you miss things.
Speaker 2 (25:13):
Also you want as dedicated to reading and making sure.
So if you could go back in time.
Speaker 5 (25:17):
You would actually just read more consistently absolutely every single
day like as information, and process the information much earlier
in the day. So how I process information these days?
All the reading everything is done before a thirty, So
everything is done before a thirty. So all the and
the a thirty we have our team meeting, we talk
about what we have absorbed. This includes everything what happened overnight,
(25:39):
what happened to, what happened in the US market, what
sort of things that's change, which company said well, which
company had done great, and what's this. And they're also
absorbing newsflow in Australian market before it opens, so all
the morning news knowing what's going to change, and by
a thirty we almost know how our market will open,
which sector will do well, which company will go up
and down, which announced meant to earnings down and all that.
(26:02):
So by a thirty everything's processed.
Speaker 4 (26:05):
We'll return to our chat following this small breakthrough, Jinbai,
is there a piece of advice for someone like me
or someone listening about how they can is the one
thing that they should be doing that can make them
a better investor or at least start to build that wealth.
Speaker 3 (26:28):
I feel like we're just all very busy, that's right.
Speaker 4 (26:30):
What can people do? You sort of juggling? People are
juggling a lot.
Speaker 5 (26:33):
Oh absolutely, and it's a never ending I've got kids myself,
it's just constantly juggling. So look, I think the advice is,
therefore someone wants to really learn about investing, because I
do all of these beforehand. Because I'm a professional farm manager,
I'm meant to know everything about what's happening in the market.
Then I can change my bed so I can be
more active. I can respond to different things. But you know,
(26:54):
if you're an individual, you're buying peel to your own portfolio,
you don't A lot of these things are noise. As individual,
we just want want to grow your own wealth. You
may one year you do a bit worse than the
share market, but it doesn't matter. You pick the company
that's still gone up. So it's a very different dynamic.
But for individual it's really about I feel it's about
the find the company you really understand and its quality,
(27:16):
so they get much less headache when you find a
spivvy stock. When you get a hot tip from somebody,
usually hot tap are bad because somebody told you the
hot tip would probably means that many other people already
got that hot tip a long time ago, and then
you might be the last person before it become not
so hot. And a lot of hot tip is fine,
but it just means they've probably it's gone up a lot,
gone very expensive. One of the example is recently there's
(27:39):
all these difference companies, Yeah, gone through the roof, that's right,
trying to sign up and everything, and I would say
a lot of them has a lot of hot air
in it, so they're not really training on how much
earning is multiple and the traditional things you're looking at
they're training are it's hot, we just got to get
in because there's only a few of them. So these
companies when they it's just risky, right, you got to
watch them because if suddenly one day people go, oh,
(28:01):
you're maybe it's not spending as much, or maybe actually
a company didn't win quite that many contract because the
shapprice the amount of share price gone out. People waiting
for a lot of contract to come through, So that's rial.
So I just think stayed with the company, especially you
can touch and feel, you understand the product and in
the quality larger blue tip. It's just much much easier,
less headache, you don't have to be on call suddenly
(28:23):
something happens, share price down twenty Just invest is that
the message you have to get started. Don't invest in
ETF for ETF is his least lazy.
Speaker 3 (28:31):
Way of doing so. Atfs are booming. Yeah, there's now
active ETF coming.
Speaker 5 (28:37):
Actually were launching it active ETF as well, So that's
with active manager ETF is fine, but you're not really learning.
Speaker 3 (28:44):
So if you really want to learn.
Speaker 5 (28:45):
About investing, when we talk about understanding company, you're doing
all that homework. That's a big part of the treasure hunting, right,
that's the fun part.
Speaker 3 (28:52):
So that's when you.
Speaker 5 (28:53):
If you pick a company, it forces you to learn
about it. So that's actually investing part. But if we
put in the ETF, that's more grow wealth part. So
because if you want to just an easy way just
say okay, I just want to go with the share market,
put in the ETF.
Speaker 3 (29:08):
That's an easy way to do it as well.
Speaker 2 (29:09):
Say we were talking defense stocks, so I might not
be able to pick the winner of who's going to
get the contracts. But I would think my logic would
say by the defense ETF, so you can spread the risk.
Speaker 5 (29:19):
So the challenge with that is that you've got to
be early, right because when the hot air comes out,
the whole thing goes. Yeah yea, So it doesn't matter
which one you're in, so it's just the whole thing goes.
So I always feel the thematic there is a lot
of thematic ETF. But when you look at your own portfolio,
you don't want to have a big part of it
in it.
Speaker 3 (29:37):
You have a small part.
Speaker 5 (29:38):
It's almost like part a little bit on this. But
my core portfolio are these things. We know the core
things because the other one can be very volatile.
Speaker 2 (29:45):
Juinbe we are fast running out of time, So I
do want to put our fast five to you, five
sort of rapid fire questions just to see.
Speaker 3 (29:53):
How we go.
Speaker 4 (29:54):
First up, morning or night.
Speaker 2 (29:56):
When do you make your best financial decisions? Morning morning, okay,
before thirty, before thirty, when you've.
Speaker 4 (30:02):
Done all the digesting.
Speaker 3 (30:03):
Yeah, that's offee is fresh. I'm assuming this' coffee in
the morning. Yeah, less of coffee, okay.
Speaker 2 (30:08):
If you could invest in one thing for the next
ten years. So you're only forget about the diversity, forget
about the I'm only allowing you to invest in one
thing for the next ten years.
Speaker 3 (30:17):
What would it be? Yeah, you miss stock stock. Yeah,
maybe that's.
Speaker 4 (30:22):
Trying to be a little bit specific. You get up.
I'm only get I'll.
Speaker 3 (30:25):
Got plenty of that.
Speaker 5 (30:25):
But I think I'm just going to give a very
high quality one, which is Cochlear. We know Cochlear, great
company in Australia, a huge, huge amount of years of that,
strong execution globally, not expensive relative to others. Yeah, I
think it's it's going to continue to grow.
Speaker 4 (30:40):
Okay. Is there any investment app you can't live without?
Speaker 3 (30:43):
Investment app? Bloomberg?
Speaker 2 (30:45):
Okay, the terminal Bloomberg is a thing you can't live without,
Like if I took it away, you would actually have
a difficult day.
Speaker 5 (30:53):
Yeah, I think yeah, because Bloomberg is a professional one
where we get all the life pricing and the like.
Speaker 2 (30:58):
Here, what's the one thing you want your kids to
learn about money or to know about money? Something you
want them to really take away.
Speaker 3 (31:04):
Oh okay, that's a really hard one. So I want
my kids.
Speaker 5 (31:07):
I think the key thing I want my kids to
start really understanding the value of money.
Speaker 3 (31:12):
I think every probably doing that. I want them to.
Speaker 5 (31:14):
Actually the key thing is I want them to understand
how to grow money. Actually already created lots of those
savings to help them to understand you grow your money,
the compound, the effect of money.
Speaker 4 (31:24):
And are they so how old are you kids again?
Speaker 3 (31:25):
Eleven? Then fourteen?
Speaker 2 (31:26):
Eleven and fourteen? And do they have their own investments?
Are you letting them invest themselves or that?
Speaker 5 (31:30):
Yeah, I've been telling them about so they do so.
But obviously they always pick the easiest, the Tesla, the
Apple and these ones. So I'm trying to get them
to whenever they see go to Woolworth and the like
and then tell them that the shares that's listed and
everything else. So that's how I get them, essentially, the
things that they touch and feel every day. The more
the consumer goods product.
Speaker 4 (31:49):
Hey, what's the one thing money can't buy?
Speaker 3 (31:51):
Happiness?
Speaker 5 (31:53):
And look, I think the money one thing money come by.
I think lots of things money come by. Even in investing,
always feel it's actually I do it for I just
think it's so much fun in doing so because of
that treasure hunting that journey, the resilience. You get things wrong, resilience,
come back and learn, then do it again. So more
than just money, it's actually for me, it's character building.
(32:15):
It's incredible experience.
Speaker 2 (32:17):
A lot of people find investing quite intimidating. So is
there a piece of advice you have for people who
look at the success that you've got and think, oh gosh,
how do I replicate that?
Speaker 3 (32:26):
Yeah?
Speaker 5 (32:26):
Look, I think I just get started. It's not intimidating
at all, and it's not. And remember you don't have
to be accountant to do really well, but if you're countan,
you'll still do it. It's not just numbers. It's actually
so much more than that. We talk about some of
those thematic and things. Every company is so interesting, and
just have the curiosity and just get started.
Speaker 4 (32:44):
I think people think they need a finance degree or
some sort of education in this. Is that sort of
a big miss? Do you think?
Speaker 3 (32:50):
I think you don't need it.
Speaker 5 (32:51):
But remember when you build a portfolio for the first time,
you first you pick the blue chip, the larger company,
and diversify. You need to have at least ten to
fifteen stock and don't just pick them out of one sector.
So if you pick a bank, and then you could
pick a growth company, you pick a gold company, picker
just a bit of everything, just so your portfolio is diversify.
Speaker 3 (33:10):
It takes away a lot of risks when you do that.
Speaker 4 (33:12):
JIMBEI, thank you so much, Thank you so much for
having me, Thanks for joining me.
Speaker 2 (33:16):
I'm Julianne Sprague, Wealth editor at The Australian. We'll have
another bonus episode of the Money Puzzle next week. We'll
sit down with Roger Montgomery, a leading fund manager, a
firm favorite at The Australian, a regular columnist. He wasn't
always a great investor, and so we'll go back and
learn how he launched the trade, some of the mistakes
(33:37):
he made, and his advice for us.
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. Well. I've mentioned in recent
weeks that we are planning to do some new features
here at the Money Puzzle, and today and over the
next three mondays, we're going to present a short series
to you on how top investors pick their winning investments.
(00:31):
My colleague at The Australian, Julianne Spragg, sat down for
a chat with top stock picker jun Bei Lu, the
co founder of ten Caps. She's more than tripled funds
under management more than one point five billion dollars. How
does she pick a good stock and what's your advice
for everyday investors? Let's find out.
Speaker 2 (00:54):
Gin Bailou, thanks for joining me. I want to have
a chat to you about your journey.
Speaker 3 (00:58):
So you came to.
Speaker 2 (00:59):
Australia as a sixteen year old, got yourself into the
funds management business, initially as an analyst involved in a
fund that I think had around three hundred million dollars
funds under management, and grew that to over a billion
dollars and now out on your own at ten cap.
Speaker 4 (01:12):
It's a pretty extraordinary story.
Speaker 3 (01:14):
Oh, thank you.
Speaker 2 (01:15):
We want to have a chat about that, but also
really keen to learn from you about what you've learned
about investing and get some of your tips for those
of us who just want to get.
Speaker 4 (01:23):
Better at it. Let's maybe just start at the beginning.
Speaker 2 (01:27):
And you came to Australia as a sixteen year old.
What was that like?
Speaker 3 (01:30):
Oh, look, it's quite incredible.
Speaker 5 (01:32):
Actually, I still remember thinking the first day I landed
in Australia, the first thing that struck me is the
sky was so blue. And I come from China at
the time, we don't see blue sky very often. Sky
so blue, and the cloud is so three D, almost
as if you could touch it. It's such a beautiful country.
I just remember thinking that was incredible. Of course, over
the next six month, I think I couldn't understand the
(01:53):
word of English, so it took a little while to
vaguely translate the body language into what people meant.
Speaker 3 (02:00):
We went to read people.
Speaker 5 (02:01):
Yeah, you kind of need to read, and it's incredible
how your our mind adapt them. So our brain sort
of adapt to the situation. I think within three months
I can sort of vaguely understand in the class that
what teachers sort of meant some subject matter like matt
and other things a bit easier, but when you go
into biology and others, becomes a bit harder.
Speaker 3 (02:19):
But still you pick up real quick.
Speaker 5 (02:20):
And I still remember every day when I was on
my way to school, I have to catch the bus
to go to school, and it's about forty minute bus ride,
and I used to take deep breath. I get quite
stressed and take deep breath, keep forcing myself thinking in English.
Because the hardest thing for a migrant is that you
think in your own language. Then you before you speak,
you translate it, and then when you hear it, then
(02:41):
you translate back and then you think again in your
own language. That's why it takes so long for you
to actually speak something. So if you force yourself to
think English, then it much faster, and then you actually
get practice all the time. So I remember that forty
minute bus ride. I used to practice every day and est.
Speaker 4 (02:58):
In your head, you're strying to speak talking to myself.
Speaker 5 (03:01):
Yeah, so I think I still today people catch me
talking to myself all the time, going crazy.
Speaker 2 (03:06):
And your parents what triggered the move? Did they sort
of talk to you at the time about why they
were doing that.
Speaker 3 (03:10):
Yeah.
Speaker 2 (03:11):
Sure.
Speaker 3 (03:11):
Look at the time, so my mother came.
Speaker 5 (03:13):
To Australia as part of that whole relaxation of student
visa posta Tiama Square and Massacre. And at the time,
but in China, China was very poor. Every person in
China really wanted to see what it's like to be
in the foreign country. It's almost it's like a dream
come true. And my mother was very fortunate that she
came through in the visa and then she managed to stay,
worked many jobs and managed to stay. And then I
(03:35):
came and joined her six years later. So we separated
for six years and joined her six years later, and
then my dad came another four years later.
Speaker 4 (03:42):
My goodness, what a journey.
Speaker 3 (03:43):
I know, it's incredible.
Speaker 2 (03:45):
And the attitudes towards money when you were growing up,
did your sort of parents sort of instilled in particular values.
Speaker 5 (03:51):
Yeah, look, I think it just we grew up pretty poor,
so making money is it's probably a big thing.
Speaker 3 (03:56):
But even though we were.
Speaker 5 (03:57):
Poor, But my dad always remember he's I think he's
quite adventures. He was I would say, one of the
earliest investors in share market or bomb market there in China.
This is I think he started in maybe like ninety
nineteen ninety when the capital market was really literally it's
infancy in China and it was more or less just punting, right.
So I remember at home, we don't have computers. He
(04:18):
will print out all these paper and draw all the
lines of where the stock is today, and then draw
all these ratio and everything, and then every day he'll
make a prediction about the stock either going up or
going down.
Speaker 3 (04:30):
He'll never get it wrong.
Speaker 5 (04:31):
And then every day he'll stick up a paper. So
we literally have all these lines of paper because we
don't have computer going across my bedroom, his bedroom, living room,
all the way down downstairs, and they're into the kitchen,
so we just have all these charts everywhere.
Speaker 3 (04:46):
So I grew up with the charters.
Speaker 4 (04:48):
Wow investing you learned by Osmosis oh.
Speaker 5 (04:50):
I reckon, it's exciting. I think what I learned is
that excitement. To me, it's always investing a bit like
treasure hunting. You go and find something before everyone else,
and then you founder you did the work, you found it,
and you know you make the return. So it's very
much like treasure hunting. So at the time I feel
a lot of my dad's excitement and disappointment and then
my at the time, I thought he would never be
(05:12):
wrong because every day he's pretic either up or doubt.
Speaker 3 (05:15):
Sideway will be the wrong day.
Speaker 4 (05:16):
What was treasure hunting?
Speaker 2 (05:18):
Can you remember your very first investment, what it might
have been, and how old you were when you made
your first, like your first investment all on your own?
Speaker 3 (05:26):
Yeah, yeah, that's right.
Speaker 5 (05:27):
So my first investment actually when I already started working,
but very early days.
Speaker 3 (05:32):
I think I put my money in a company.
Speaker 5 (05:35):
Actually I put my money in a company where at
the time I thought, oh, look, I don't really know
how to invest. I just want to invest in something
that I know what it is, which is worth her
and because I go to the store. In fact, I
worked in Woolworth briefly as a checkout chick in high school.
Speaker 1 (05:50):
So you knew it.
Speaker 3 (05:51):
Well, yeah, so it's like that touch and feel. It's
really exciting.
Speaker 4 (05:54):
And I still have my name bad from Coles just quietly, Oh.
Speaker 3 (05:57):
I think I do too, Yeah, I think I do too.
And that was my first experience.
Speaker 5 (06:04):
I didn't know anything about it, and that was at
the time where I just started looking at some of
the financial statements I learned in UNI and then my
first job as a start analyst, also working for morning
Staff for a bit as well.
Speaker 2 (06:14):
So you studied finance to knew you wanted to go
into the finance industry become an analyst. So you've got
a bit of knowledge behind you then, but then you
sort of think you still stick to what you know.
Speaker 5 (06:23):
So you'll buy I tell you what I think that
it's actually less inspirational than often what I portrayed to be.
It's actually, look, I always feel finance. I did finance
because as a Chinese kid, we'll go finance or accounting
definitely will find a job. That's what my mother tells me.
And as I go through finance, and then I kind
of learned the things that I like. I never liked
(06:44):
the accounting part of it. I find a very try
so and.
Speaker 2 (06:48):
People who know me, they'll be having a giggle now
because one of my stories is my dad wanted me
to study accounting.
Speaker 4 (06:54):
You'll get a job. But then I was just delinquent,
going no, I don't want accounting.
Speaker 5 (06:59):
No, yeah, I think the accounting is the thing. Yeah,
Well I think I'm kind of pivoted as well. So
because with accounting, I did a one year of accounting
or that that that's not.
Speaker 4 (07:09):
Me all the accounting.
Speaker 5 (07:10):
Yeah, that's right, and they're too scared to drop the
entire commerce. Then my mother will be hugely disappointed. So
I shifted to finance, and then in finance that you
learn about behavioral finance and economics and a few other things.
And behavioral finance was so fascinating because that's the soft skill.
That's where you do the treasure hunting. You're trying to
think about how everyone else is thinking, what are their biases.
(07:33):
It's almost like a psychology class. I find that very fascinating.
Speaker 2 (07:36):
Is that then how you can work out whether to
go with the herd or not? You know how there's
that herd mentality in markets.
Speaker 5 (07:42):
That's absolutely right. I actually think unlike what many other
people think. Many people think investing about numbers and get
the numbers right and everything. I actually think get the
numbers right is almost a basic and that's a small
component of ultimate what the share price will do. It's
actually get your numbers right and what the share price
will do, especially in the immediate future, in the next
three to six months. Short term is all about sentiment.
(08:04):
Sentiment is behavioral bias, you know, is all about what
would other people pay for those numbers that you just
put together, And that's what share market. That's why these
days you see wild swings.
Speaker 3 (08:15):
It's just that sentiment.
Speaker 5 (08:16):
So it's actually incredibly important because if you can understand
that and then you can sometimes go against the hurd
then you make a lot more return. There's your treasure.
You found that before other people realized it was a treasure.
Speaker 2 (08:27):
So is there something that you look towards to try
and work out that behavioral piece? Like, is there I
don't know if you're reading different aspects of how do
you try and determine what people are going to do?
Speaker 3 (08:38):
Yeah?
Speaker 5 (08:38):
I think firstly you need to and when you start
investing in something, don't start with a preconceived idea of
what it should be, because I find many investors make
this mistake is that they always feel, oh, I think
this is that, and then they when you believe something
firmly without open mind, then you start finding evidence just
to support your own view, our own view sometimes right,
sometimes right. It's very important to when you start looking
(09:01):
at something just keep a complete open mind looking at
as afresh or some of the previous mistakes, many mistakes
made mistake all the time, and one of some of
the biggest mistake is that when we have presecuencive idea,
then we start making pivot to the wrong side. Then
you stop listening to everyone, and then you kind of
just make the wrong bet about a company's future simply
(09:21):
because you just couldn't see what is coming. So yeah,
so I think open mind and curiosity is very important.
Speaker 2 (09:28):
Do you have any rules or structures around how you
go to invest that you're talking about? It sounds like
you do an awful lot of research and you sort
of sounds like you pause and really get to understand
the company before you invest.
Speaker 4 (09:40):
But how long does that take?
Speaker 2 (09:42):
And is that sort of a metric or some sort
of plan that you work to before you actually invest
your money or your client's money.
Speaker 1 (09:49):
Oh.
Speaker 5 (09:50):
Absolutely, so look for a brand new company, it does
take much longer because ultimately we always talk about doing
your homework, is that you do need to understand the business.
So the core understanding of the business is firstly, what's
its customer proposition? What's the proposition? Why does it exist?
So ask this question, why does it exist? How does
it exist? How is it better than others? And how
(10:11):
does it make money and is that how or specialty
going to continue? Are they keep reinvesting what's special about
that business that they can keep going? And then you
can decide, Okay, well it can make this much money
and next share you will make more because I know
all these things they're doing, it's going to drive this
and I know the management execution is very important. They've
(10:32):
done it before and you met the management need. They're
driven because ultimately, especially small business, they run by people
who's creating, innovating an idea, so they've got to be driven.
Speaker 3 (10:42):
So it's them. You kind of follow them when it's
early on.
Speaker 5 (10:46):
So a lot of these when once you're done your homeworld,
you understand, you really understand the driver of the business,
where it's going, You understand the management, you understand in
and out of that business and that industry. And then
this is the first part of it. And then the
next part of it is to actually work out what
you want to pay for it. And that is the
tricky part.
Speaker 4 (11:06):
That is the tricky part.
Speaker 2 (11:07):
When we come back, let's talk about how to know
when a stock is too expensive, And I also want
to know your investing mistakes. What do they teach you
and what's your investing advice for everyday investors. We'll return
to our chat following this small break.
Speaker 4 (11:36):
Jim Bay.
Speaker 2 (11:37):
Before we went to the break, we were talking about
investing in shares, so doing all of the research deciding
which company you'd like to back. The tricky part though,
is working out whether there's value in that company. How
do you go about working out whether a company is
too expensive to buy?
Speaker 5 (11:53):
I think in today's world the expensiveness really come back
down to relative valuation, so you compare it with something else.
So we in Australian market, if something is expensive, it's
not a reason for not buying something or for selling
something because yeah, I tell you why.
Speaker 3 (12:11):
I'll tell you why.
Speaker 5 (12:11):
Because Australian market growth is very hard to come buy.
So and then there's only limited there's only a couple
of companies you can buy that can grow. So there's
an incredible amount of money keeps piling into growth within
our share market and they will keep going to the
same company. So the evaluation today is much much higher
than they were ten years ago.
Speaker 2 (12:30):
Simply because it's just not as many companies, not many compants,
that's right, And there's an awful lot of money that
needs to be funneled.
Speaker 3 (12:36):
Towards amount of money. That's right, Yeah, that's right.
Speaker 5 (12:39):
And everyone wants to growth company to future proof their portfolio. Right,
So your portfolio will have always have bit of everything.
You have, bit of gold, bit of a company that
paid dividend like banks and things give you good income,
and then bit of maybe bit of material, but bit
of a growth company because in five years time, you
want your portfolio to keep growing rather than just paying
out dividend, right, you don't want to then still every
(13:01):
year they say share market should double every seven years,
So you want that growth company to be the core
holding of a portfolio. And then on top of that
you've got some dividend. You've got some ciclical they call
a cicl call ciclicll is like companies do well when
the economy picks up and then do badly when economy
So you buy and sell you much more shorter term
(13:21):
with those ones.
Speaker 3 (13:22):
So that's the portfolio.
Speaker 4 (13:23):
So you think I need to have a bank in
my portfolio.
Speaker 2 (13:26):
We always refer to the Big four and then Commonwealth
Bank has absolutely gone out on its own, like it
is just on a different level. So then how do
you work out then, if I want to have a bank,
does Commonwealth now look so expensive that I'm better off
going with these other three?
Speaker 3 (13:40):
Pick one of them?
Speaker 2 (13:41):
Or do you say, like what we were talking about
before is like the herds obviously going with CBA.
Speaker 4 (13:47):
How do you make that decision? How do you sit
down and assess it?
Speaker 5 (13:50):
Yeah?
Speaker 3 (13:50):
Look a two things I agree with you. I think
banks looks really expensive. Yeah yeah.
Speaker 5 (13:54):
And then the thing is like you don't really want
to As an investor who's not constantly watching the market,
I always have advice to stick with quality, stick with
the best quality company, and because you don't want to
worry about a day to day you've got to day
trade and all of that. Right, So unfortunately, I think
CBA is best position. It's the best bank, most expensive
in the world, I can say that. So when you
(14:14):
pick one, I think NAB looks okay. Relative Again, we're
talking about relative valuation. Things look relatively cheaper. NAP still
looks expensive for a bank on historical terms, but it's
a whole lot cheaper than what CBA is offering. So
I think relatively I would hold NAB instead of CBA.
But nothing will stop CBA from keep rallying away because.
Speaker 4 (14:34):
If anyone listening, if they just put CBA, you.
Speaker 5 (14:36):
Keep up because I tell you what, last three months
at the share price going where it actually six six
months ago a share price was moving higher because of
it's earning was doing a bit better and buy back
and all these great things. But last three months all
because international investor want to put money in Australia and
then what do they do. They kind of just buy
the top companies and they don't want to buy resources,
(14:58):
so they bought banks and then watch banks buy, you
buy the CBA. They don't want the problem with an
they's had a lot of issues and even Westpac is
not doing gray, so they kind of just put money
in the big one.
Speaker 2 (15:09):
We get told a lot that, particularly when markets are volatile,
don't sell, sit tight, hang in there. I think for
investors too, there is an art in knowing when to sell.
How do you work out when it's a great time
to sell?
Speaker 5 (15:24):
Yeah, so to sell is always the hardest question for it. Yeah,
so hardest question. I always believe you find a proper
growth winner. You do not sell right so you can
trim a little bit because you need money to buy
something else.
Speaker 3 (15:37):
That's how we look at it.
Speaker 5 (15:38):
So if I some of our winner like like three sixty,
Promedicus and these one that incredibly well. But the thing is,
if I find something else I think also can do
very well in the next to a month, I might
sell a little bit and put into it, but I
don't completely sell out because winners history have proven that
if you sell it, you'll never buy back in because
they keep going. So a company like that is they
(15:59):
just such a strong driver behind them in terms of
earning's growth. It just we just don't have many of
them around.
Speaker 4 (16:06):
So how do you go about balancing your portfolio?
Speaker 5 (16:08):
Yeah, So the good thing is that when you find
when we have the next opportunity coming out maybe so
I think even with like three sixty, it was a
few years ago, was very cheap. Everyone worried about what's
happening with the US and all that, and then you know,
you sell some of the growth names and funding too.
Those and even early in the year when you talk
about the market volatility, these times are great to picking
up high quality companies because people sell everything, especially people
(16:32):
like to sell winners because they go, oh, I don't
know what tariff is going to do I'm going to
sell my profit my winners because I've done so well
out of them. So people sold out all the growth names.
They're all thirty percent cheaper, literally in three weeks thirty
percent cheaper, and then they all jumped more than thirty percent.
Some of them have gone up thirty percent.
Speaker 4 (16:50):
Behindslight's wonderful, isn't it. So yeah, that's how do you
stay calm in those times it can be turbulent.
Speaker 2 (16:56):
That's got a job where you'll wake up in the
morning or maybe I don't know if you would have
done to go what's my morning going to be? Like,
It's just it's what Deffen is happening on global markets
really does impact what's happening on the local market.
Speaker 5 (17:08):
Absolutely, so I think, look, I've been doing this for
twenty five years, so you kind of get used to
the volatility. Volatility will come, but you know it will
always pass. It will always pass, but you need to
work out what's the new information. So what we didn't
know at the time was really in this particular time
was tariff. We don't know what Trump is going to
do one hundred and forty seven percent on China or
(17:28):
all that. So for companies that potentially get impacted by
that tariff. We just thought that's too hard because I
don't know tomorrow. It could be one hundred percent tomorrow
or zero percent.
Speaker 3 (17:37):
I don't know. That's we don't do.
Speaker 5 (17:39):
But for the company actually doesn't get impacted by tariff,
they are thirty percent lower on no change to earnings.
This way, we know it will come back. So you
buy these businesses same as during pandemic. I remember when
market went free four same thing. Everything fell, especially the winners,
they fell first, and then we just sort of work
out what we do know what we don't know. So
(18:00):
the first thing is that what we do know is
that hard asset will come back. Sit in the airport.
Someone will buy this thing. It was forty percent cheap,
or someone will buy it. So you buy the hard asset,
and then we have the government promised to step in
give stimulus and all of that. Then we'll go, okay,
we can then buy retailers by JP high vibe. So
really need to really understand what information is there and
(18:20):
then based on and see if there's any change to
your investment assumptions of a company.
Speaker 2 (18:25):
Let's dive into some of the mistakes along the way.
We've all made some safe places.
Speaker 3 (18:31):
It's a safe space, that's right.
Speaker 2 (18:34):
But I think to learn and to grow and to
become a better investor, you've had to have made some
clangers along the way. So I don't know if there's
one in particular that you recall what it was and
what it taught you.
Speaker 5 (18:44):
Yeah, look, we make a mistake all the time, that's
what they say. So investing in the share market, right,
you work out your probability, so what they say, but
we do better than that, So we are probability is
about seventy to twenty percent will outperform, and but that
twenty percent time that we're underperforming will pick the company
that in the workhouse. So you always make misspedakes. That's
the key advice. You have to make mistake to learn,
(19:05):
otherwise you never learn. So there's one name always click
with me because that's early days in my career, obviously
feeling fantastic buying Woolworth's.
Speaker 2 (19:13):
Oh this is easy, and so that investment went well,
we meant an So that that was your first investment.
Speaker 4 (19:18):
Can you recall how much you's?
Speaker 5 (19:19):
Can remember, Yeah, I made money and then I sold it. Yeah,
that's right, I made money. I think I made a
thousand dollars. I was so excited and I saw it,
I was like, yes, lock it.
Speaker 3 (19:27):
In, okay.
Speaker 4 (19:28):
So then you feel like, yeah, I know what I'm doing.
Speaker 3 (19:29):
Yeah, that's right. It's way too easy.
Speaker 5 (19:31):
And then that's when and then the I also just
started my celside job where I was the first time
young person being my full lead analysts and initiate on
this company. And I remember at the time JBHIGHI just
listed and it was expensive. I think sixteen times earnings
was very expensive. Then now will be like two hundred times.
But anyway, I was sixteen times earning. And then I thought, oh,
(19:52):
jbhif I sixteen times earning, Strathfield Car Radio, I don't
know if you know that one.
Speaker 3 (19:57):
Oh that's going back. Yeah, yeah, okay, that's it. So
Strathfield Car Radio was trading on twelve times.
Speaker 2 (20:04):
And and so just weren't they They were the company
and you could take out your the car radio and
your existing car and put in like the radis and
city players and stuff.
Speaker 3 (20:13):
That's right.
Speaker 5 (20:13):
And then those days car radio is big thing. So
every people when they buy the car, they go and
change their radio, they upgrade their radio. So JB High
Fi used to have those as well with the car radio.
It was a big credit, big components of that time, right,
that's right. Yeah, So you walk into Strathfield car radio.
They so they got car radio they got back then
they just started selling mobile phone in those things, and
(20:35):
they got a little bit of consumer electronics on the
side as well. So it's like a mini JB high five,
but poor men version JB High.
Speaker 3 (20:41):
Five, okay, And he thought, well, it's cheaper. I was
as much cheaper.
Speaker 5 (20:43):
Why not? They're rolling our stores as well, and JB
High five's rolling our stores.
Speaker 3 (20:47):
Why would not buy this one? It's all great?
Speaker 5 (20:49):
But and then I put on a great strong buy
and everything, and actually share price did well for about
three months. And then Richard Utriz was running JB High
five at the time. He came omember and saw for me.
Speaker 3 (21:00):
He's like, you bad.
Speaker 5 (21:02):
Have you been to the Strathfield store. That's the question
to me. He's like, have you actually been to the store.
I was like, no, I've seen pictures. It looks fine.
Speaker 3 (21:12):
He's like, you should go and have a look.
Speaker 4 (21:14):
And was he there to chat to you about trying
to invest in it? You never sell one jock.
Speaker 5 (21:20):
I didn't have cell but they just just essentially he's
educating in the market, just listed yeah, doing a kind
of road show, and he's like, have you been to
the store. I've seen the pictures and everything. And then
I thought, oh damn, I probably should go and see
the store. And I did go see the store, was saying,
oh god, this is not like JB High Fi. A
majority of the store was designated to the car radio.
(21:40):
And then there's a couple of I think they have
a big contract where the Optus or Telstra, they're like
Telstra Optus love us, gave us all these big trailing revenue.
We sell one mobile phone, we'll get paid so much
and all that, and then tiny bit income stroom electronics,
completely different, very old school, very dated. They're not in
the shopping center, they're outside on those Paramatta roads, and
very different vibe between the stores. And then it's not
(22:02):
efficient every category and jbhihid back then only just started
selling a few category. They haven't started selling game yet,
they haven't started selling PC. There were so many new
categories to come, completely different, and I came back thinking
this is not good. But anyway, I wasn't experienced that
I thought, look, I could write it because.
Speaker 4 (22:19):
You've made your decision right, and so I'm going to
back yourself in.
Speaker 3 (22:21):
So every fritten it's great.
Speaker 5 (22:22):
Yeah, and invested and I said it's great, buy and
then trying to convince everyone to buy. And six months later,
retail condition got a bit tougher, so consumer become tightened
their pockets and everything else. Immediately, Stratfield, they're like for
like started going negative.
Speaker 4 (22:38):
Can you what year are we talking?
Speaker 5 (22:39):
Maybe it was two thousand and five. There was one
year many retailer had downgrades. I think maybe it was
May two thousand and five or two thousand and four.
Winter was too hot as well, everyone downgraded because it
was two hot jackets won't selling A just group was
listed at the time as well. Remember but yeah, so
just retailer when things got a little bit tougher, retailer
don't have strong business model.
Speaker 3 (23:00):
They just don't do it as well. People don't need
to go to.
Speaker 5 (23:02):
Stratfield, whereas JB High Fire because they have a strong
busin models, but they pull people in. People want to
go and see what's going on or the excited excitement.
So things started going backwards and the minute staff for
retailers when things going backwards, going negative, it's heavily leveraged
because they don't have much debt, but the lease.
Speaker 3 (23:19):
They have to pay a lot on the lease, so
there's not much room to move for retailers.
Speaker 2 (23:22):
Start to see it turn negative, but you realize, as
we spoke about earlier, it's like you've made a decision
and you don't.
Speaker 4 (23:28):
You don't sell out when things get volatile.
Speaker 3 (23:30):
So did you stay? Oh no, no, no, So I
got this one wrong.
Speaker 5 (23:33):
Yeah, because I realized how quickly things can back can
get bad, and so the minute it turns negative, I
think I sat there for six months, longer than I
should six months. So when it started turning, I didn't
move straight away because I thought it will get better.
Maybe just patch your consumer, Maybe they just unlucky. Management
always find the best excuses. Oh this thing happened, too
much rain or something.
Speaker 3 (23:53):
Always this.
Speaker 5 (23:54):
So at the end, so and they're six month later,
I realized that the operating d leverage is very significant
for a retil and for a retailer. By then, I
have realized that there is something that whatever I thought
it was special about the company, it was not there.
I should have really visited the store. Really see what
was the value driver why people walk into that store?
Speaker 3 (24:14):
There was no reason. That's why when things are tough,
people don't walk in.
Speaker 4 (24:17):
Do you remember how much money you might have lost
with that investment?
Speaker 1 (24:20):
Oh?
Speaker 3 (24:20):
I think I lost like twenty thirty percent of the investment.
Speaker 5 (24:23):
Yeah, okay, all right, but it stuck with you all
this time. Mistake forever. It's just to do the homework right.
It's about really truly understand the business instead of what
management tell you.
Speaker 2 (24:33):
Seeing as we're going down back to two thousand and five,
maybe if you could go back sort of twenty years
or so, if there was a financial habit that you
could have picked up back then, do you know what
that would have been?
Speaker 4 (24:44):
Just layering a good.
Speaker 3 (24:46):
Habit, financial habit.
Speaker 5 (24:48):
I think it's probably back then I was at the
early stage of I do think reading financial publication is
very important.
Speaker 4 (24:54):
Excellent, you can all read this.
Speaker 3 (24:56):
The Australia is the best. Well, that's right, that's right.
Speaker 5 (24:59):
I actually it's really important. And these days that's where
we read about the mergers and acquisitions, the rumored deal
that's coming through. We'll get it from the paper. And
in those days, still early days, a scheme through every
now and then, but then you miss things.
Speaker 2 (25:13):
Also you want as dedicated to reading and making sure.
So if you could go back in time.
Speaker 5 (25:17):
You would actually just read more consistently absolutely every single
day like as information, and process the information much earlier
in the day. So how I process information these days?
All the reading everything is done before a thirty, So
everything is done before a thirty. So all the and
the a thirty we have our team meeting, we talk
about what we have absorbed. This includes everything what happened overnight,
(25:39):
what happened to, what happened in the US market, what
sort of things that's change, which company said well, which
company had done great, and what's this. And they're also
absorbing newsflow in Australian market before it opens, so all
the morning news knowing what's going to change, and by
a thirty we almost know how our market will open,
which sector will do well, which company will go up
and down, which announced meant to earnings down and all that.
(26:02):
So by a thirty everything's processed.
Speaker 4 (26:05):
We'll return to our chat following this small breakthrough, Jinbai,
is there a piece of advice for someone like me
or someone listening about how they can is the one
thing that they should be doing that can make them
a better investor or at least start to build that wealth.
Speaker 3 (26:28):
I feel like we're just all very busy, that's right.
Speaker 4 (26:30):
What can people do? You sort of juggling? People are
juggling a lot.
Speaker 5 (26:33):
Oh absolutely, and it's a never ending I've got kids myself,
it's just constantly juggling. So look, I think the advice is,
therefore someone wants to really learn about investing, because I
do all of these beforehand. Because I'm a professional farm manager,
I'm meant to know everything about what's happening in the market.
Then I can change my bed so I can be
more active. I can respond to different things. But you know,
(26:54):
if you're an individual, you're buying peel to your own portfolio,
you don't A lot of these things are noise. As individual,
we just want want to grow your own wealth. You
may one year you do a bit worse than the
share market, but it doesn't matter. You pick the company
that's still gone up. So it's a very different dynamic.
But for individual it's really about I feel it's about
the find the company you really understand and its quality,
(27:16):
so they get much less headache when you find a
spivvy stock. When you get a hot tip from somebody,
usually hot tap are bad because somebody told you the
hot tip would probably means that many other people already
got that hot tip a long time ago, and then
you might be the last person before it become not
so hot. And a lot of hot tip is fine,
but it just means they've probably it's gone up a lot,
gone very expensive. One of the example is recently there's
(27:39):
all these difference companies, Yeah, gone through the roof, that's right,
trying to sign up and everything, and I would say
a lot of them has a lot of hot air
in it, so they're not really training on how much
earning is multiple and the traditional things you're looking at
they're training are it's hot, we just got to get
in because there's only a few of them. So these
companies when they it's just risky, right, you got to
watch them because if suddenly one day people go, oh,
(28:01):
you're maybe it's not spending as much, or maybe actually
a company didn't win quite that many contract because the
shapprice the amount of share price gone out. People waiting
for a lot of contract to come through, So that's rial.
So I just think stayed with the company, especially you
can touch and feel, you understand the product and in
the quality larger blue tip. It's just much much easier,
less headache, you don't have to be on call suddenly
(28:23):
something happens, share price down twenty Just invest is that
the message you have to get started. Don't invest in
ETF for ETF is his least lazy.
Speaker 3 (28:31):
Way of doing so. Atfs are booming. Yeah, there's now
active ETF coming.
Speaker 5 (28:37):
Actually were launching it active ETF as well, So that's
with active manager ETF is fine, but you're not really learning.
Speaker 3 (28:44):
So if you really want to learn.
Speaker 5 (28:45):
About investing, when we talk about understanding company, you're doing
all that homework. That's a big part of the treasure hunting, right,
that's the fun part.
Speaker 3 (28:52):
So that's when you.
Speaker 5 (28:53):
If you pick a company, it forces you to learn
about it. So that's actually investing part. But if we
put in the ETF, that's more grow wealth part. So
because if you want to just an easy way just
say okay, I just want to go with the share market,
put in the ETF.
Speaker 3 (29:08):
That's an easy way to do it as well.
Speaker 2 (29:09):
Say we were talking defense stocks, so I might not
be able to pick the winner of who's going to
get the contracts. But I would think my logic would
say by the defense ETF, so you can spread the risk.
Speaker 5 (29:19):
So the challenge with that is that you've got to
be early, right because when the hot air comes out,
the whole thing goes. Yeah yea, So it doesn't matter
which one you're in, so it's just the whole thing goes.
So I always feel the thematic there is a lot
of thematic ETF. But when you look at your own portfolio,
you don't want to have a big part of it
in it.
Speaker 3 (29:37):
You have a small part.
Speaker 5 (29:38):
It's almost like part a little bit on this. But
my core portfolio are these things. We know the core
things because the other one can be very volatile.
Speaker 2 (29:45):
Juinbe we are fast running out of time, So I
do want to put our fast five to you, five
sort of rapid fire questions just to see.
Speaker 3 (29:53):
How we go.
Speaker 4 (29:54):
First up, morning or night.
Speaker 2 (29:56):
When do you make your best financial decisions? Morning morning, okay,
before thirty, before thirty, when you've.
Speaker 4 (30:02):
Done all the digesting.
Speaker 3 (30:03):
Yeah, that's offee is fresh. I'm assuming this' coffee in
the morning. Yeah, less of coffee, okay.
Speaker 2 (30:08):
If you could invest in one thing for the next
ten years. So you're only forget about the diversity, forget
about the I'm only allowing you to invest in one
thing for the next ten years.
Speaker 3 (30:17):
What would it be? Yeah, you miss stock stock. Yeah,
maybe that's.
Speaker 4 (30:22):
Trying to be a little bit specific. You get up.
I'm only get I'll.
Speaker 3 (30:25):
Got plenty of that.
Speaker 5 (30:25):
But I think I'm just going to give a very
high quality one, which is Cochlear. We know Cochlear, great
company in Australia, a huge, huge amount of years of that,
strong execution globally, not expensive relative to others. Yeah, I
think it's it's going to continue to grow.
Speaker 4 (30:40):
Okay. Is there any investment app you can't live without?
Speaker 3 (30:43):
Investment app? Bloomberg?
Speaker 2 (30:45):
Okay, the terminal Bloomberg is a thing you can't live without,
Like if I took it away, you would actually have
a difficult day.
Speaker 5 (30:53):
Yeah, I think yeah, because Bloomberg is a professional one
where we get all the life pricing and the like.
Speaker 2 (30:58):
Here, what's the one thing you want your kids to
learn about money or to know about money? Something you
want them to really take away.
Speaker 3 (31:04):
Oh okay, that's a really hard one. So I want
my kids.
Speaker 5 (31:07):
I think the key thing I want my kids to
start really understanding the value of money.
Speaker 3 (31:12):
I think every probably doing that. I want them to.
Speaker 5 (31:14):
Actually the key thing is I want them to understand
how to grow money. Actually already created lots of those
savings to help them to understand you grow your money,
the compound, the effect of money.
Speaker 4 (31:24):
And are they so how old are you kids again?
Speaker 3 (31:25):
Eleven? Then fourteen?
Speaker 2 (31:26):
Eleven and fourteen? And do they have their own investments?
Are you letting them invest themselves or that?
Speaker 5 (31:30):
Yeah, I've been telling them about so they do so.
But obviously they always pick the easiest, the Tesla, the
Apple and these ones. So I'm trying to get them
to whenever they see go to Woolworth and the like
and then tell them that the shares that's listed and
everything else. So that's how I get them, essentially, the
things that they touch and feel every day. The more
the consumer goods product.
Speaker 4 (31:49):
Hey, what's the one thing money can't buy?
Speaker 3 (31:51):
Happiness?
Speaker 5 (31:53):
And look, I think the money one thing money come by.
I think lots of things money come by. Even in investing,
always feel it's actually I do it for I just
think it's so much fun in doing so because of
that treasure hunting that journey, the resilience. You get things wrong, resilience,
come back and learn, then do it again. So more
than just money, it's actually for me, it's character building.
(32:15):
It's incredible experience.
Speaker 2 (32:17):
A lot of people find investing quite intimidating. So is
there a piece of advice you have for people who
look at the success that you've got and think, oh gosh,
how do I replicate that?
Speaker 3 (32:26):
Yeah?
Speaker 5 (32:26):
Look, I think I just get started. It's not intimidating
at all, and it's not. And remember you don't have
to be accountant to do really well, but if you're countan,
you'll still do it. It's not just numbers. It's actually
so much more than that. We talk about some of
those thematic and things. Every company is so interesting, and
just have the curiosity and just get started.
Speaker 4 (32:44):
I think people think they need a finance degree or
some sort of education in this. Is that sort of
a big miss? Do you think?
Speaker 3 (32:50):
I think you don't need it.
Speaker 5 (32:51):
But remember when you build a portfolio for the first time,
you first you pick the blue chip, the larger company,
and diversify. You need to have at least ten to
fifteen stock and don't just pick them out of one sector.
So if you pick a bank, and then you could
pick a growth company, you pick a gold company, picker
just a bit of everything, just so your portfolio is diversify.
Speaker 3 (33:10):
It takes away a lot of risks when you do that.
Speaker 4 (33:12):
JIMBEI, thank you so much, Thank you so much for
having me, Thanks for joining me.
Speaker 2 (33:16):
I'm Julianne Sprague, Wealth editor at The Australian. We'll have
another bonus episode of the Money Puzzle next week. We'll
sit down with Roger Montgomery, a leading fund manager, a
firm favorite at The Australian, a regular columnist. He wasn't
always a great investor, and so we'll go back and
learn how he launched the trade, some of the mistakes
(33:37):
he made, and his advice for us.
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