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My first ever investment: 15 fund and wealth managers reveal all - Part 2
by Elsa Buchanan on Sep 12, 2013 at 13:39
In the second edition of our two-part feature a Swiss elevator company, the 'Royal Event' and Bob the Builder feature among some of our readers' early money making ideas.
James Maltin, investment director, Rathbones
My first ever investment was one of time. At school there was a rota which required the junior pupils to wake up the dormitories in time for breakfast. This entailed dragging oneself out of bed about half an hour earlier than usual and ringing a large brass bell through the corridors of the house.
Having always been an early riser this didn’t bother me much, but others dreaded the day when the responsibility came to rest on their shoulders. So for about £10 per week (1.75p per day I think it was), I would step in on behalf of friends who when given the choice of change in their pocket or time under the duvet, would happily opt for the latter. The only capital employed in this business was human and the overheads practically non-existent. Creditors were not accepted but I do recall special purpose vehicles amongst third parties which facilitated loans to the lazy. It was all free cash flow and at age thirteen most welcome.
Stacey Ash, director and investment manager at iFunds
I seem to recall that it was Thornton Oriental Income and that was over twenty years ago. This was quite an unusual fund at the time, as the concept of high growth companies in Asia paying dividends was counter-intuitive. However, it had a reasonable dividend stream, so helped to diversify your income geographically while gaining exposure to high growth economies. Thornton was taken over by Dresdner bank and the fund was closed in 2002.
I think that the Dresdner funds were taken over by Allianz. It is interesting to note, that in 2008 Allianz launched the Oriental Income fund. So I think it’s fair to say the fund was ahead of its time!
Thomas Becket, chief investment officer, Psigma Investment Management
When I assumed the poisoned chalice that is the role of Psigma's CIO in late 2008, I was keen to make a good early impression. The only issue was that we were in the grips of the worst bear market for decades, with confidence and wealth evaporating simultaneously.
I've never been one for timing. Having been very defensively positioned in 2008, I recommended that we took a more positive approach to equities in November 2008, primarily through the purchase of the River and Mercantile Long Term Equity Recovery fund. Forget long term, the fund shot up almost immediately and I thought this was about the easiest game I had ever played. Zero to Hero.
Then the Santa Claus Rally of 2008 vintage stopped, investors panicked and serious questions were asked about this early decision, my first as CIO. Hero back to Zero.
Another two months of misery endured as the FTSE fell to a ‘false’ bottom in February before rebounding aggressively in March and the investment performed well. I'm still considered a Zero. Lessons learned? Plenty. Humility, patience, trust in yourself, don't catch falling knives unless you are a true masochist and whisky helps to soothe any pain.
Chris Kitchenham, director at Walker Crips
My first investment was in 1997. Lots of colleagues ‘invested’ and I wanted to feel part of it, I think it was about 150 Lloyds Bank shares at about 700p. I sold them shortly after at 800p, it felt great to be involved and I made about £100, which if I remember correctly I spent on a camera. Good times!
Richard Power, head of the smaller companies team at Octopus Investments
One of my early memorable investments was HiT Entertainment. Originally founded in 1983 in order to coordinate the co-production of Fraggle Rock, HiT Entertainment floated on AIM in 1996 as an owner of children’s entertainment and intellectual property rights, including Brambly Hedge, Angelina Ballerina, Kipper, Percy the Park Keeper and at the time the little known animated television show called Bob the Builder.
With an opening valuation on AIM of just £18 million the company’s CEO, Peter Orton, set about turning Bob the Builder into a mega-hit on both sides of the Atlantic. The success of Bob the Builder provided the platform for the company to expand and following a placing in 1999, the company’s valuation had ballooned to £170 million. In February 2001 HiT acquired Lyrick Corp, the owner of Barney the Dinosaur for $160 million.
Post the transaction HiT had a market cap of over £600 million. The company’s acquisition spree continued (Pingu 2001, Thomas the Tank Engine 2002) before finally being acquired by Apax Partners in 2005 for £489 million. In February 2012 Apax Partners sold HiT Entertainment to Mattel for $680 million.James Thompson, director at Taylor Patterson Financial Planning
When I was 17 and seemingly obsessed with fast cars (it’s all about the fuel economy now!). I bought a ‘hot hatch’ Vauxhall Nova, which I wasn’t all that happy with. It must have been a good investment though as not long afterwards, I was approached with an offer to buy the car with a substantially higher price than I paid. Needless to say, I accepted the offer with -well concealed- glee. Unfortunately, this trend did not continue.
François-Joseph Furry, alternative strategies manager, Carmignac Gestion
I started at Fidelity in 2002, covering oil shipping and services. With the oil price below $30 a barrel this was not a fashionable area. Equally unfashionably, I invested in Frontline, the world leader in oil tanker shipping. The supply of tankers far outstripped demand. But I liked the way that Frontline had built a modern fleet, while older ships were bound to be scrapped as environmental constraints toughened.
I could also see structural growth in oil demand: a recent trip to China convinced me that its entry into the World Trade Organisation (WTO) had turned it into a significant oil importer from being a historical exporter. Finally, the duo running the company, tycoon John Fredriksen and his right hand man Tor-Olav Troïm, owned a big stake, and had recently increased it. We bought 10% of the company and enjoyed a 10-fold rise over the next 2-3 years with a cherry-on-the-cake 20% annual dividend.
Ross Hunter, investment manager at Anderson Strathern Asset Management
My first investment was in the privatisation of National Grid and Powergen. After watching countless elders and betters profiting from the earlier rounds of privatisation, I decided to invest my student loan and planned to use the ill-gotten gains to help fund a three month expedition to Zimbabwe and South Africa.
Unfortunately for me, the lessons had been learned from previous privatisations and the discount offered had be minimised. After 10 months, I sold my holding and broke even. Whilst disappointing, I still made it to Africa. In hindsight, had I stayed in cash, like most students I would probably have invested it in cheap beer and super noodles, so it was still a smart move!
Richard Philbin, Hardwood Capital
My first investment was 'The Royal Event' – back in 1985 I think as it was probably linked to Charles and Di’s wedding. There was a proper fanfare associated with TV advertising (yes for a unit trust launch!) and they offered 3 funds: a cautious, a balanced and an international growth fund. The funds were offered by Royal Insurance, which became Royal & Sun Alliance, and then ultimately F&C.
I did a lump sum investment of £250 and £20 a month regular savings. Considering I was only earning pocket money, and earning a little extra on a paper route, and odd jobs, I went all in! The fund actually had to be bought on my account being as I wasn’t old enough to make an investment decision in my own name.
I was recommended the International growth fund from a friend’s dad (who also happened to be an IFA – it is never too young to take professional advice). He discounted his commission.
I sold the investment at a nice profit a couple of years later to buy a scrambler motorbike (I was 16 in July 1987) so you could argue it was perfect market timing! I bought the motorbike, which was left in a mates garage for protection. When I say protection, it wasn’t because I thought it would get stolen, it was me protecting my life should my parents find out I had bought a motorbike. Needless to say my mates parents told my parents and the bike had to go.
I was then perceived 'too foolish' with my money and before I could then use the proceeds (no loss, no gain) to buy back into the market, the October crash happened and the money stayed on deposit for 12 months until I used that cash and other bits stored up to buy a car...which lasted 11 weeks before being written off when I careered underneath a lorry that decided to do a U-turn in front of me.
John Ewart, head of global emerging markets ex-Asia, Aubrey Capital Management
My first share that was purchased was Schindler, the Swiss elevator company. The stock was the Schindler PC (participation certificate) and reflected the historic share structure of many European companies in the 1980s and 1990s. The Family owned the registered shares, and those shares held the voting rights, whilst the foreigners had to buy the non-voting bearer shares or PC’s. Thankfully that attitude toward international minority investors has changed since then and we now have one class of share.
The investment rationale remains the same today as it did over 20 years ago. The urbanisation of populations requires residential apartment blocks, and the increasing commercial development of offices in cities also requires elevators. The industry consolidation has been driven by the R&D requirement for technology advances, and the technical nature of the equipment has enabled a servicing revenue stream to be developed for the companies. Clearly the emerging market urban development ambitions offer new elevator sales prospects, but the western world has a lot of lifts that require servicing and ultimately will also be replaced.
Aubrey currently has a holding in Kone, the Finnish elevator company which is expected to benefit from the themes outlined.
Andrew Buchanan, fund manager on the Smaller Companies team at Octopus Investments and co-manager of the Octopus AIM Venture Capital Trust and the Octopus Second AIM
Remembering back to 1994, a colleague and I launched an investment trust called Beacon, which was designed to invest in tiny companies traded under the Rule 535 facility. This was the basis of what became AIM in 1995, making Beacon the first dedicated AIM investment vehicle. Beacon’s first investment was Furlong Homes, a house builder founded by Jim Furlong, who had sold his original company some years earlier to another company. Furlong Homes specialised in East London developments, although I never let Jim forget about the company’s bit of land near King’s Lynn.
Ask an AIM investor today to name a house builder on AIM, particularly one that specialises in East London developments and you might well get the answer Telford Homes. Furlong Homes was sold to a larger, privately owned competitor very successfully and the management established Telford Homes. To all intents and purposes Furlong Homes continues as Telford Homes today and, for its investors, it looks well on the way to being as successful.
My first investment for what was then the Close Brothers AIM CT PLC and is now the Octopus AIM VCT PLC was made in 1998 (if I remember correctly: it was a long time ago!) into Mears Group, which had floated on AIM about three years earlier at 10p. The AIM VCT paid 12.5p for each of its 1.6 million shares. The VCT still holds some of those shares today at a price of a little over 400p. By any yardstick Mears Group has been a very successful investment and just shows what can be achieved by backing sound management over the long term.
John James, investment manager, Private Client - Wealth Management, Blackadders
I can’t remember my first trade, but one of my earliest favourites was a purchase of GEC circa 1998 at around £4. It had £4 billion in cash in the balance sheet and it was a well-run, profitable though rather dull company. A couple of years later it had transformed itself into a dot.com company with £4 billion of debt, called itself Marconi and we sold at £11 in 1999/2000.
John Birdwood, head of discretionary absolute return portfolios at Societe Generale Private Banking Hambros
In 1994 I was moving countries and never got around to completing the application form to buy Baring Eastern Europe Trust at launch. After launch it fell sharply. Some months later, I nervously re-examined the case and bought it. Over the next dozen years it went up almost 20 times. I then needed some of the money and sold it just ahead of the start of the financial crisis. There was a bit of skill but you can't ignore the role of luck.
Peter Lowman, chief investment officer at Investment Quorum
I ventured into the City of London as a young man of 18 in 1972 starting my career with Cazenove & Co, the city blue bloods and most respected house in the square mile. This was a slightly daunting experience for a young man like myself as I entered through the sacred doors of 12 Tokenhouse Yard, none-the-less my adrenaline was flowing at the excitement of beginning a career in the world of finance.
On that premise it was not too long before my interests in personal investing began to gain some momentum, particularly, throughout that period of the 1970’s when two major oil crises struck in 1973 and 1979 which saw the price of crude oil rise from around US$12.0 a barrel to a peak of US$35.0 by 1980, and the opportunity to invest into something called 'oil shale' as at this price, the profitable resurgence of extracting oil from shale became a supposedly dead cert, and 'money in the bank' certainly an attractive place to invest a few quid of my hard earned cash!
Now it just so happened that there were two Australian oil shale companies that were quoted on both the Australian, and London stock exchanges, Central Pacific Petroleum and Southern Pacific Petroleum otherwise known as the 'Rundle Twins', led by the entrepreneur Sir Ian McFarlane. These two Aussie companies had successfully identified, and discovered huge oil shale deposits in Queensland; including the Rundle deposits near Gladstone, hence the above nickname, and its southern neighbour, Stuart.
Now with the price of crude oil rising it was not too long before we saw the share prices of both of these companies begin to rise aggressively, as the 'hot money' poured into the 'oil shale story' indeed, these two companies had gone from being penny to pound stocks, in fact, if I recollect both went up many times from their lows to their all-time highs.
Hopefully, by now you can see what is coming, whilst the professional money was in very early, the speculators, or hot money, came in late in the day, as the story went around the market that both these company’s share prices had further to go, indeed they did for a while.
Now for the bad news, following the 1970’s crude oil crisis came a slowing down of industrial economies, and a stabilisation of supply, and demand, leading to a nasty correction in the crude oil price, which led to some questions about the current profitability of oil shale, and with that, came a rapid fall in the share prices of our super stocks the 'Rundle Twins'.
And so my early venture into investing taught me a few valuable lessons, firstly, understand the business model before making an investment, secondly, define how much risk there is in the investment, thirdly, avoid the herd instinct, fourthly, when you are ahead consider leaving the last 10% for the next investor, fifthly, you won’t be a poor man taking profits, and lastly, don’t be too hasty in trying to make a quick fortune, remember what Warren Buffet once said: 'risk comes from not knowing what you’re doing'. And so, after spending over 40 years in finance, my age, experience, and risk tolerance, now tends to lead me to much more sensible investment strategies with much better results!
Alan Miller, founding partner at SCM Private
As a young optimist in the early 1980s my beliefs chimed with Thatcher's policy of privatisation as ‘fundamental to improving Britain’s economic performance’. It is easy to forget that by the late 1970s Britain was an ill economy dominated by strikes and managers without the freedom to manage.
The wave of privatisation plus having spent years fighting my three brothers on the Monopoly board meant I was determined to own shares in utilities so even though I was a poor law student working two jobs I bought my first shares in British Telecom in 1984.