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Marcus Padley: Success Stories

What's the secret of long-term investing prowess? Two qualities stand out. Here, Marcus recollects two highly individual investing characters and how they defied expectations to make the market work for them.

The client

One of my past clients was a bit of a legend at my broking house. He was focused. He was objective. He was an Australian who lived in Bali. He had inherited $500,000 he didn't expect or need, and with no stock market knowledge, he set about investing it. He found me. Sought me out. He even did his homework finding a broker. 

Mr Themes interestingly had all his own ideas and almost all of them were good. It got to a point where my broking colleagues started surreptitiously watching his account in the back end to find out what he was doing. The chatter in the lift was regularly about what “The Man in Bali” had just done.

And he was a bit unique for a couple of reasons. One was that he only ever held one or five stocks. No diversification for him. And the other oddity was that he didn't want to listen to me, or anyone else. If he was going to lose his money, it was going to be him that lost it, no one else. And if he was going to make it, him that made it. 

I was a person he requested information from and who executed trades for him. He never wanted to hear my lame morning meeting ideas. They were for the sheep, which suggests he was the wolf. But he wasn’t. He was a sheep as well, a very nice and cuddly, pleasant sheep, but the sort of sheep who would let someone barge the queue at the abattoir. An independent sheep. Just a very pleasant guy really. When I first met him he started with that $500,000. By the time I left him to go and write newsletters? Millions. 

I wouldn’t be writing about him if he had lost money or earned an average return but he didn’t so I am. The incredible thing about this client was his focus. Zero to five stocks with a 100% hit rate. He didn’t trade, he played themes. When I was talking to him (some years ago now), he was playing the iron ore theme in the resources boom. He “sat” most of his money in BHP. He held Fortescue Metals when it was just an explorer. Never saw him sell it. He also played uranium. He held Paladin when it was less than 5c. He sold it the day Fukushima blew up. 

I would ring him up and unimaginatively tell him to buy Leighton Holdings because the analyst had told us it was cheap, and he’d say “Marcus, I don’t know the stock, I don’t care if its cheap, what’s the theme, what’s driving it, what’s the catalyst, without that, without the fundamentals getting better, the price won’t go up, so why would I buy it”. And there’s the key. 

He only bought and held stocks that were riding a wave, because of some catalyst. The static fundamentals alone, cheap or expensive, are not enough. The fundamentals need to be changing for the better. Let’s repeat that. The fundamentals need to be changing for the better. The resources boom was a theme that made him rich. The global expansion of nuclear power made him richer. Fukushima ended that theme. He knew it that day. And sold.

Mr Focus, Mr zero to five stocks succeeded because he came at stocks through themes. And he found those themes by doing a lot of reading. In Bali. Plenty of reading time in Bali. And as an Australian in Bali I felt his edge was that he came at Australian stocks from the ‘outside’. He was the Man in the Moon. The Man in Bali if you like. His objectivity was key. He saw what we missed because we were up too close. He saw that China has to have Australian iron to build a City the size of Brisbane every three months. That’s all it took. One theme. Poof. Rich.

 

The stock broker

Mr Lazy was a stockbroker I worked with, a stockbroker who didn’t seem to do any work. He was one of those wealthy stockbrokers. He thoroughly enjoyed the stock market and always had time for people. Stock market people are punters not plodders. Because of that they have colour and character and put together they create a simply fascinating working experience.  

For anyone in this industry the grass is never greener on the other side. And when the stock market became accessible to the masses, you can see why, given the tools to trade in our living rooms, so many of people have joined the game. The community you develop through an interest in the stockmarket is always interesting, often fulfilling and potentially financially rewarding. It’s like a Book Club with money. (This is a picture by artist Clifford Bailey called “Six Stockbrokers” – 1998) 

 

Mr Lazy was wealthy enough to be patient. He would leave his junior to sit in the market with one brief. Call him if anything good went past the window. That was it. We would hardly see him, but once or twice a year he would appear. If he was lucky it was before lunch. It would usually be a placement to sophisticated investors, or a firm allocation to an IPO or some other such corporate event but not always. In he would wander and for maybe two hours a year sparks would fly. 

For him and for many of the players in the stockmarket this is the game. The commission and the living you make is secondary. It is a place where opportunity goes past, opportunity to make accelerated wealth, available opportunity. 

His most rewarding quality was patience and people. The art of it is to be patient. Have you ever met a rich person in a rush. Stock brokers avoid people in a rush. There is only one future awaiting the m. 

It helps to be wealthy to be patient of course, but look around, patience is the key to anything stockmarket. If you rush you lose. For every high profile winner there is a trail of losers. We only ever hear from the winners. 

 

The moral of these stories

  • You don’t buy stocks because of the fundamentals. You buy stocks because the fundamentals are improving. So ask. What’s the catalyst that will change the fundamentals?
  • Less stocks is more.
  • Be patient, nobody makes money in a hurry.
  • You don’t have to hit every ball or any ball. Wait for the right pitch then hit with all your might. 
  • And Network. Surround yourself with stockmarket people. They are opportunity on legs. The relationships you develop in this industry often become your life, far more valuable than the money. You will not get rich in a dark room alone. 

A free trial of the Marcus Today newsletter for nabtrade clients is available here.

 

 

 

Marcus Padley is the author of the daily stock market newsletter Marcus Today. Analysis as at 30 September 2022. This information has been provided by Marcus Today (AFSL is 473383), for WealthHub Securities Ltd ABN 83 089 718 249 AFSL No. 230704 (WealthHub Securities, we), a Market Participant under the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances. 


About the Author
Marcus Today

Marcus Today is a stock market newsletter founded by Marcus Padley over 20 years ago. Its key contributors have a uniquely open and honest writing style and are known for ‘telling it how it is’. The Marcus Today website also contains resources including educational articles and a stock database. Marcus Today has four feature areas: Strategy, Portfolios & Stock Ideas, Market Overview, Resource Tools and Education.