Meet Barry: The retiree who isn't afraid to take a risk

Barry isn't your typical retiree. As a self-described "natural risk-taker", Barry has repeatedly put it all on the line to survive and thrive in the face of the challenges life has thrown at him and,  most of the time, he has reaped the rewards. 

While a few major losses in his early years may have taught him to take a more "conservative" approach to investing, when it comes to enjoying life, Barry lives on the wild side. 

He's spent the last decade travelling the globe on a motorbike with his wife, Linda, riding on some of the world's most famous roads, including Route 66 in the US, and the picturesque (and incredibly winding roads) of the Italian coastline.  

In his early years, Barry competed at an international level around the world as a cyclist, before buying a bankrupt monitoring business at 35 after the 1987 market crash. Here he learnt that "making it work" wasn't as easy as one would expect.

He admits that if he had not partnered with a person with access to the market, the business would not have become the success it was. In fact, he says it almost certainly would have failed. 

After a major windfall from later selling this business, Barry committed to learning more about investing. Early on, he realised that sometimes even the professionals can get it wrong, and now invests half of his savings with a diversified, conservative fund manager, and the other half he puts "on the line" himself. 

Having already helped one of their sons through Oxford, Barry is focusing his attention (and investments) on building his dream home to live out his years with his wife and beaglier Lulu in Napier, Hawke's Bay, a coastal wine region on the North Island of New Zealand. He also eventually wants his Family Trust to fund the education of underprivileged students.

In this Meet the Investor profile, Barry candidly shares some of the mistakes he has made during his investing journey, as well as the lessons he has taken from them. He also divulges his penchant for quality, "unstoppable" growth companies, and some of the stocks that he will be backing despite any "market gyrations" today.  

Livewire Investor Profile

Name: Barry

Age: 68

Employment Status: Retired

Years Investing: More than 40 years

Investment goals: Live as well as we can for as long as we are fit and healthy, and leave enough in our trust to fund the advanced education of outstanding students from underprivileged backgrounds

Products used: Fund manager, direct ASX holdings, direct property development

Biggest portfolio holding: ASX-listed companies exposed to lithium and copper

How old are you and how long have you been investing?

I'm 68. I sold a good business when I was 48 and so have had money to manage for about 20 years. But before selling that business, I dabbled in property and shares and thought I was doing well until Black Monday, 19 October 1987. I had borrowed $25,000 for shares and lost it all!

After selling our business, my wife and I had enough money to live well for the rest of our lives but after my 1987 effort, I had no confidence to manage my own money. After seeking advice, I placed funds from the sale of the business with three different management companies.

In hindsight, the outcome was predictable. One fund made good money, one pretty much broke-even and the third put us into dubious investments and we lost a good bundle (more than $300,000).

But the investment management industry was poorly regulated in those days and I doubt that would happen now.

What is your objective from your investing? What is your appetite for risk? Are you still working?

Last year in the March lockdown, we were holidaying in a smaller provincial centre and liked it, so we sold our city property and moved. We bought a wonderful piece of land with sensational views and have embarked on building a house and an apartment for income and live-in accommodation for a future carer.

We gave our architect a budget but these guys are not spending their own money and so the cost is substantially more than budgeted. So now we are cashed up with no income, trying to complete an upmarket development without going broke. It's probably not smart at age 68, but circumstances have somewhat dictated this.

We hope to be fit and healthy until age 80 and as we now have no income, I need to manage our finances to fund our building development to completion but have enough investment return to achieve our life goals.

Remembering my 1987 effort, I decided to split our funds 50/50 — half with a fund manager and half with me. I followed the recommendation of a friend, researched the market and placed 50% of our funds with a management company in a conservative fund. After six months this company has done very well at about 12% annualised return after fees and tax.

I know this has been in a bull market but the fund is very diversified and so I think in a major market correction it will be reasonably resistant to serious downside. This fund lost 3% of capital in the global financial crisis but recovered it in a few months.

Lacking confidence, I took a really conservative approach with the 50% I was managing.

At first I placed all of the money on fixed deposit at 1% before tax. This was never going to be satisfactory so I decided to start learning and see if I could improve on my previous poor batting average.

Livewire Markets was one of the first sites I subscribed to and is one of the few that I still follow closely. I have found many articles and interviews to be very helpful in determining my direction and asset allocation. Some of my best investments have been made after listening to Livewire podcasts.

What products do you use to execute your strategy?

As our funds are split about 50/50 managed and self-managed, I figure one of us will do okay and so I'll draw from the leader and pay for the build. On the self-managed side, I am investing solely in Australian and New Zealand equities.

How would you describe your strategy?

My wife and I do not have dependents and so our goal is to complete this build and have enough left to achieve all our goals. We want to live as well as we can for as long as we are fit and healthy, and leave enough in our trust to fund the advanced education of outstanding students from underprivileged backgrounds.

As I think we probably have enough to complete the development, I’d be happy with a 5% annual return on all our funds, but at our age, capital preservation is key.

Despite my lack of confidence, I am naturally a risk taker and suffer from FOMO (fear of missing out), so I can’t help myself from putting something on the line, feeling safe that I’ve placed 50% in a very diversified managed fund.

I’m not a trader. Therefore, I've tried to be careful to buy into solid businesses with established earnings and into market sectors likely to do well in the current and emerging market. This has been a big learning curve, and over the last 18 months, my approach has changed considerably.

At first, I thought aged care, utilities, health companies and technology would be relatively safe, plus tourism, opening up after COVID recovery. What I didn't understand was that aged care and utilities can be regulated and the impact of the whole ESG thing (environmental, social and governance) was far greater than I had anticipated, meanwhile, the impact of COVID still affects many areas of the market.

I also didn’t understand that the market is substantially influenced by shorts, index funds, insider trading, cyclical issues, government money printing and regulation, and the influence of China, amongst other macro influences.

I have concluded that companies with quality management and earnings are likely to increase in value irrespective of these factors. There is also a timing factor: buy quality, buy on weakness and hold regardless of market gyrations.

I have been studying market sectors that can be ESG compliant and have above market average growth and are resistant to serious downside.

My 1987 experience taught me that when the market turns bearish, it can have a huge downside. Companies with high price/earnings ratios and overstated growth potential can be exposed and often fail under a burden of poor earnings and excessive debt. But solid companies with proven income streams survive and generally recover more quickly.

There are so many companies that have great fundamentals, quality management, strong balance sheets, huge global opportunities and I’ve tried to identify these within a spread of market sectors. My study has led me to what I think are unstoppable growth companies. Kind of like buying into oil in the 30s and 40s.

I'm betting on renewable energy. Governments all over the world are really on board with the Paris Accord to reduce carbon emissions. There are many incentives worldwide for companies to be green, reduce carbon emissions and move to renewable energy.

There are opportunities to invest in all forms of renewable energy (wind farms etc) but I’m certain batteries are a very significant factor. One of the principal drivers of rapidly increasing demand for batteries is the worldwide trend towards electric vehicles and the government incentives to promote this.

The principal components of batteries must come under supply pressure. Until another battery technology emerges, which will happen but is unlikely in the next few years, there must be pressure on lithium, copper and nickel supply for at least five years. 

But I’m learning that it’s not that simple. This market is very manipulated, predominately by the Chinese, who stockpile, dump and drive prices down, but the world is changing and we now have Europe, Japan, Korea, and the US as major battery manufacturers and I believe the Chinese influence will diminish in the next year or two.

Demand will increase and there will be a shortage of quality battery materials that will drive prices up. Time will tell. I might be right or wrong. The adventurer in me is saying buy into the battery material leaders.

But this isn’t easy either as they are being forced to cut carbon emissions and be green, which is costly and puts pressure on margins.  It is easy to be influenced by the wild market gyrations. But do thorough research and then hold on. 

What are your top 5 holdings in percentage terms? Why do you hold each of these positions?

My research has identified Pilbara Minerals (ASX: PLS), Orocobre (ASX: ORE) and Mineral Resources (ASX: MIN) for their lithium holdings, quality management and balance sheets and Aeris Resources (ASX: AIS) for its copper holdings.

I’m learning that the Australian commodity market is very volatile and subject to considerable manipulation. But because I’m so sure, I’ve committed 30% of my funds to these companies.

I also have 20% in the health market with EBOS Group (ASX: EBO) and Fisher & Paykel Healthcare Corporation (ASX: FPH) because they are quality companies with strong market positions, good management and strong balance sheets. In addition, I hold 20% in retirement villages but feel I will reduce here soon. The remaining 10% is largely in utilities.

Is there a standout product, asset class or fund manager in your income strategy?

Yes. Everything I study predicts a shortage of lithium over the next few years. And I think the management of Pilbara Minerals will influence the global price and supply structure. Time will tell. I'm committed for a minimum of two years. I'm up about 50% in my lithium stocks but I'm well aware that in the commodities market this can disappear very quickly.

Could you tell me about your worst investment?

I lost well over $300,000 giving funds to others to manage in the early 2000s. Then there was the $25,000 I borrowed to invest in an overheated market in 1987. I lost the whole lot.

More recently, AGL Energy (ASX: AGL) and A2 Milk (ASX: A2M) have not been wise choices. 

How does Livewire help with your investing process and what tips can you share with other investors about using Livewire?

I have learned a lot from Livewire — probably more than any other source of learning. I find most of Patrick Poke's interviews interesting and often of value. And the Buy, Hold, Sell episodes are always interesting and have often caused me to research featured companies.

Do you have a favourite contributor you recommend other investors follow?

No, not really.

What can Livewire do better or what do you dislike about Livewire?

The problem is probably not with Livewire. There are many so many posts and I need to better filter what I receive and study contributors to a greater degree. I find the Buy Hold Sell podcast interesting but it is often not dealing with companies or market sectors that interest me.

The real problem is that there is so much information available and only so much time to digest.

It reminds me of the days when I was a medium-sized employer and we would receive 500 applications for one position. Filtering is difficult. Of value to me would be a buy, hold or sell format discussing market sectors and the buy, hold, sell within a specific sector.

Is there a lesson you’ve learned as an investor that could help others?

Plenty:

• Don't borrow to invest.
  
• Don't get attached to your investments.
  
• Watch the macro environment, as there are usually signals that tides may be changing.
  
• Study investments for a few weeks before buying or selling. Be patient.
  
• Have clear goals and targets.
  
• Be patient and wait for opportunities.
  
• FOMO will cause poor decisions that will usually cost you.
  
• Seek quality information on your potential investments.
  
• Keep a good spread across a number of market sectors.
  
• Use a mixture of fundamental analysis and technical analysis in buy or sell decisions.
  

Can you share a personal passion or ambition you have for your future?

I want to finish this house development and have enough income and capital for my wife and I to continue to live well, then advance the education of some smart young people who would not otherwise have the opportunity for higher education.

I do find managing some of our own investments challenging and interesting. It's a complex field and there is always plenty to learn, so it’s a personal growth challenge for me.

I'm looking forward to continuing to study and developing greater expertise. But it's truly a minefield.

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