Meet David: The self-taught trader with 37% returns p.a.

David isn't spending time meticulously analysing a company's fundamentals before he invests. In fact, his entire portfolio shifts every few days. 

As a self-professed quant, whose days are a "brutal study in increasing self-discipline", David spends his time carefully studying breakouts and pullbacks in trending small and mid-cap ASX-listed shares. There are currently around 300 companies on his watchlist, although he typically only holds 13-17 stocks. 

It's a far cry from where it all began - a young 19-year-old hooked on the thrill of investing. After university, at 25, David landed a graduate job with Macquarie's investment banking division. He only lasted three weeks, although he hasn't looked back since. Other than those three weeks, he's never had a real job or boss. How many can say the same? 

While working for yourself and by yourself has its merits, it hasn't been all easy sailing. He's had countless losses, but he's learnt to focus on where he's going rather than dwell on the past. 

"My current level of performance leaves around $50,000-$100,000 a month in lost income from not following my own rules," David says. 

"Changing this is my immediate goal. Over 23 years, I’ve had two losing years with the others ranging from 15-90%. Overall, my average yearly return is around 37% p.a."

In this Meet the Investor profile, David candidly shares what inspired his path as a trader, some of the stocks on his watchlist, as well as some of the lessons he's learnt along the way.

Investor Profile

1. Can you share how you started investing and what your first investment was?

My father used to leave charts around the house sent to him from his broker who was heavily into technical analysis. I had always been pretty good with maths/patterns so naturally I was fascinated by stochastics, Fibonacci, moving averages etc... I opened a small account and took my first trade – a tip from a school friend whose Dad worked at a TV network and was apparently about to acquire a company. I bought at 21c and three months later the company ran out of cash and went off the board. I then read everything I could find and leased some office space near uni to pursue my own approach in between lectures.

2. How would you describe your strategy and your investment goals?

As a private and solo trader with two children under 4, very little sleep and big fitness, family and life goals, I have zero time or mental headspace for anything that does not move me forward. My trading is borderline pre-emptive in that it's aggressively targeting what I perceive to be pullbacks and breakouts in trending small and mid-cap shares. 

The industry would probably describe me as a self-programmed quant constantly battling my own lack of mental discipline. My positions normally last a few days. My current level of performance leaves around $50-100k a month in lost income from not following my rules. Changing this is my immediate goal. Over 23 years, I’ve had two losing years with the others ranging from 15-90%. Overall, my average yearly return is around 37% p.a.

Passive income is everyone’s goal – I started investing in commercial real estate about ten years ago to get a tax effective 8% and take the pressure off my daily performance but that isn’t foolproof either - one is now in the Brisbane Magistrate’s court as the tenant refuses to pay the outgoings. I’d say every reader wants cash flow at 6-10% with minimal risk of capital loss. I’d say diversify a lot and actively manage what you can.

3. Can you share your top 5 holdings in % terms and why you hold these positions?

My entire portfolio shifts every few days. I would probably have already exited the positions by the time this article goes live. Moreover, taking anyone’s advice as to an entry leaves you totally powerless as to when to exit, which in my experience, is far more important.

4. What investment is on your watchlist? (i.e you don’t currently own it)

My watchlist covers about 300 shares and each morning I commit the entries and management to memory. Right now, some of those include: ASX: AIM, ASX: ALA, ASX: AUC, ASX: CU6, ASX: DXB, ASX: EGL, ASX: KLI, ASX: OIL, ASX: PNV, ASX: RIM, ASX: SKS, ASX: SPR, ASX: TRI, ASX: TTM, ASX: TTT, ASX: VYS, ASX: WTM, ASX: XRF, and ASX: ZIP. There’s a lot moving right now.

5. What has been your worst investment and what has been your best?

I have had many significant losses. One of the worst was Intrepid Mines, about ten years ago now. I woke up, had my buckwheat porridge and three coffees, and sat at my desk to see the share was suspended. I read the announcement and media coverage and from what I can remember, a group of locals backed by some Indonesian police walked onto the mine site and said that it was now under their control. It was totally illegal and ridiculous, however, that was the end of it. I was 31 and lost about half a million. 

I fantasised for months about getting some friends together who were in the military and heading over there to take it back. We even had a plan. But sometimes, as I’ve learnt from other issues, you need to focus beyond the problem to where you are going. Otherwise, right now, I’d probably still be running around a jungle somewhere. My best single trade has been BPH Energy (ASX: BPH) moving into speculation over mining lease retention, somewhere in the vicinity of $800k plus another $560k or so on options a year later.

6. Are there any lessons you’ve learnt during this journey that could help others? 

I would say from a psychological point of view, ask yourself what not sticking to your trading plan says about how you value yourself and your self-worth. 

From a small/mid-cap trading point of view, know that movement is essentially governed by capital raises going in and out of a company-defining event. From a lifestyle point of view, trading by yourself can mean silence and your own thoughts for 7 hours a day. Financially, don’t start with less than $1 million. Finally, be resilient, because everything will go wrong, all the time.

7. Can you share a personal passion or ambition you have for the future?

Drinking coffee in the hot sun, reading great books, working out/running and travelling with my family. Until that is possible, my weekdays are a brutal study in increasing self-discipline. A diet free from dairy, gluten, sugar etc.. cold showers, running 10-15km each night, clinical trade execution even when the current cocktail of COVID/RSV/unicorn flu starts to breed in your lungs. Also, despite being the fat kid (solid) at school, it turns out I’m actually pretty good at running. I’m in the process of qualifying for my first ultra [marathon]. I also need to learn how to take holidays.

Want to share your story like David? 

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