Meet Jeff: He's young, well-read and hungry to take calculated risks

19-year-old Melbournian Jeff certainly has. 

"They taught me to be independent and critical in my thinking and to not blindly obey social norms and values — and to rebuild my world views from scratch," he said. 

"I believe this philosophical process of deconstruction and reconstruction coincides with what a rational investor does in the unpredictable and forever-changing market landscape." 

While Jeff was previously planning to study philosophy at university, he instead pivoted towards finance and economics. He believes that this early education in philosophy will hold him in good stead when he eventually lands a full-time role in finance. 

"Many fund managers like George Soros had an education in philosophy and went on to do great things in the field of finance," Jeff said. 

"In interviews, they all share how philosophy taught them the unique skill of synthesising abstract ideas and understanding their practical implication." 

And he's already on his way, having just completed an internship with Schroders - one that he nabbed after winning a Future IM/Pact university investment competition. 

In this Meet the Investor profile, Jeff shares some of the texts and books that have influenced both his philosophy on life and investing, as well as the biggest mistake he has made in his relatively short investing journey, his top portfolio holdings and his hopes for the future. 

About Future IM/Pact 

As part of our partnership with Future IM/Pact, Livewire is interviewing the two winning students from its annual investment competition. Future IM/Pact targets 18 to 25 years olds either in university or in the first stages of their careers. The program provides students with a deeper insight into what a career in finance would look like, introduces them to high-profile role models, runs investment competitions, and gives them the platform to demonstrate their skills to potential employers (so they can actually land jobs). You can learn more about Future IM/Pact here. 

Livewire investor profile

• Name: Jeff Xiong
• Age: 19
• Employment Status: Student
• Years Investing: Two years
• Investment goals: Capital appreciation 
• Products used: Local and international shares
• Biggest portfolio holding: Cash

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

I’m 19 years old and I have been investing for two years. I started investing after reading Intelligent Investor by Benjamin Graham, Changing World Order by Ray Dalio and One Up On Wall Street by Peter Lynch. Apart from investing personally, I’m also an analyst at the Social Impact Investment Fund at the University of Melbourne which is a student-run investment fund with $20,000 in assets under management. We invest in ASX-listed companies and donate the profit we make to charities we partner with.

What is your objective from investing? 

My objective is capital appreciation and I have a high appetite for risk, which I attribute to the fact that in the last decade, I have only experienced a bull market run. My limited experience often results in over-optimism. I realised this during my summer internship at Schroders’ Sydney office where I spent time in the products, Australian equities, fixed income, multi-asset and private debt teams. I received invaluable guidance from my colleagues in each team and I was able to take what I learned from them and refine my thinking.

What products do you use to execute your strategy? 

I do individual stock selections because I believe in “putting my eggs in one basket but holding the basket carefully." My portfolio does face greater risk due to a lack of diversification, but it is a price I’m willing to pay in exchange for the potential for greater returns.

How would you describe your strategy?

My strategy is heavily influenced by Peter Lynch’s philosophy in One Up on Wall Street. I believe that paying attention to products and services in daily life allows us to see investment opportunities that institutional investors fail to see. Most of my investment ideas come from the services and products we use daily. I avoid investing in products or services that I personally don’t use.

Could you please share your top holdings in % terms and tell me a bit about why you hold each of these positions?

Bilibili (NASDAQ: BILI) - 30%

Bilibili is an online streaming platform like Youtube but catered towards the younger generation of the Chinese population (10 to 35-year-olds). Due to China’s internet firewall, Bilibili doesn’t have to compete against the likes of Youtube and its current competitors’ main audience is the older population which is aging and decreasing.

This was more of a speculative buy. I bought Facebook when its share price dropped due to its decision to invest and grow its metaverse products. Other than its failed metaverse investment, Facebook fundamentally is still a sound advertising business. The price has rebounded as Mark Zuckerberg carried out his operational efficiency improvements and removed employee redundancy.

Blackmores is a vitamin dietary supplement (VDS) manufacturing company. It has a dominant position in the South East Asia market and a fast-growing pet supplement segment. Although Blackmores has always performed poorly in the Chinese market, the surge in VDS demands resulted from China shifting its COVID policy to herd immunity boosts BKL’s sales.

Cash 40%

Given the uncertain outlook of the market, I have maintained a high percentage of cash. Although this may result in me missing the market rebound, it prevents me from the risk of big losses should a hard landing occur. The decision is primarily based on Buffet’s golden rule of “don’t lose money”.

Could you tell me about your worst investment?

My worst investment has been Evolution Mining (ASX: EVN), in which I lost about 50% of the money I invested. The investment was made by submitting my first-ever stock pitch competition slide deck where I attempted to value EVN via a simple discounted cash flow model. I learned the hard way that valuations for gold companies aren’t exactly helpful because their values are often highly correlated with gold price movements, so you’d probably be better off predicting gold movement rather than valuing gold mines.

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

I learnt that when valuing companies, the calculation of discount rates doesn’t matter as much as what the university professors tell you. The problem with the academic method of using the capital asset pricing model as a proxy for the cost of equity is that it assumes high volatility equals a greater rate, which is not always the case in the real market. A somewhat qualitative estimate of the discount rate works just as well or perhaps even better than a carefully calculated one.

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

They taught me to be independent and critical in my thinking and to not blindly obey social norms and values — and to rebuild my world views from scratch. I believe this philosophical process of deconstruction and reconstruction coincides with what a rational investor does in the unpredictable and forever-changing market landscape.

In terms of personal ambitions I have for my future, I would like to become an Excel wizard and know all the relevant shortcut keys that will make my life so much easier. In the future, I wish to also find a suitable graduate opportunity to begin my career in the world of finance.

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