To a generation of us growing up through the 80s and 90s, Mark Waugh was one of Australia’s great cricketers. Few batsmen have been more enjoyable to watch. To the statisticians, however, he is an also ran. He averaged just 41.8 runs per dismissal, ranking him a lowly 13th among 17 Australian batsmen to score more than 2,000 runs between 1990 and 2010.
Mark Waugh’s problem was that he didn’t rack up enough monster scores. He scored more half centuries than his twin Steve Waugh, who finished his career with averaging 53 runs per dismissal. Upon reaching 50, though, Mark averaged just 47 further runs, versus 95 additional runs for Steve. Having reached a milestone, Mark Waugh threw his wicket away more often than not, and that severely hampered his overall average.
I’ve been putting the performance report together for this year, and I feel we’ve had a bit of a Mark Waugh year in the Forager Australian Shares Fund.
Unless something dramatic happens in the next two weeks, the return for the year will be in excess of 20% net of all fees. In a year the market delivered next to nothing, 20% is the equivalent of a test century. But it could (and should) have been better.
Twice in the past year we have done good research on cheap stocks only for me to spend too much time sucking thumbs and not doing anything about it. The first was insurance comparison website iSelect (ASX:ISU). This business has its problems but at less than $0.70 per share the company’s cash and future guaranteed commissions covered the entire market capitalisation. It only traded there for a few days, but we had already done the work and simply didn’t act quickly enough.
The second opportunity was grocery retailer Metcash (ASX:MTS). Again, as a grocery wholesaler caught in the middle of a war between giants Coles, Woolworths and upstart Aldi, this a business not short of issues. At $1 per share though, you weren’t paying much for it. Metcash had fixed its balance sheet with the sale of its automotive parts business and the group owns a hardware business, Mitre 10, that would go close to justifying the entire market capitalisation at that price.
I don’t even have an excuse for not buying this one. We just dithered.
Metcash has more than doubled since and iSelect is up more than 75%. Hindsight is a wonderful thing, of course, but that’s why 20% wasn’t 30%.
I’m not one to dwell on the past. Stressing about it isn’t going to change anything. But there are things we can do better. As the Forager team grows, we need to keep the ability and willingness to act quickly and decisively. We need to make sure we’re spending time on the most prospective ideas and we need to ensure we don’t get too conservative in our old age.
Because we don’t want to end up with a Mark Waugh like investing record. There will come a day where runs are hard to come by, and we will look back on the 2016 financial year as one where we should have scored more.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.