RYK VAN NIEKERK: Welcome to this week’s version of the Be a Higher Investor podcast. It’s a podcast the place I converse to skilled buyers and we focus on how they strategy investments, how they choose winners and losers, and what they do with losers. That is in fact within the context of their private portfolios, not the skilled portfolios they handle. The thought is to search out golden nuggets of knowledge from their views and experiences to help beginner retail buyers to turn into higher buyers.
My visitor right now is funding rockstar David Shapiro. He’s formally the deputy chairman of Sasfin, however he’s been within the trade for greater than 50 years and he has seen all of it. He has additionally gained many of the funding awards accessible in South Africa. David, thanks a lot for becoming a member of me. I simply wish to begin off with you becoming a member of the JSE in 1972. It’s essential to have seen so many market crashes, recoveries. How do they relate to what we’re presently seeing?
DAVID SHAPIRO: They’re all the identical. They at all times check you and also you at all times assume you’ll by no means see the tip of the tunnel. You already know, you solely see bleakness. However issues cross and this one may even cross. It rattles you, it exams you, however that is the time that individuals do silly issues. So I believe the recommendation, in quite simple phrases, Ryk, is in the event you return to after I began available on the market in 1972, in the event you return one other 50 years earlier than that, and also you have a look at the market and also you have a look at the place it’s right now, that chart remains to be going from the underside left hand to the highest proper hand nook. That’s how markets work. Economies will develop, corporations will emerge, there shall be alternatives.
So there are ups and downs and what I’m saying to you might be trite, and may not provide you with consolation. However we get by way of these items and you understand it’s going to come back.
After each drunken spree you get a hangover. That’s the way it works.
Even when you’re at that occasion, you understand what you’re going to really feel like within the morning, and I believe that’s actually what it’s.
RYK VAN NIEKERK: Do you continue to get anxious once you see these massive dark-red numbers?
DAVID SHAPIRO: Nicely, I choose to not have that, however Ryk, what you do – and there are such a lot of classes that I’ve realized alongside the way in which –what you be taught to do is you be taught over time simply to focus. I do know that’s a simple phrase, it’s a five-letter phrase. However what you do is you retain searching for high quality investments that you understand you’re going to be with for a very long time. And that takes expertise.
How do you discover high quality corporations? You already know that they’re going to emerge and you understand that they’re going to be stronger and they’re going to proceed to choose up – and also you simply experience it by way of.
It’s simple for me, it’s simple to pick out these shares. The problem is dealing with the feelings of purchasers and other people that you just discuss to; the problem is managing the aspirations and feelings.
RYK VAN NIEKERK: Yeah, feelings. I believe that’s the worst – to react on feelings. It’s been confirmed time and again that it’s going to value you some huge cash.
However you might have invested, and make investments, all folks’s financial savings, their life financial savings. Your success will decide their high quality of life put up retirement. You additionally handle your individual private portfolio. Do you handle them in a different way?
DAVID SHAPIRO: Nah, precisely the identical. In different phrases, I’d not purchase one thing for my purchasers that I wouldn’t purchase for myself. I’m not speculatively minded in any respect. Under no circumstances. I’m a theme-driven individual. Even now I’m battling with a variety of commentators, I’m battling with a variety of analysts. The query I maintain asking is, okay, the place are we going to be in two years, three years, 4 years, 5 years down the road? What are the businesses that we’re going to be investing in? In reality, I answered a query about passive funding versus lively funding, or why not simply purchase an index. I mentioned the wonder about lively funding is we aren’t searching for the businesses which are dominating the market now.
We’re searching for the businesses which are going to dominate the market in three, 4, 5 years.
They may be the present corporations. I’m not saying they gained’t be there, however you’re at all times searching for different areas of progress and improvement. That’s at all times been my strategy. What worries me in the meanwhile – and I believe the Fed has actually bummed issues up this time, as a result of I believe issues have gone uncontrolled. While you see markets performing the way in which they’re in the meanwhile, all that’s exposing is an absence of management. They’ve misplaced management of issues. In different phrases, they haven’t comforted investments. This isn’t, sure, you wish to let the air out of the tyre slowly or out of the blue. What’s occurred is that they’ve popped it. I’m undecided how they’re going to blow it up once more, or how they’re going to repair the puncture – simply to hold on with an analogy.
However I’m saying we in the meanwhile are going to purchasers and saying, look, the businesses we’ve acquired, the businesses we personal, are nonetheless in superb form, all properly – humorous, you title it –there. They usually’re nonetheless going to be round in three, 4, 5 years. They’re nonetheless going to be the businesses which are dominating the financial panorama. I have to say, a variety of these are offshore companies and that. In order that’s what we deal with. From the macro aspect it’s very tough. The micro aspect – that’s simple, it’s not tough.
RYK VAN NIEKERK: Let’s return. You grew up in Turffontein within the south of Joburg.
DAVID SHAPIRO: That was my dad.
RYK VAN NIEKERK: The place did you develop up? I believed you had been there.
DAVID SHAPIRO: I grew up in Greenside. However my dad was Turffontein, Rosettenville. He went to Forest Excessive. Forest City is snooty – that’s by the Zoo Lake. That is Forest Excessive, which was Turffontein, La Rochelle, all these areas. So he was introduced up in a really, very powerful atmosphere.
RYK VAN NIEKERK: Did he introduce you to the inventory market?
DAVID SHAPIRO: He joined the market in 1933, and there was a break available in the market. Hear, I wasn’t round there, however there was one thing to do with, I believe, both South Africa going off the gold commonplace, or that period. One thing occurred which created a growth available on the market and, having simply matriculated, [he found] there have been no jobs. You had been within the depths of the despair. He by no means had cash to go to varsity. His dad was deceased. His mother – I believe she was actually supported by our kinfolk. He simply went to the inventory trade – he had a good friend who labored there – and he was given a job and by no means left. He began within the job in 1933, and he left when he died. That was the final time. So he spent 60 years available on the market.
He cherished to commerce gold. Now, he was a gold dealer however, Ryk, they traded in gold shares. There’s a giant distinction between gold shares and gold. It was the golden age of our market.
RYK VAN NIEKERK: Many of the shares at one stage had been gold shares.
DAVID SHAPIRO: Nicely, that’s what I’m saying. Individuals, generally they are saying to me, oh, your dad was a gold bull. Sure, however he was a gold mining bull, as a result of every mine had its personal traits. You’d measure the grade, what they known as the pennyweight that corporations may mine. There have been some very wealthy mines, there have been some very poor mines. The thoughts supervisor was necessary since you needed to know easy methods to mine it, the prices and so forth. So every mine itself was an trade. That’s what we traded in.
One of many issues he did do together with his companions, he idolised Eric Freemantle, who was a doyen available on the market. They used to go around the continent and introduce gold shares to Zurich. They did it in Paris and Belgium, and clearly London had been a big-time participant in gold shares and that. That was their historical past. The continent [was] very massive in shopping for gold shares. And naturally the US, New York, had been additionally locations. That was the market then.
RYK VAN NIEKERK: So when did you have a look at the market and say, ‘Hear, I wish to make a profession out of this’?
DAVID SHAPIRO: I’m a chartered accountant. I certified as an accountant. Then I wasn’t fairly positive what I needed to do, and I joined the market. I used to be a runner. I actually got here as a chartered accountant, was on the ground working orders to the sellers, speaking to purchasers on the telephone, giving them costs by way of the binoculars. You already know, all the things was on [the trading] ground. It was a variety of enjoyable.
I learnt quite a bit there. I learnt quite a bit concerning the market, simply being round, realizing when the market was going up. You already know, you may really feel the heart beat in these days. The tone available on the market modified and you may really feel when markets had been getting stronger. There have been many poor days as properly. Consider me, there have been days after we did nothing. But it surely’s an expertise I want all people may have had, quite than sitting in entrance of a display as I’m now, and simply crimson.
RYK VAN NIEKERK: Nicely, what was the very, very first share you purchased?
DAVID SHAPIRO: I’m making an attempt to assume – it was Wesbank Letters. There you might be. I keep in mind that. I made a revenue and with the revenue purchased my spouse a gold coin. Wesbank was a part of the Schlesinger group. I believe right now it’s a part of FirstRand or one thing. I believe it was the identical. My historical past’s a bit of blurred on that. However they had been having a rights concern and I purchased the letters.
RYK VAN NIEKERK: When was that?
DAVID SHAPIRO: This was in 1972, or thereabouts. I keep in mind I offered them a couple of minutes later, made sufficient cash to purchase my spouse a gold coin, which was all of about R30 or R40.
RYK VAN NIEKERK: So that you held the shares for a couple of minutes after which offered them once more? That was simple!
DAVID SHAPIRO: Yeah, that was it. The world’s best dealer [laughing].
RYK VAN NIEKERK: What would you regard as your greatest funding ever?
DAVID SHAPIRO: My greatest investments are my present portfolio now, and the present shares that we’re holding for purchasers in the meanwhile. For me, the tech growth is simply one thing that we haven’t witnessed earlier than – the entire transfer to expertise, which began within the nineties, Ryk. You already know, it began there and has developed into the place we’re in the meanwhile. I believe the positive factors that we now have made holding corporations like Amazon and Alphabet and Google and Apple, and different corporations like ASML, which is the Dutch firm. I’ve by no means made proportion earnings like these earlier than. I nonetheless assume that is going to proceed.
RYK VAN NIEKERK: When did you get into Apple?
DAVID SHAPIRO: The early phases, very early phases. We held them and we held them for a very long time with no returns. However many of the tech shares we’ve had we proceed to carry. Ryk, you even have to know that the markets that we’re presently engaged in, being worldwide, are far totally different from the markets that we traded on the JSE within the seventies and the eighties – and even into the nineties. It was a really parochial market, and actually typically markets had been very parochial. They had been by no means worldwide.
I’ll inform you when the most effective interval as properly right here was: I believe within the late eighties, that ’87 period, the place we had corporations like Didata, Bidvest, Investec. The nineties was an excellent interval for us, significantly in financials.
As this nation got here into the brand new period that we’re in in the meanwhile, I believe there have been a variety of companies there which do very properly right here. There have been some excellent little companies round then – a a lot higher selection than we now have in the meanwhile.
RYK VAN NIEKERK: However that run got here to an finish within the late nineties; it got here to finish fairly abruptly. After which within the 2000s, a complete totally different world financial system emerged. It was not as linked to expertise because it was. And now presently we seeing expertise shares dominate once more and now we’re seeing it coming to an abrupt halt. We don’t know the place the underside can be. Do you assume we may see a repeat of historical past?
DAVID SHAPIRO: No. I believe that we’re going into one other period of large mounted funding. You already know, the final decade was extra social media, Instagram, YouTube, Fb, even to an extent Google. It didn’t assist productiveness.
I believe the subsequent decade that we’re going into now’s going to assist productiveness and it’s going to be a distinct decade of technological development…
…once you consider the advances which are being made in drugs, in well being, primarily by way of expertise, helped by 5G and points round that, after we consider the cloud.
I’m sitting right here at house now and I may by no means have finished this a long time in the past, or perhaps a few years in the past, the place I’m utterly operational. We’ve acquired this new hybrid mannequin the place I can go anyplace on the earth and entry international markets. These corporations now are doing their books on zero. In different phrases, you’re getting real-time, up-to-date accounting, administration accounts, which we by no means had earlier than. After which we’re getting the transfer to electrical autos – and that is dominated by the patron.
So the extra themes I provide you with, the extra excited I’m concerning the corporations which are going to emerge – all of them technologically associated.
RYK VAN NIEKERK: The hot button is you’re going to have all these themes. You could have all these corporations that can emerge, however how do you choose the winners?
DAVID SHAPIRO: You already know what, you’ll be able to’t have all the things. A good friend of mine who used to work with me mentioned, ‘You already know, you’ll be able to’t go to the dance and kiss each lady there’. Know what I imply? You’ve acquired to whittle it down to a couple choices. Or, to place it in one other method, Warren Buffett used to say it’s just like the horror of ladies, he says you don’t get to know all of them. So it’s much better to search out one lady or two – sorry if I’m being a bit sexist on this dialog – however you’re getting the purpose. I’m saying finally you must select.
I discover that’s one of many points.
You already know, folks wish to personal a variety of shares. They wish to personal all the things. You may’t. Simply discover those that you just like. And if these corporations fail you – which they will, generally they don’t find yourself fulfilling the sort of expectations that you just had’– transfer on, discover one thing else. I’m discovering that with Tencent in the meanwhile.
I used to be a large Tencent individual [for] Naspers. Abruptly you’re looking at it and saying, maintain on a sec, that is going to take a very long time. This isn’t their fault, this isn’t the corporate’s fault. That is political. You may’t blame administration, However realise that, no matter it’s, you made a little bit of revenue otherwise you may be in a loss – transfer on, discover one thing else.
So I believe you must make these choices the place you understand it’s mistaken. Don’t let your ego get in the way in which, simply get out. Don’t get hooked up, by no means get hooked up to shares.
RYK VAN NIEKERK: Now the massive query. What was your worst funding ever?
DAVID SHAPIRO: I believe within the eighties, within the late eighties, we had a growth. I don’t know whether or not you had been round at that stage.
RYK VAN NIEKERK: I used to be nonetheless in school in ’87.
DAVID SHAPIRO: We had a large growth right here, which I believe was just like [that in] 1969. Then an enormous variety of companies got here on and I believe we simply went for something there. All the pieces was being listed. I believe they might record a flag pole [chuckling] and keep in mind on October 20 or 19 in America, I believe it got here out [on the 20th].
The markets collapsed 20%, 25% and I believe it was that period that all of us acquired caught with a complete lot of investments. I keep in mind we had Wembley Toys. I’m making an attempt to think about the others that we had – IB Joffe. These weren’t unhealthy companies; they had been fairly affordable companies, however I believe the markets simply trashed them after they listed. They weren’t worthy of being listed within the true sense. They had been superb little companies. All people took benefit to make just a few ‘bob’ [shillings]. There was a printing firm and we additionally ended up with these shares and I believed, oh gosh, I simply noticed my wealth being completely whittled away by these new points. But it surely taught me a lesson. It was a serious studying curve on easy methods to make investments. That’s an excellent 30-plus years in the past. We simply mentioned, okay, from now …
RYK VAN NIEKERK: … solely good corporations.
DAVID SHAPIRO: Solely good corporations. Search for liquidity, know the administration, know the stability sheet and so forth. I’m making an attempt to think about among the different corporations that we did. However throughout that interval we had a portfolio of stuff that ended up simply being paper.
RYK VAN NIEKERK: In fact you’re a CA, and you’ve got analysis groups who actually have a look at the numbers in a variety of element, however do you utilize intestine really feel in any respect?
DAVID SHAPIRO: Sure, on a regular basis.
Intestine really feel shouldn’t be intestine really feel. Intestine really feel is studying. In different phrases, I learn quite a bit and I comply with the market. What I discover with intestine really feel is that in your head there’s an information level that’s measured there. After which someplace alongside the road, all these information factors come collectively and provide help to type an opinion.
I believe that’s essential. The extra you learn, every day you might be studying a bit of bit extra. And I believe it’s essential to try this sort of studying. And also you study corporations as properly, Ryk.
What I’ve mentioned – and I’ve mentioned it in different interviews – we are inclined to fall in love too simply. Someone promotes an organization and tells us what they’re doing and impulsively we get very infatuated and purchase it, [though] we all know little or no about it.
I’m saying once you purchase a share or once you make an funding, it should be just like constructing a relationship with an individual. Your mates are revamped time. You would possibly meet somebody and never like him, or alternatively meet somebody very good, whom you want, like a associate – and also you assume, oh, that is the love of my life. Three days later, it’s like ‘What am I doing?’ sort of factor.
I believe it’s necessary to deal with your investments like relationships. So if you wish to study administration, you wish to monitor administration for a very long time earlier than you make it. Simply consider Steve Jobs, simply consider such an Satya Nadella, who has taken over Microsoft now and is an outstanding operator. Once they first joined we didn’t assume a lot of them however over time we’ve realized to like them. It’s the identical sort of factor as Google. I’m making an attempt to assume…
RYK VAN NIEKERK: Elon Musk?
DAVID SHAPIRO: Yeah, look, he’s too flamboyant for me, you understand what I imply? What’s the phrase – phlegmatic. I don’t know what the trite phrase is, in all places.
RYK VAN NIEKERK: Deurmekaar [laughs].
DAVID SHAPIRO: Deurmekaar. I can’t maintain him. I can’t perceive what he’s doing subsequent. Maintain on, that is simply an excessive amount of for me. In fact, we’d’ve been extremely properly off if we had purchased him. He’s too tough for me to know. What he has finished and the place one has to commend him is what he did with electrical autos. All people now’s making an attempt to comply with him, making an attempt to play catch-up.
However I’m making an attempt to assume who else we solely grew to love. Nicely, Koos [Bekker] was nice – up to some extent. I believe we did very properly out of him; he’s that sort of individual, sure. However I believe recently I’m undecided I’m totally in favour of the place [Naspers] goes in the meanwhile, of the place Naspers is heading. However these are the sort of chaps that you just be taught to help and belief, a chap like Jebb McIntosh from CMH or his predecessor – these are stable, good folks.
I’m positive there are many others that we are able to determine as properly. The Joffes, even a chap like Stephen Saad. Yeah, he’s going by way of just a few points in the meanwhile, however you be taught to help them. You be taught to belief what they are saying. Poor outdated Stephen – that is one thing that basically turned to chew him. It’s not his fault. He thought he was doing the precise factor and he was doing the precise factor. However he’ll come out of it. [There are] a variety of good males, and South Africa has produced excellent managers. Piet Erasmus now at Shoprite – excellent job.
RYK VAN NIEKERK: Take a look at Capitec, Riaan Stassen.
DAVID SHAPIRO: Nice instance.
RYK VAN NIEKERK: Did you get into Capitec, and at what stage?
DAVID SHAPIRO: You already know what, I keep in mind a gathering with Riaan Stassen, and he instructed me they had been rejects from Boland Financial institution, if I’m getting the story proper. This must have some fact-checkers, as a result of keep in mind on the entire Absa consolidation I believe they had been simply discarded. However what they did have – and I keep in mind the story – was that they’d essentially the most excellent IT, they usually by no means had so as to add on. In case you perceive, the entire mannequin of Capitec was round their expertise. But in addition you’ll be able to see by the way in which that they’ve captured their purchasers – an enormous quantity of belief handed on from one client to the subsequent.
I believe it’s been one of many largest successes in South Africa, a large success.
I don’t wish to measure it when it comes to dimension however, coming from the place they’ve, I believe they’ve quick surpassed some other monetary establishment. Discovery may be one as properly, however I believe Capitec has sort of headed the lot.
RYK VAN NIEKERK: We’ll have to go away it there. David, thanks a lot in your participation right now. I actually thought it was extraordinary and really, very attention-grabbing. That was David Shapiro, the deputy chairman of Sasfin.