In 2019, building on his experience as a maths graduate and his career in investment banking and private equity, Sam started investing full-time.

Having recently moved out of London with his partner and two sons, he balances managing his portfolio with maintaining his new property, outdoor pursuits and a variety of sports including golf, tennis, hockey and cycling.

He says: ‘I really enjoy the hunt for great investment opportunities as well as reading and utilising my analytical background as a maths graduate and investment banking analyst.

‘There is always something new and different to discover and learn, and I can work anytime from anywhere with an internet connection, so it provides great flexibility to focus on my family and other interests.’

A FULL-TIME INVESTOR

Sam, now in his 40s, started working for a private equity firm in 2011 which was centred on buying listed companies and taking them off the market. His role involved analysing these listed businesses with a view to buying the whole company. It was upon leaving that role three years ago that he took the leap and started to make his money from the markets instead.

As he explains: ‘Having built an income stream from my investment subscription and professional client advisory business, my investment goals are focused on long-term compounding of capital to fund retirement and discretionary purchases.’

Sam exclusively invests in individual stocks in the UK, North America and Europe where he feels he has a handle on the cultural and legal frameworks.

‘This is already an enormous opportunity set for one person and while I don’t focus on specific sectors, I do not invest in banks or financial institutions because they are too opaque, asset management businesses or investment funds because I am opposed to the business model, insurance which I don’t understand well enough and property, which is a specialism in its own right,’ he explains.

Sam’s has a reasonably ambitious targeted return. ‘I have an overall goal of compounding at 15% of more annually,’ he says.

To achieve this, he aims for a balance between opportunities where he thinks the share price could at least double on a two or three-year timeframe (accepting there will be volatility along the way) and more established, less volatile investments which he thinks are ‘fundamentally undervalued’ and can offer steady growth over the medium and longer term.

MOST AND LEAST REWARDING INVESTMENTS

Among the current stocks in his portfolio, the one he is most pleased with is AIM-quoted biopharmaceutical firm Avacta (AVCT:AIM). Sam says the company recently announced ‘exceptional clinical trial results in the development of a platform to provide chemotherapy without side-effects’.

However, the biggest return he has ever scored was from an investment in Canadian bioenergy pellet producers and supplier Pinnacle Renewable Energy.

He benefited from the company fixing some of its short-term operational issues in its distribution business. Having subsequently moved to an expansion phase, it was then taken over by energy firm Drax (DRAX), described by Sam as a ‘strategic operator’, for an enterprise value of more than £400 million in 2021.

Despite employing his investment framework and bringing his professional experience to bear, Sam has seen some of investments go badly wrong. ‘My worst investment was mCloud Technologies (MCLD:CVE), a business with an asset management platform to enable energy producers and infrastructure and building operators to optimise their energy usage.

‘I completely overestimated the management’s understanding of per share intrinsic value as they diluted shareholders time after time with a variety of instruments, underestimated the length of time to roll out the solution extensively and failed to sell anywhere near quickly enough despite red flags. It was a huge learning experience.’ The shares have fallen by more than 80% in value since 2019.

Sam’s investment process

Six key questions he asks before making an investment:

- Why is it a good business?

- Why does the opportunity exist?

- Who am I partnering with (in other words who are the management, board and other shareholders)?

- What happens when something goes wrong?

- What biases are impacting my business appraisal?

- What is the ‘no-brainer’ value proposition?

TAKING A RATIONAL VIEW

Sam tries to maintain a sense of perspective if his investments go wrong. ‘I immediately remind myself that making mistakes is the only guarantee in investing and not to get emotional. All my investment decisions are based on a probability-weighted expected return that specifically incorporates a scenario of what happens when something goes wrong.

‘The focus is acknowledging and accepting that sometimes the probability goes against you and then analysing whether the downside scenario was wrong. If it was, I’m trying to understand what was foreseeable and what wasn’t to build pattern recognition for future opportunities.’

Through his time in the private equity industry Sam has learned to put some emphasis on downside protection, investing with a margin of safety or, in other words, only buying something when it is priced by the market at less than its intrinsic value, doing proper homework and identifying areas where both the business and management can improve.

‘That is the basis of my approach that I have refined to suit a publicly listed and slightly more diversified portfolio,’ he says.

DISCLAIMER: Please note, we do not provide financial advice in case study articles, and we are unable to comment on the suitability of the subject’s investments. Individuals who are unsure about the suitability of investments should consult a suitably qualified financial adviser. Past performance is not a guide to future performance and some investments need to be held for the long term. Tax treatment depends on your individual circumstances and rules may change. ISA and pension rules apply.

‹ Previous2023-02-09Next ›