Like many members of The Constant Investor community, Bill Robertson has been following Alan Kohler’s work for a long time.
Bill’s head of information technology at De Bortoli, but he doesn’t believe in investing in the area where you work. Instead he focuses on his interests in science and technology – and he’s got some great tips on tech stocks that are worthy of further investigation.
Bill tells The Constant Investor’s Buffy Gorrilla that investing is really a hobby for him, but one that he takes very seriously and finds most rewarding.
Buffy Gorrilla: It is the 24th of March and I am Buffy Gorrilla on theconstantinvestor.com and I am speaking to Bill Robertson from the Constant Investor Community. Thanks for joining us Bill.
Bill Robertson: Thank you, Buffy. Thanks for the invite.
BG: I need to know a little bit about you. Can you tell me a little bit about yourself?
BR: I live out in rural NSW. I live in Leeton and work over in Griffith, about 600km inland from Sydney, 500 odd km north of Melbourne. Genuinely lovely part of the world. It is quite intriguing, because I am in a high tech environment, I am an IT manager for a fairly progressive family owned company, DeBortoli Wines. It is a great life.
BG: How long have you been in IT?
BR: I have been in IT most of my working life, so it is about 30 odd years. Yeah, quite a while.
BG: You must have seen quite a lot of changes in the IT landscape over the years?
BR: Ah, yes, and the funny thing with IT is that they talk about IT having a half-life of knowledge of 2 years so that every 2 years, theoretically, half of what you know is almost worthless and needs to be relearned. So it is an intriguing industry.
BG: Well that is also very inspiring, to keep that knowledge fresh. So tell me a little bit about yourself in the investment landscape. You mentioned you are a hobby investor, what does that mean to you exactly, Bill?
BR: My retirement strategy is based more on traditional super and investment property. My hobby investment is my share portfolio. My wife is not particularly excited by shares. I think that the rationale is that if you do need to get access to the funds for an emergency, everyone else is doing the same and so they are worth less. The times that you don’t need them are the times that they are worth the most. So we compromise by making my share trading my hobby. Where some guys might put their money on the horses or spend it on boats, I do my shares and my hobby investment.
BG: So where are you invested at the moment?
BR: I do a whole range of things. There is a mixture of traditional blue chips as a foundation, and a lot of that is because I love the idea of compound interest, so I really like the blue chips that offer DRPs so things like CBA, NAB, Woodside, Fortescue, Rio, Newcrest. Newcrest is also a little bit of gold hedging. 30 odd years ago I had a bit of gold investment and I like the idea of counter cyclic investing. I love DRPs with the idea of compound interest and other more traditional blue chips with a bit of BHP and South 32. Things like some agribusiness experiments. Elders, which has not been at all kind to me, and Websters. Elders was certainly one of the mistakes.
BG: And do you work with anyone on your investments or is this, as you mentioned it is your hobby, so are you wholly responsible for the good the bad and the ugly of all the results of your investments.
BR: Yes, in the past, where I maybe got advice from friends and family. You should try and invest in XYZ because that could be great because of ABC. Those family and friends style suggestions have pretty much always ended in tears. In recent times I have worked on a combination of value investing if it is going to be for traditional things like DRP, look at companies that you think are solid and hold for the long term and the others are going to be around, if it is going to be speculative, look to where you have a competitive advantage over the average investor. So in my case, not only do I have a background in IT, I do a lot of reading on technology, biotechnology, do lots of research in to all of that whole innovation around biotech and where that is going. So that gives me some competitive advantage over at least the average investor in that space. So my speculative investments will be in that area.
BG: So do you have any top tech stock tips for our community, Bill?
BR: Well I do a bit of both, so in terms of the blue chip biotech’s are things like CSL and Cochlear. The rationale for people like, why for example Cochlear? When I look at where we are heading, which is implantable devices, connections between electronics and nervous systems, Cochlear have been in this space now for decades. Interfacing electronics with biology is fraught with an enormous amount of complexity and risk. These are guys that have been there forever. Been there done that. And it gives them, if they can capitalise on it, it gives them a real springboard in to that whole space. People like CSL, we are constantly getting a better understanding of the way our immune system works and there are a lot concepts around things like heart disease and the like are more inflammatory responses. At some level there may be in some cases various diseases impacting inflammation from other underlying diseases may have an impact. We are seeing that a lot of cancers, something that research pointed out probably out decades ago, that many of our cancers are probably virus related. So if you look through the way viruses work in terms of the way that they replicate and the way that they hijack genetic material, and if you look at the human genome and how much viral legacy there is there. You only have to look at now in recently years, now we are worried about the Tasmanian Devil, because of a virus that is causing facial tumours. We know that we are making great stuff with the papilloma virus vaccines for girls, but there is also work that is showing that that seems to reduce the incidence of things like potentially prostate cancers in guys. So there are a wide range of things that are half known and we are on the cusp of knowing more of and companies like CSL are in the position of looking at it. Companies in Australia like Viralytics are also looking into this sort of space. There are companies like Mesoblast looking at things like stem cells for regenerating tissue. And again the same thing, there has been lots of work in the labs on how you would produce stem cells and differentiate the stem cells, but at the end of the day it always comes back to the scaffolding. So it is all well and good, we now know that we can produce stem cells and differentiate them to produce different material, but you’re still going to have an engineering problem of how you produce the scaffolding around it, so there are companies in Australia that are working on things like that. That is the sort of thinking that ties in to it.
BG: So are you invested in those companies, or do you also refer to, I am just thinking of some of our Top Stock picks that are health related, Osprey Medical, Novo Nordisk, with their Diabetes. Do you have your portfolio primarily in biotech and tech stocks or how are you diversified?
BR: The foundation of it is still blue chips, and a lot of that is because I have been in them for so long, the magic of compound interest… when you start getting DRP’s on your DRP’s that becomes really… the magic of compound interest in the long term works in your favour. So it is probably spread the weight on the blue chips have landed up being a larger and larger part, more by just the factor of time and that they do offer DRPs. I do consider the biotech’s gambling. If you are going to gamble, I would rather gamble on a cure for cancer. For me there is more fun in that than the third at Rose Hill, the Sunday races. So if I am going to gamble, why not gamble on something that may actually do something great.
BG: I think that sounds like a lovely strategy. Do you have any books that you have read that have influenced your strategy or the way that you look at investment?
BR: What I tend to do is to look more at underlying research. I think it was the idea from Warren Buffet that you need to be careful about taking too much second and third hand advice. At times you have to be prepared to read first principles. So I tend to read a lot of things like New Scientist or even look at articles – a perfect example, things like the funnel web venom they are looking at recently, one of the peptides being able to help stroke patients, and that made the traditional news, but then there is to go back and read the underlying research papers to try and get an understanding, well how is that working. It is all well and good to say yes it is working, but then to understand how is it working. These peptides are affecting ion channels and there’s a cascading series of reactions that lead to neuron death and what are they trying to do at a low level. If you understand first principles, you have got a better chance of saying, well how do cause and effect join and where are the opportunities if someone is going to capitalise on this. What will they need to know and what will they need to do. So that is things like New Scientist a weekly magazine that has a lot of science articles and covers a broad breadth of science related stuff is sort of a go to for me. I do got to say, I’ll give you guys a plug, I love Alan Kohler’s work. I used to subscribe to various things over the years and I am with The Constant Investor because I love the collection of work that you guys, Alan and the team do, particularly like the weekend briefings, it covers a broad range of things, so it is not just saying… I’m less interested in invest in A or invest in B than I am in saying well here is the big picture of where the bond market is going because of A, B and C, or here is the big picture of where interest rates are likely to go, and here is the big picture in where currency movements are likely to be, here is where the euro is at and where it is likely to go. And again, I take it all with a grain of salt, but it is useful to have those additional ideas percolate through, and the big picture ideas and they do and I find that incredibly useful, valuable.
BG: I need to ask, do you think wine is a good investment?
BR: me personally, I had some great advice from a mate of mine a few years ago who is actually in the wine industry. It was actually advice from his dad, which is never invest in the industry that you are employed by. Because if something happens cyclically on the industry then you lose on both your investment and your job. So I thought that was pretty spectacular advice. So for me, wine I have deliberately stayed away from wine as an investment. I personally think that it is a poor investment because the nature of many agricultural endeavours, wine in particular is they are very cyclic and I find when I work with the DeBortoli board, their thinking tends to be 1 year, 5 year , 10 year, 20 year timeframes. So if we think that we would really like some particular variety, maybe zinfandel is going to do well, or we want to try some new Spanish varieties that haven’t happened in Australia before, we have to source some grape material, do some trial plantings, wait 3 years, produce some wine, see if that wine will hit the mark, whether we can produce a decent wine, then turn around if the wine is OK, then we have got to see if we can engage consumers, then if that works we have to start again, source enough grape material, source some vineyards and some grape material to plant out, then wait 3 years before we can get some volume. If you work in a business that thinks like that, you realise that normal corporate culture, where all they are obsessed about is next quarters returns, doesn’t mesh well. So I think traditional companies where the thinking is so short term doesn’t play well in an industry where the thinking necessarily has to be very long term.
BG: Well Bill, thank you very much for your time and your tips. It has been great chatting with you.
BR: Well thank you Buffy, it has been fun.