Loyal local

By Vincent Heeringa

Saturday 1st May 2004

There's plenty to criticise about Carmel Fisher's approach to investing. The founder of Fisher Funds, which listed Kingfish on the NZX on 31 March, likes to buy sizable stakes in small companies, though some say you're better to do the reverse to minimize risk. She focuses solely on New Zealand firms, while others argue that's like restricting yourself to buying houses only in Twizel. She doesn't like buying many stocks, which could be criticised as not spreading your portfolio. She couldn't give a damn about what other investors are doing even though benchmarks such as index funds are credited as giving better performance. And she doesn't mind paying a premium to get into a good company despite the fact many other investors won't bend from the "buy low, sell high" rule.

What you can't argue about is Fisher's ability to pick winners. In the last five years her unit trust, the Fisher Funds New Zealand Growth Fund, has averaged an 18% return before tax. In the 12 years since 1991 she claims her investment portfolios, including those with her previous employer Prudential, have averaged 18.5%. Her success in that time is based largely on her confidence in what were then unheralded small caps: Baycorp, Michael Hill, The Warehouse, GPG, Infratil and Turners Auctions among others.

Having ditched the familiar mantras of spreading risk, timing your entry and exit, looking for undervalued stocks and so on, Fisher's sole focus is finding a handful of good companies and staying with them to enjoy the ride upwards. By "good" she means two things. First, a proven track record in earnings growth and the potential to earn a lot more. Second, a sustainable competitive advantage. That can include a brand, a dominant market position, a significant position in a fast growing market - what respected investor Warren Buffet calls a franchise. Curiously, Fisher doesn't count skilled staff, customer service or age of the company as competitive advantages. "They're important but not differentiators." Nor does she count export sales as important for earnings growth, pointing to The Warehouse and Briscoes as examples. She couldn't give a hoot about foreign exchange or interest rate movements either. Good companies cope well with the business environment, she says.

How does that translate into share price? Baycorp is a success she likes to quote as an example of investing for the long-term. She bought in ten years ago at around 60 cents, some 30 cents above its so-called true value. "But I believed its value would eventually be significant because of the long-term growth prospects." Baycorp reached the giddy heights of $9 before tanking following the 2002 merger with Aussie firm Data Advantage. Fisher sold out after it tanked, but still made a significant profit.

Once she likes a company, she gets involved. She regularly visits with management and customers, especially in the research phase. She's an active shareholder, voting at the AGMs (discreetly not publicly). She's prepared to take big stakes too - Fisher Funds owns 12% of Turner's Auctions. And she's in for the long term. "We're the dream shareholder, really."

You won't get Fisher to make stock picks for publication, but a look at her current investments might give you a clue: Freightways, Metlifecare, Infratil, GPG, Waste Management, Turner Auctions. As for her New Zealand focus, she remains confident there's sufficient value here. "I want to be able to eyeball my companies at short notice if I need to. I can't do that in Australia or elsewhere." Just local heroes, thanks.

Comments from our readers

No comments yet