A fund manager who cut his cloth in Schroders London. He joined Coronation South Africa in 1998, running the Smaller Companies Fund which had the best 5-yr record in the sector during his tenure. In 2005 he left Coronation to pursue his passion in writing (and invest without constraints). He recently completed his first novel, a financial thriller called "White Man's Numbers" which can be purchased from Lulu.com and Amazon. Highly acclaimed, See excerpt and reviews on website link below.
- Description: Occasional investor. Trading frequency: Not Trading
- Interests: Stocks - long
searching . . . for the oracle in troubled times
White Man's Numbers: Excerpt Chapter 13 The Nelson Mandela Conference Room buzzed with excitement. Fifty seats were filled with pinstripe suits. Straining necks and earnest faces peered at the empty stage, waiting expectantly for the fest to begin. Christopher couldn’t help thinking the atmosphere resembled a highly anticipated musical more than a ...More
company presentation. “Music . . . but wait, where are the dancing girls?” “What, no lithe, lip-sticked lovelies? Just a mere man in a black turtleneck? Hey, we want our money back!” “Hold on! You’ll get your money back. You’ll get your money back many times over – just listen to what I gotta say!” “Good Morning Gentlemen, thank you for making the time. I’m here to tell you about Techtronic Systems, or TS Accelerator,” said the turtleneck. Christopher smirked as he sensed the immediate relief around the room. “Who needs dancing girls when you can have Techtronic Systems?” You had to love this game. “Let me start with a brief history for those that are not familiar with us,” said the turtleneck, “I’m Nigel Epstein. I listed TS Accelerator, and the group has enjoyed a 45% compound growth in revenue over the last 5 years. We are now ready to spearhead our global expansion to the next level. Hence our placing of new shares for those who haven’t been in on the ride.” Nigel sported a sympathetic smile, yet gazed around the conference room accusingly for the pinstriped offenders. “In today’s world, the corporate employee is on the move. He’s out there hustling, constantly on the road, to ensure his company isn’t consigned to the rubbish heap of yesteryear. Today’s organisation must manage customers across multiple channels. The challenge is to make it easy for people to do business with your company any way they want – at any time, through any channel, in any language or currency . . . And the software that enables this, Customer Relationship Management, or CRM, is the future. Gentlemen, I give you Techtronic Systems.” Turtleneck turned slowly to watch the screen behind him as a video began whirring. A packet of electrons whizzed from an egg-headed employee’s laptop to a satellite in outer space; the packet then split into multiple beams and each whooshed back to earth, to a number of different computer servers in flourishing businesses. The video image split into four, each showing a face sitting next to a computer; the faces lit up as the message from the divine beam turned their screens into a series of colourful graphs and happy avatars. He turned back to his audience. “To date, Gentlemen, CRM was out of reach for most, as the cost of the software was prohibitive for all but the largest conglomerates. Over the last five years, TS has developed one of the most versatile and rugged CRM packages on the market,” he drew in a conglomerate-sized breath, “and most importantly, priced it within the means of a small business!” Music. “Now, Gentlemen, the small company can obtain all the advantages of the corporate gorillas . . . through our software!” More pulsating music, trying to keep to the pace of Techtronic’s digital dance. Nigel’s voice bellowed above the dancing violins. “TS applications are complete, pre-built business intelligence solutions.” He seemed so familiar with the rap that he devoted his energy to his urgent pacing around the stage. One pinstripe in the front row shrank in his seat as Nigel glowered at him. “Who will your competitors be in the US market?” a still-doubting voice asked from the back after the violins faded. “And who will implement your software?” “Well,” said Nigel, nodding sagely, “you don’t have to take my word for the quality of TS – here’s our position in a recent Gartner Survey.” Nigel, now strutting like a peacock puffed with pride, nodded to his video assistant who retrieved the relevant file; Nigel then did a half-pirouette to face the graph on the screen. And there it was: TS Accelerator, sitting comfortably in the magic quadrant. Christopher had been sitting there with a look of increasing incredulity at Nigel’s theatrics. But he also knew that being in the top-right magic quadrant of none lesser than Gartner almost automatically conferred a gravity-defying share price. He wondered if most of Techtronic’s budget had been squandered on this slick marketing hype that proclaimed its functionality, leaving scarce resources for it to actually do so. Then again, he knew that his scepticism of this whole IT frenzy was beginning to hurt. The stockmarket pullback he’d been hoping for never materialised and each time he’d considered raising his weighting in the tech sector he’d always hesitated on the grounds of valuation, which for him, verged on the ludicrous – reaching for earnings ten years away to obtain a vaguely terrestrial PE was not his style. Yet he knew that principles were a very expensive luxury in markets. The concept of valuation was far less a fixed anchor than it was a shifting tide of changing investor sentiment. And a big part of his job was to read that tide. His instinct said the second dotcom frenzy was entering its last gasp, but it had been saying that for the past year. And when it came down to the choice of being loyal to a principle or losing money, loyalty always took second place. As he sat there and observed these young Turks salivating for more, he realised he’d underestimated this second dotcom wave. His conclusion had nothing to do with the presenter’s TS Accelerator. The bull signs were written on the faces around him. This wave was going higher. Christopher had no doubt that the current game of musical chairs would one day stop, and many of the whippets around him would experience a classic jaw-crunching collapse. But that was the game. And these little smug upstarts would soon learn the price to play. It was no consolation that Ravi’s smallcap portfolio had fared much better. His fund was littered with these IT rockets, and although none had achieved their profit aspirations, as long as their revenue line was growing, the market seemed happy, in the hope that the killer application was just one corner away from rocking the world. Ravi’s holding in TS had already trebled in value, and Christopher knew this secondary placing was the time for his portfolios to hitch a ride, if at all. He glanced over at Ravi, who was sitting there, seemingly entranced by the theatrics in front of them. “Regarding implementation,” Nigel continued, “there are a number of independent software distributors in the US that have expressed a keen interest. We won’t try and do it ourselves. We’re a software house – that’s our niche – and we’ll outsource the implementation. As I’m sure you’re aware, the incremental margin of software is close to 100%. You only have to look at Microsoft. Also, we have set up data centres to allow companies to transfer their computing infrastructure into the cloud, so that they can lease our software rather than be obliged to buy it. I’m sure you’ve all heard how cloud computing is transforming IT globally.” The gall, thought Christopher, for a tiny upstart at the arse end of Africa, to make an analogy to Microsoft! He was beginning to feel a mounting irritation; he knew couldn’t stand this much longer. Some investor in the audience had stood up to ask a question. Just from his tone Christopher concluded the man was more interested in his own voice than an answer. He wore an immaculate white shirt under bright red braces, whilst his fluorescent blue tie sparkled with his gesticulations, his booming voice drivelling on and on. Christopher wondered if his resentment was because the man was black. Did they all try so hard to dress well to compensate for decades of deprivation during apartheid, and now, was their addiction to all the chic labels a natural human response? Or was it just a cultural affinity to colour? He looked around the room and noticed some other coloured faces, mostly new young players in the game. The competition didn’t faze him; it never did. He knew there were few people anywhere, here or in London or on Wall Street, who possessed his contact network. But did they think being conspicuous was the way forward, he wondered, this new black empowered elite that flaunted the flashiest cars and the gaudiest ties, attire that seemed more appropriate for the royal harem of a despot than the money game? Hadn’t someone told them the trick was to operate under the radar, with stealth and purpose. To become the puppet master, not the bloody flashy puppet! He wasn’t racist, but someone needed to tell them! Of course he wasn’t racist. He always marvelled that any athletic sprint event was dominated by blacks, regardless of the country represented – a friend had gone as far as to remark that they all sprinted like there was a police car right behind them! But the money game was all about leveraging your contact base, using anyone and everyone for maximum personal gain. And he’d never encountered a black whose intellect or market instinct he respected. Take Jacob for instance. He could feel a sense of bewilderment just as he thought about the young man’s thought process! Granted, it was fun to have his jovial personality around, but they’d be sitting in the office, discussing a share or arbitrage opportunity, and Jacob would blurt out something about the ecological consequences! Or the transportation problems in making it happen! Yes jolly interesting, but . . . but! Christopher had often tried hard, sometimes even entertaining Jacob’s green perspective to wean him round, but despite Themba’s potential utility, Christopher knew his patience was wearing thin. Christopher wished he could convert Jacob – for the sake of the country he once loved if nothing else – but acquiring the right persona for a player in the money game was a question of generations, not decades. And there hadn’t been enough time. In his job as PAM’s head, he increasingly had to deal with some of the new black appointees who now held positions of influence in public pension funds, and he was often impressed by their dedication, their sense of loyalty in improving the lot of their underlings. Hell, he even had to dine some of them at his home to clinch the deal, and, yes, sometimes it had been entertaining! Yet on many an occasion he had to employ his mastered and affected smile as he listened to some overweight swaggerer’s ramblings after three glasses of wine. The black man whose intellect or market instinct he respected . . . show me that and I’ll change my mind. Ravi put up his hand after Nigel had disparaged the previous questioner’s self-promotion, forcing Christopher back to the presentation. “Is your software compatible with the major accounting packages used abroad?” Ravi asked. Nigel paused and fingered his turtleneck collar before answering. “We are in the exploration phase with numerous vendors, as well as the global operating systems like Microsoft. Their responses have been very encouraging. Naturally it’s in their interest to ensure compatibility with tomorrow’s indispensable CRM tool. You should note that 20% of our sales already come from the US, from pioneer companies who can’t wait. Any other questions?” Pinstriped reverential nods of approval. “Thank you for your time, Gentlemen,” Nigel concluded. “As you may well know, we have appointed three brokers, who are ready and waiting to take your orders over the next seven days. Naturally one should consider the risk of being downscaled if the placing is oversubscribed.” The pinstripes filed out of the Mandela Conference Room. Staccato chattering, innuendoes of the bounty that lay ahead. * * * “Give me a minute, Ravi, I’ll see you at the car,” Christopher said, and walked over to Nigel, who was surrounded by blabbering pinstripes. Ravi couldn’t help watching. Christopher said something and Nigel immediately left his group and followed him aside. Christopher talked quickly for a minute and Nigel started nodding; he then said something and shook Christopher’s hand vigorously. Ravi decided he should leave, before Christopher saw him snooping. “Well, Ravi, what do you think?” Christopher asked as he drove them back to their offices in his stately Mercedes. “It’s already done well, but the returns could be spectacular if they break into the US market. As Nigel said, the software’s built, it’s now a question of adoption and rolling it out. Provided, of course, they can hook up to existing systems. For me, that’s the big if, because it was built on accounting packages here, its compatibility with the existing global players is still a big unknown.” “If he’s right and they can crack that issue, would you put new money into it?” “It’s a big if, but let’s assume they can, then the potential upside justifies the underlying risk. But I think I would give this placing a miss. On the tiniest hiccup it could easily halve . . .” “So you’re going to sell your holding along with this secondary listing?” “I didn’t say that.” Ravi could sense he was being cornered. “But even if I wanted to, Christopher, I could probably trade out my holding in a day. If you got involved for PAM’s global funds, it would be a huge stake and then TS and PAM would be long-term partners, not investors!” “No sitting on the fence, I’m afraid, Ravi. Would you buy or sell the share today?” Christopher turned to look at Ravi, even though they were at a busy intersection. Ravi taken aback, thought carefully before answering. “Well, it’s news to me that 20% of their sales are already from the US. That’s a big positive, you know, foreign endorsement before they’ve been approved by people like Microsoft . . .” “So if you had the option of either selling your existing stake today, or keeping it in the hope of more American penetration, what would you do?” “In that case, I would keep my holding,” Ravi said in a muted voice. “That’s my conclusion too.” He turned to face Ravi again with his penetrating stare, leaving no room for ambiguity. “I’ll be relying on you to keep me informed. I hope that’s clear. Time for me to buy some TS.” “How many shares should I apply for? You know we might get scaled down if it’s oversubscribed, which it probably will be.” “We’ll get 40% of the secondary allocation. That’s what we apply for.” Ravi was stunned. It took him a moment to respond. “Christopher, TS is about to double the shares in issue – that would mean PAM would end up owning 20% of the company.” 20% of the entire company! “That’s ridiculous, considering how little we know about it!” “Well, actually how little you know about it. It’s in your fund, Ravi, so you must have a high degree of confidence already. But I’m sure you’ll do some more digging.” “But how do you know we’ll get our allocation?” “I told our pompous peacock about some of my contacts in Silicon Valley, a few big boys who might be interested. Don’t worry, we’ll get our full allocation.” * * * It isn’t such a malicious move, Christopher thought as they drove on, seeing Ravi slumped in his seat in bafflement. After all, if Ravi could speak about metrics such as market cap per eyeball (market cap of the company divided by number of visits to the website) with a straight face, then by all means, let the unscarred optimist lead the way. Christopher wasn’t normally comfortable relying on somebody else. He much preferred laying out the jigsaw pieces in front of him and forming his own picture. But since Ravi was available, why not have a fall guy if things went awry? He guided the Mercedes around the winding corners of De Waal Drive. A gusty wind was blowing down from the mountain towards the port, making the wild grass swirl. He felt good. His thoughts drifted, and he found himself thinking about his love for the money game. He categorised players in two broad camps: first, people who could read the numbers, where the essence of a company – its financial health, its working capital challenges, its pure real cash flow – virtually leapt up at them from the financial statements. The major drawback of this crowd was that they could rarely verbalise their thoughts, and they were penalised in the corporate world for their semi-autism. The second group were the Margarets of the world: people who could sell an igloo to an Eskimo. He would bet she could even make diarrhoea sound like a pleasant experience. But when it came to the numbers, this crowd fudged it. He was sure Margaret didn’t really understand how the cash flow of a company worked, how its lifeblood was affected, if say inventory or creditors changed. But when it came to marketing, there were few who could twirl a listener around their little finger as well as her, whilst skirting daintily past accounting issues she didn’t comprehend. He was sure her trajectory into the upper echelons of the money game would continue. And then there was Ravi. The guy did have potential, he had to admit; he had strengths from both camps. A great work ethic, a promising nose for the market’s mood . . . Christopher was often amazed by Ravi’s mental agility, where Ravi deduced a conclusion a step or two ahead of even him. Ravi also had a better grasp of all the quantitative drivel that was currently the vogue, the statistical relationships that he deemed utterly useless due to their premise of the past trending into the future. But it was the current fashion of the game and Ravi was two steps ahead. Also, Christopher conceded, Ravi was certainly getting better at expressing himself; he knew Ravi studied Margaret carefully to learn from the marketing pro. In sum, the potential to also make it big. Save one fatal flaw: he needed to be liked! To be liked? What a handicap! Why care about being liked when the rewards of human leverage, of skilful manipulation, could buy you more likes than you could swallow in ten lifetimes. Christopher knew he wielded enormous power over Ravi – and he would keep it that way. He couldn’t help thinking about the other TS, Eliot the author, and one of his reflections that had always stuck in his mind; it was so apt for this age: “Where is the wisdom we have lost in knowledge and where is the knowledge we have lost in information?” Nice rhetorical question, Christopher thought, but when you couldn’t find it, you just had to make sure it was somebody else’s problem. He looked sideways at Ravi, who was twitching his fingers nervously. Hell, he thought, as he eased down the accelerator and let his car chuckle in delight for the last bend before the highway, there wasn’t another job in the world he’d rather have.
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