måndag 20 oktober 2014

Intervju med Tim du Toit

Eftersom jag använder mig en del av Quant Investing Screener så passade jag även på att intervjua Tim du Toit som utvecklat screenern.

Didner & Gerge är ju ett fondbolag som pratar en del om hur de använder någon form av screening för att få ned antalet potentiella kandidater att undersöka närmre. Jag tror de flesta gör så. Världen är så otroligt fylld av olika bolag så man måste på något sätt hantera det. Många kanske i första hand fokuserar på bolag noterade i sitt hemland. Andra att specialisera sig på en viss bransch, kanske en kombination ibland.

Även om man inte har syftet att de facto investera i ett utländskt bolag kan det ändå vara intressant att läsa på om dem. I många fall så får man då en bredare syn på bolag här hemma. Man får även en bättre insyn i branschen i sig. Ta Volvo till exempel. Hur ska man kunna göra en bedömning över branschen om man inte också ser närmre på Volvos konkurrenter? Gör man inte det så är man ju enbart hänvisad till Volvos egen omvärldsbeskrivning. Det kan ju bli lite snävt och enkelspårigt.

En screener kan m.a.o. vara lämplig för att vaska fram intressanta bolag även om man inte avser investera i dem. Detaljkunskap kring en balansräkning kan vara bra, men en utvidgad syn på de stora sammanhangen kan vara minst lika viktig.

Nog babblat. Här kommer intervjun. Håll till godo.


How did you get started in investing?

In 1986, shortly after finishing school, I enrolled in a stock market correspondence course. That really first got me interested in investing. 

A year or so later I pooled my limited funds with an investment from my father and started to invest in the real world.

I then went on to make nearly every investment mistake you can think of (technical analysis, broker recommendations etc.) until I read a unknown 84 page book called “Winning on the JSE” by Karl Posel an engineer and former professor of applied mathematics.

This book was my introduction to value investing. It broke investing down into a logical process.
The book also made me realised that investing was not a recent human activity and that there must be some good research and books about what has worked, not in the short term but over long periods of time in up and down markets.

So from about 1998 this is what I have done, read and tried everything I could find that can help me improve my investment returns.

You can read more about my investment journey here: meet Tim du Toit 

What is your main investment strategy?

I used to be a classic value investor investing in low price to earnings, price to book and high dividend yield companies.

This however changed when I read the outstanding book by Joel Greenblatt called The Little book that beats the market, where he introduced me to the Magic Formula 

After finishing the book I started doing a lot more reading and research into quantitative investing and how it can be combined with value investing.

As part of my research a friend and I in 2012 set out to find the investment strategy that would have given you the best returns in the European markets over the 12 year period from June 1999 to June 2011.

As you know 1999 to 2011 was a horrible time to be an investor (not just in Europe) as this period included both the bursting of the Internet bubble (2000) the financial crisis (2007 and 2008) as well as the European sovereign debt crisis (2010 to 2013).

We called the study Quantitative Value Investing in Europe: What Works for Achieving Alpha 

What we found astounded me, with the best performing strategy returning 1157% over the 12 year period.

In fact the top 10 strategies we found generated an average return of 881%, a return I’m sure you will also be proud of.

The thing about the study that will surprise you (it surprised me) is that valuation was not the most important factor in any the best performing strategies. Valuation was important but is not the first thing you should look at. 

What was more important was to first look for companies with strong share price momentum and select the most undervalued companies from this list. 

You may be asking if the research study changed me from classical value investor to a completely quantitative value investor.

The answer is I became a bit of both.

I still enjoy analysing companies and have of course remained a value investor but I make sure all of the ideas I analyse come from one of the best investment strategies in the research study as well as from continued research.

But I’ve also become a quantitative value investor investing part of my portfolio in ideas that are quantitatively generated.

How do you mainly find investment ideas?

I only use the Quant Investing Screener to generate ideas. 

All the best ideas from the research paper are saved as templates that all subscribers can use. We add to these templates as we find additional research we have independently tested and have found of value.

Some of the best strategies we have found are summarised here: Quant Investing Strategies  

You can read about all the new ideas and insight we have found on the Quant Investing Blog 

Can you mention any investment mistakes you have made and lessons learned from it?

This is an easy question to answer. 

Isn’t it funny how you remember losers but quickly forget winners? For the life of me I cannot say what my best investment was, I can however easily say what my biggest mistakes were.
The largest one was a company called Lambert Howarth and the huge loss I suffered in 2007 when the company went into administration.

You can read the whole story in the article Worst investment ever - My story and how you can acoid it 

Here is the summarised version.

In July 2006 I identified Lambert Howarth on one of my screens. It was trading at book value with a price to earnings ratio of 6.5, had no debt and cash equal 8% of market value. 

Its market value was £34 million and the previous year had bought back shares with a value of £10.2 million. And it was trading on a historical 14.7% dividend yield.
You must admit the company was cheap.

I invested in August 2006 and after I invested the share price kept on going down. I re-did my analysis and bought more. The share price declined further and I kept on buying until the company made up 12% of my portfolio.

Shortly after I bought the last time the company announced that it had lost the Marks & Spencer shoe account, this was 50% of their business.

Not much later the company announced it was going into administration as it lost the remainder of Marks & Spencer’s business.

Looking back at my notes and analysis my decision to invest was correct. What was wrong was that I continuing to buy as the share price went down, allowing the position to make up such a large part of my portfolio.

Since then I am a lot more conservative with investments in small companies. I am also a lot more careful of buying more as a company’s share price falls. This also fits with the research I mentioned above concerning positive momentum or relative strength

My other large mistake was the sofa retailer SCS Upholstery that also went into administration after credit insurers cancelled its cover. 

You can read more about my experience with SCS in a comprehensive post mortem: Its never to late to sell 

What I learned from that experience was that, irrespective of how large the loss on an investment is, it is never too late to sell. The money you have invested (even if there is not much left) is still real money.

Why did you develop the Quant Investing Screener?

I am always on the look for ideas and insights that can increase my investment returns. But in order to make sure that these can really increase my investment returns I needed a database to test the ideas.
As I did not find anything that fit my needs (and budget) I decided to build it myself. This allows me maximum flexibility and the ability to try out all ideas. 

As I had to get a good data source, which as you know is expensive; I also make the screener available to other like-minded investors.   

This does not mean it only has tools I use, I am always glad to incorporate the ideas of subscribers to make the use of the screener as wide as possible.

Because I use the screener to invest my own money is the reason why subscribers can be sure the data quality as well as the performance of the investment strategies are good.

I eat my own cooking.

What makes this screener stand out from other screeners?

The first thing you will notice when you use the screener are the four filters (or funnels) that allow you to select up to four ratios and then use the range slider (for each ratio separately) to choose the range of companies you want to include.

The image below gives you an example of how easy it is to screen using four filters (or funnels):

The four ratios mentioned above are just examples. The screener has more than 79 ratios and indicators you can use to search for companies that exactly meet your investment strategy.
You can find a list of all ratios and indicators here: Glossary 

Do you have tips to users as how to use the Quant Investing Screener best?

To get the most out of the screener the first thing would be to take a quick look at the two quick start guides we have put together.

This gives you a quick idea of how the screener works allowing you to quickly find a list of companies that exactly fit your investment strategy.

We tried to make it as intuitive to use as possible but some functions, that can make your life a lot easier, take a bit of getting used to.

You also don’t have to be a subscriber to take a look at the quick start documents; you can find them on the bottom of this page Quant Investing Screener  This will also give you a good idea of how the screener works.

Next we have set up more than 10 pre-defined screens for you, covering everything from a Quality Dividend Screen to a US Short screen.
Please don’t worry if the terms are unknown to you, the glossary explains everything in easy to understand English. 

And should anything is unclear just send us a quick email and we will answer as soon as possible.

Anything else you want to add?

Each person has his own unique approach to investing and that is a good thing else we will all be buying the exact same companies.

This is also the reason why we programmed the screener with over 79 ratios and indicators to ensure you find something that fits your investment strategy.

And if you find that something is missing let us know and we will add it.

The idea with the screener is to allow you to, as easily as possible, find investment ideas that fit your investment style. 

We test strategies all the time to give you an idea of what works and what not but this is not meant to change your investment style just to help you with ideas to improve your returns. 

And who does not want that, I included.

 Let me end on a more philosophical note.

Investing is not a difficult skill to master but it is more difficult than it looks. 

If you are interested in investing your own money my best advice is to ignore the popular media completely. Read books and research studies by other investors that have been successful over long periods of time in up and down markets. Learn from each of them but build your own investment strategy by taking the best from what you've learned that makes sense to you.

Each person has got a different temperament and invests in a different way. However if you follow time-tested investment strategies and build your investment strategy on what has worked you cannot do anything else but have outstanding returns over long periods of time.


Med det tackar jag Tim du Toit så mycket för hans tid. Jag har läst en del innan kring och av Tim innan jag började använda screenern. Jag tycker många av Tims tankar, baserade på hans egna erfarenheter är värda att begrunda.

Jag är själv ingen hårdkokt kvant-investerare, men visst har jag smygfuskat lite i gebitet. Magic Sixes är ju ett exempel på det. En del andra bloggare i bloggosfären är också mer kvant-investerare än vad jag är. Intresse för net-nets är ju till exempel på det. Utifrån det perspektivet är det naturligtvis svårt för mig att säga att screenern passar alla, men jag kan tycka att det antagligen är värt att ta en närmre titt på den för de flesta: Quant Investing

12 kommentarer:

  1. Tack för en intresant intervju! Kände inte till Tim

  2. Tack! Skulle vara intressant att få prova det. Kanske finns det en gratis testperiod?!

    1. Tack själv. Inte vad jag vet, men du kan ju alltid ta kontakt och fråga.

  3. Kan du inte köra Sampo genom screenern och ge dina kommentarer på det bolaget?

    1. Screenern fungerar åt andra hållet. Man ställer in vilka parametrar man vill se och ut kommer bolag som uppfyller dem. Senast gjorda genomlysning av Sampo i bloggosfären har mig veterligen Analysakademin gjort: http://www.analysakademin.com/2014/02/24/omfattandeanalys-sampo-2014/

  4. Alltid samma historia någon har hittat något roulettsystem som tycks fungera. I krönikorna brukar det heta"The best way to lose your shirt is to think that you have discovered a pattern in a game of chance".

    Bara namnet magic formula är ju avskräckande. I USA finns det miljoner investerare proffs och amatörer alla med tillgång till databaser och investeringsråd. Det blir som det brukar heta a massive scavenger hunt that should drive prices to their fair value. Som en random walker vilja avråda från detta.
    Med vänlig hälsning

    1. Nej en kvant-screener är inte till hjälp för någon som har A random walk down Wallstreet som grundfilosofi. Då är kanske Jack Bogles ideer är mer användbart. Kanske kan bli ett inlägg om det också i framtiden för att få in fler perspektiv. :)

  5. Verkar ju vara en trevlig screener som säkert kan göra bra utvaskningar av guldkorn som man sen kan stöta och blöta, vad kostar abbonemanget?

    1. ps du verkar ha tjall på tidsangivelsen, det star 03:40 på mitt inlägg och klockan är 12:40, strax efter lunch :-)

    2. Finns prisuppgifter här: https://www.quant-investing.com/join-today

    3. Mmmm Stilla havstid/västkuststid på bloggen. Får en att tänka på San Fransisco... ^^