What got you into markets in the first place?
I have always been an entrepreneurial thinker and am constantly looking at ways to grow my wealth. At age 23, I owned my first business as a 7 Eleven franchisee while studying radiography on a full-time basis at RMIT University. I funded this by obtaining a personal loan with 20% interest per annum and a credit card.
The success made in this store enabled me to sell it within just one year for double the price I had paid, the proceeds of which was then used to purchase a second store. This store was also very successful which resulted in a sound income stream and allowed me to also build up my savings which was then used to purchase my first stock. I went on to own a further franchise and was successful in lifting sales significantly through executing a strong business and management plan.
Upon graduating, and through my success with 7-Eleven, I was passionate about sales and secured a role in a global pharmaceutical company which involved selling directly to pharmacies. It was through my daily interactions with pharmacists that I identified an opportunity in A2 Milk being a hot seller. This led to me not only investing in A2 Milk but Bellamys, both of which did very well.
Ever since, I have fallen in love with the speculative side of the market and its potential to produce life changing wins. In that regard, I have friends who have managed to turn $50,000 into millions. In my experience, I have found that it’s extremely difficult to make such returns in any other area of the market.
From an entrepreneurial perspective, I also built a successful burger business from scratch. This process involved branding, design, creating menus as well as marketing for two individual stores which I owned and operated. Each store achieved in excess of a million dollars in just their first year. This success led to being approached by Asian franchise who were looking at breaking into the burger market.
Having completed their due diligence, they were impressed with the product and made an offer to purchase the business which I accepted. This resulted in Asian franchise converting the product which I created into a national franchise with various sites located across Australia. I recently sold one of my burger stores (moving the proceeds into the stock market) and am currently in the process of selling my second store with the intention of investing even more given my love for the market.
I have managed to achieve all of this whilst maintaining a full-time job in the pharmaceutical industry. Given my experience in this area, if I consider investing in a retail stock, I create my own business plan and look at the growth opportunities. In fact, I have reached out to management on a number of occasions to provide my thoughts and ideas.
Can you give us a summary of your investment strategy?
My investment strategy is something that I have fine-tuned over the years. Initially, it was focussed on a business that I fundamentally understood. Prior to investing in A2 Milk, I enquired with friends (who are pharmacists by trade) about its popularity and sales which led to my decision to invest.
Following various interactions on Twitter, a well-known spec investor came into my burger store a couple of years ago to meet in person over a bite. We hit it off instantly and have become good friends since. With his vast experience and success, he assisted me with developing a revised strategy consisting of the following:
- penny stocks;
- preferably under 1c;
- low market capital;
- a unique stock and one that is not overly discussed;
- a company led by management who are the ‘real deal’ and able to deliver;
- a resource or product undervalued or not yet considered ‘hot’;
- resources in countries with less sovereign risk; and
- low SOI.
Investing with these factors at the forefront of my mind led me onto the right path. The result was that I selected many winners. At times, however, I lacked the conviction to hold and sold earlier than I should have, thereby missing out on significant gains. Having said that, I believe there are warning signals, and if they show up, I’m inclined to walk away and sell.
The two main warning signals are when management’s story constantly changes and when timelines are pushed out. Basically, if management is not executing the plan, it is likely I will sell and move onto something new. My focus is to set a goal and invest in low market cap stocks until I reach it. This is the reason why I aim to get in on the base and trust in the research I have undertaken to see me hit the desired market cap.
In July, I completed the Penny Stock Investing course which also assisted in enhancing my strategy further. In addition to the factors outlined above, I now also consider the following:
- whether management have invested in their own resources or products;
- the company’s financials (my preference is to invest in a company that has 12-18 months of funds at hand which will avoid the need for a capital raise);
- the top 20 shareholders; and
- a focus on EV.
A major component of my strategy involves talking to directors or someone reliable who can provide me with a reference on director(s) based on their previous dealings. Usually, I will only take a large position in a stock which I believe has a minimum of ten bags. Before doing so, I spend a significant amount of time researching every aspect of the company to provide me with the necessary degree of comfort to invest. I also place myself in the director’s shoes and map out a business plan for the company comprising of its strengths, weaknesses, opportunities and threats.
If I find that the business plan makes sense, then I’ll take a strong position. From my personal experience in business, I have learnt to complete my due diligence and carefully consider every aspect of the company before investing.
If there was one thing you wish you knew when you first started what would it be?
The importance of having a solid investment strategy in place which covers the most important aspects of a company. This is necessary to have any real chance of success. There are high risks involved when investing in speculative stocks, so it is important to minimise these to the best of your ability and potentially save years of learnings and losses.
Tell us about your biggest winner?
Usually, my portfolio consists of no more than five stocks at any one time. My biggest win was with AUZ, a ten bagger. Looking back now, I could have had at least another eight of these and then some if I had the conviction to hold. I have learnt this valuable lesson and now hold most stocks. If I’m happy with the company’s fundamentals and the stock fits my strategy, then I will continue to hold. It took me years to build this confidence.
Tell us about your biggest loser and how did you mentally recover from that?
A heartbreaking loss of $200,000 in one stock which wasn’t easy for me to accept. Being inexperienced, I believed in the story management had portrayed without undertaking thorough research myself. Initially, I was very down, felt incredibly defeated and nearly gave up on trading altogether.
After taking some time to disconnect and mentally recover, I reached out to my experienced friend who explained that losing is part of investing. He shared his investment journey with me and from memory he ‘blew up’ his account on many occasions, going from millions to literally nothing. He backed his strategy, recovered well and has become one of the most successful investors in the speculative end. Hearing his story provided me with motivation to rewrite my own mistake.
I injected a considerable amount of time researching, networking and understanding the different aspects of companies before investing into them heavily. With the benefit of hindsight, I see that loss as a blessing in disguise and a constant reminder to never get ahead of myself. I am now a 708 Sophisticated Investor and hope to take my investing game to the next level. I have set myself high but achievable goals in the next 12-24 months and aspire to join the board of a biotech company which is where my passion now lies.
As a burger addict myself, it was fantastic to have a true burger connoisseur as a guest on the Spec Investor QnA! If you want to connect with Mena you can reach out to him on Twitter.