Mailbag: incl. How can we find takeover targets? December 15, 2024

26:03But that's just me. So I think we talked relatively recently about maximizing your returns versus make sure your returns are safe and solid. Yeah. And we've got to probably come up with some – I mean, there's risk-adjusted return, which is kind of the phrase the boffins use, and we mean it differently. We've probably got to come up with some other different phrase around more trade market. But the optimal strategy is going to – well, the best returns are going to come in hindsight from the one stock that went up 10x in the next four years, right? and we can't know what that's going to be. And I know you're not expecting us to know that, Anonymous, but that would be the best possible return.

26:39And if you work back from there to about optimal rather than maximum, which is the word you use, which is actually a really wise word to use, is how can I kind of get the best out of my portfolio without taking silly risk is probably how I would define that, right? And it depends on your timeframe. Remember, we talked about bonds and cash, and I agree with him. If your timeframe is, I am thinking about between 60 or 59 you are now and 99, and I want to maximize my returns over that period of time without taking a silly risk, there's no value in bonds and cash. The chance that bonds and cash outperform shares over the next 40 years is about as close to zero as you're going to get.

27:11Not impossible, but about as close to zero as you're going to get. Now, if that's your timeframe and that's your horizon and you can stomach the volatility both in terms of your mental and emotional state and your cash flow needs, there is zero value in being in a less volatile, lower return asset. It makes no sense. No. Unless you need that lower. I say this all the time. Unless you need, for those reasons, emotional, mental, or financial, less volatility so you can draw down on your portfolio, knowing the money's going to be there if you want it. But even then you can put a small allocation towards cash.

27:41As I said before, just have the cash drag. Okay, you know, I know what I'm doing here, but I've always got money to draw on. And if the market, you know, wets the bed, then cool, I'll just ride it out. And that's the great thing. Well, there's a lot of great things about having a big fat asset portfolio, but one of the great things is that even without that, even if you were to draw down, I don't know, $100 ,000 a year or whatever you feel as though you need, given that you own your house outright. $2 ,000 a week is not bad, right? You are selling when the market is down, but the quantity of asset is so much that it's really not going to make too much of a difference anyway.

28:21The proportion you're having to sell is so small. If you're having to sell half your asset, you want to pick your optimum time to do that. Absolutely. If you're selling a fraction of your asset, 100 grand on a few million dollars, it's a tiny percentage. That's rounding it up, yeah. So I think that's right. Secrets risk is really interesting. And again, it kind of gets academic pretty fast. Secrets of return risk basically says, if you're going to get a 10 % return on average, but you lose 50 % on day one, the rest of the returns have to grow and the next 10 % comes off that much lower asset base, right?

28:49So it's the first return you get and the order in which they come have a massive impact on where you end up. and the reason I say that it's an academic question is probably frankly because you can't you can't know what's going to happen next but also a little bit like I hate saying it doesn't matter or it doesn't or don't worry about it it's not a big deal but in this case I just don't I don't know that I would so well the question how you take care of the risk I would not personally try because we can't know what the future is going to look like now you could minimize your downside by having cash and bonds which is kind of what they're doing it's like they're saying to you, here's a portfolio which has got a range of assets and when some zig, some will zag and you kind of feel like, good, that means I won't lose too much money on day one if the market falls.

29:31That's absolutely true. 100 % true. Over time, where am I better having my money? And or if the market goes up, what value in there? I am, again, like we're not traditional financial people, right? I think about probabilities rather than trying to be too clever or active or smart in air quotes. A lot of people try and sell you complex strategies because complexity feels like it's attractive and somehow smarter. How do you reckon Warren Buffett deals with sequence risk? He doesn't, right? Because why would you? So I think from that perspective, my personal view is, I get the question. If I had a smaller portfolio and it really mattered what happens in the next six months, I may think differently about it.

30:15Different story. If I had to liquidate it in three years' time, I'd be in cash the whole time. You couldn't make me invest in shares over the next three years. If I had to have the money out on the whatever of December 2027, I'd have it in cash. If I needed that money regardless, because I don't want to be in a position of saying, I need 100 grand, I've got 80. Well, bugger. I might have 120, but I might have 80. So I'll take the 100 and lock it in. I put it in the bank, so I'll get some interest on it, by the way, to offset inflation. But, you know, much and much less. So sequence of return risk, I think, is academic.

30:44I think it's – I think, by the way, a lot of financial advisors believe it. I'm not saying it's not – they don't genuinely think it's a thing. I just don't know that there is a strategy which meaningfully overcomes it at an individual level that makes any sense. If you do – what's the saying? If you do what everyone else is doing, you can't expect outsized returns. Like, definitionally, like, every single person who wears those hats will say, do this. And I'm like, okay, cool. you just guarantee and it might be you're happy with it but i mean you are guaranteed mediocre returns right because everyone else is doing the same thing like outsized returns requires a little bit of outside of the box thinking or you know i'm not saying you got to be careful because that doesn't mean oh i'm going to do something completely at odds with traditional wisdom and therefore i will go well yeah no i'm saying it's a precondition to do well you know Michael Burry didn't make a fortune shorting the US housing market because it was what everyone thought.

31:48Exactly, exactly. You know? So, you have to be a little bit – you have to be, I think, you have to be a little skeptical of people who advocate for a strategy that has demonstrably been mediocre over a very long period of time. Now, they love that because it's a wonderful backside covering strategy because you're never going to get fired because, well, that's what everyone else recommended. And look, you still made money. And look, we got rid of all of the risk for you. Yeah. I was like, yeah, but that's because you don't know what risk is and you define it in this funny way. And it's just like, and again, it sounds like I'm saying, ah, caution to the wind.

32:28Yeah. Go for it. Roll the dice. You never, you only live once FOMO. I'm not, I'm not saying that, but it's just sort of like to do the thing that everyone is doing. Like did Buffett do that? Did Lynch do that? Like insert investor, famous investor here. It's like, no, because if they did, then you'd never know about them. Look, again, you know, I will defend financial advisors in one sense, which is that a lot of their clients think they want something and will blame them when it doesn't work out. Oh, that's why you get it. That's the reason you get a financial advisor. Right. And so my parents - Not my fault that way.

33:03Right. My parents had a financial advisor and dad died and mum, first year or two after he died, the superannuation statement said the super's gone down that's not supposed to happen why am i saving i've said this i've used this example before why has it gone down i thought super was supposed to make money now the reality is the market had a crappy year has gone really really well before during and since but what that year was just crappy year right but she felt like it was a bad thing and somehow she was jeopardizing her retirement because the superannuation balance had fallen now most people listening to this podcast will kind of shake their heads go of course everyone knows that things everyone doesn't know that right and it's scary when you lose money And so if you're a financial advisor and you know your clients, you've probably had the experience of the market falls 10%.

33:42Everyone's on the phone. What do I do? What do I do? What do I do? And you think, okay, well, you're obviously not cut out for it. What I'll do is I'll give you a diversified thing. You'll get a lower return, but you'll sleep better. You won't call me. You'll feel better about things. And I don't really even blame them for those clients, right? It is know yourself and know your client to some degree. but given you're listening to this podcast if I was 59 and I had a couple million bucks and I wanted to retire and I wanted to maximize my returns over 40 years or the optimum return I'd invest in all the shares most of the shares pay dividends I'd have probably 12 months living expenses on the side in fact I'm going to say what sounds like a horrible setup but it's not But the reason I will mention it is because we run a service.

34:29I've mentioned this before. It's sort of everlasting income. Don't buy it just because I'm talking about it. But the reason I mention it is because that's exactly what we do with that portfolio. The Motley Fool put a million bucks in and worked in 2017. We have 19 individual investments and a bucket of cash. And the bucket of cash is because every month we pay out money. We pay it back to the company because it's obviously company money, but our members pay it to themselves as their paycheck. And so we've got effectively, what's there? I think it's about 12, yeah, almost exactly 12 months worth of cash in that account.

34:56and the dividends refill the cash account and the monthly withdrawals take it out of the cash account. And that's how we do it. We firmly think that approach will deliver a really nice long-term income flow from quality assets and hopefully appreciate a bit in price, nice tax-effective dividends from that. So the other thing I mentioned is I said, well, if that's what I would do, I'm just saying, that's literally what I would do because that's what we're doing. That's what we're telling our members to do. That's what we're helping them do for themselves is here's a portfolio. they can mirror. So would I own property?

35:28No, not personally. But if you already got it and it's worth keeping, then don't pay the tax. You might as well keep it. And if it feels like it's diversification, then go for it. If you like having cash and bonds because it just feels less risky, then go for it. You're telling yourself or telling us that's what you want. I own bonds because they're less risky. Should I do that? Well, if you own them because they're less risky and that's important to you, then yes, of course you should because you're doing it for that reason. Your rationale is valid given what you've told us. And again, we can't give you advice anyway, But given what you said, which is I value this thing, so I've done this thing, all we can really say is, is your action likely to deliver the result you're seeking?

36:03In that case, yes, cash and bonds are less volatile than shares. Property is going to probably give you a less volatile return, only if nothing else because it's not quoted daily, minimally, hourly. So, yeah, if it makes sense to you and you're doing it for that reason, you like that reason, go for it. If you're saying I can deal with a bit more volatility and I want some tax-effective income and I'm happy to concentrate on the income flow and let the capital, the asset prices do what they do, then for me, my mother-in-law, I've said this before as well, she's got a portfolio which is along the lines of the service I just mentioned.

36:34It's like, here's some cash on the side. Here's a dividend paying portfolio. That's what we do. Yeah. That's enough from Matt. Also, just on that one small point I'll riff on a little bit is if as a financial advisor, your clients are ringing up and concerned, angry, scared at a 10 % drop, I actually wouldn't see that as a personal failing on your behalf. Right. I've long, I'm not trying, it sounds like I'm just having a go because I love to put the boot in and that's a little bit true. But it's also, I've long thought in this industry, you get the clients you deserve. And unfortunately, the best way to grow your business is to make ridiculous promises.

37:12Yeah. Or reconfirm a preconception. Yeah, tell people, mirror back to people what they want to hear. I really like this. Don't you think that's good? Yes, I do. I should be in bonds because it's safer. Okay, good idea. Yeah, absolutely. You should do that. And it's good. It's a good short-term strategy. But I can tell you people, anyone who's been in the game for any length of time are actually very good at turning people away. And it's very hard to do as a business owner. But it's also something that what you do is you, part of your job as a financial planner is you, and look, I've got to be, I've got to say this because I'm tainting everyone with the same brush.

37:51There are some absolute miracle workers out there. Let me just say that before anyone writes in. If you're a financial planner listening to this, I'm sure you're one of the good ones, but I'm sure you will also admit that there's a lot of charlatans in your industry, just as me and Scott will every week admit that there is the biggest, dodgiest buggers in the world. I'm not going to admit we will go out there and say that loud and proud because it's really important people know that. So I'm not in a glass house throwing rocks at others, but, you know, it's true, right? It just is. We smashed our glass house years ago.

38:17Just completely smashed. So there are some absolute rainmakers there. And you know what they will tell you? The good ones will tell you, hey, Bob and Mary, more than happy to give you some financial advice. I'm going to recommend this. And I'll tell you what, this is why I'm going to recommend this. And I want to challenge some thoughts here. I'm going to recommend a very heavy allocation to shares, knowing that it's going to be super volatile. And that means that you are going to have years where you're angry and upset. And if you are not happy with that, then it's absolutely fine. Then it's not a relationship that neither of us should pursue here.

38:49In fact, here's a piece of paper that I want you to sign that attests to the fact that you are not going to be upset with me when this happens. Because it's not going to maybe happen. It is 100 % guaranteed to happen. And it's a bit of tough love. And I'm really just directing this to the financial planners. The good ones know this anyway. The other one's just sort of like, I know the temptation is there, but give people the, you know, the unvarnished truth and it will pay you back tenfold. Even though it might take you a while longer to grow your practice, you'll get people who trust you implicitly, who have been forewarned is forearmed, right?

39:33and and i've tried to do this with my own business or even just running a service when i've been with other companies which is you go through periods where you're just you've got the minus touch right like everything is brilliant and when that happens the temptation is to do the victory lap and go oh look how smart i am and it's just it's guaranteed like probably before fall yeah so when when the markets in in your particular record's not doing well you need to be talking about actually what it is you own and why it's going to get better. And that's easy to do. When it's not going, when it is going incredibly well, that is the time that you say to all your customers, implicitly, I know you guys do it.

40:16I know all the good ones do it. It's like, hey, we're really happy that we had a good year. It's, wasn't it been great? Look at our score cards. They're fantastic. By the way, not normal. Absolutely not normal. This is not going to happen every single year. It can't happen every single year. History will tend to show that after you have a good run for a little bit you probably you know things mean revert to some degree i'm warning you now and that is when you do get to that part of the cycle you can you can talk you can point back and say hey remember that time i said this and again it's people what people still some people will still be angry because people are always you know a little bit like that but but it those that recognize the the appreciate the candor and just the truth telling in in this kind of stuff i I think we'll stick with you for a long, long time.

41:02Sorry, I've laboured the point too much, but it's one worth making. No, that's a very good point. Yeah, I think I'm good. I think the only defence I'll make for the financial, again, for the bad financial, maybe the good ones that look bad ones, is just there is an element of serving the customer, which is, I've said to the guys, I've said this on the pod before, but I said to our team, the only good advice is your advice that's taken. Sure. And followed, right? And I can say to our, If I had a personal financial advice client, look, in my advice, you've got your 59, you're 40 years to live, I'd all be in shares.

41:35Yep. And they say, cool, because you're the best return. It'll be volatile. And that's cool. I'd really rather not have the volatility, please. Yeah. But you have to have shares because they're going to do better for you. Yeah, but I don't really feel like I should. At some point, there is a serving the customer, which is actually meet them where they're at, help them improve what you can help them improve rather than forcing on them something they can't see through or don't want to look with that. All you do, though, is you clarify for them the trade-off. And you go, absolutely, Mr. Customer.

42:05You know what? There's no right or wrong answer here. It's whatever you want. Yes, yes. But don't call me up in five years' time when we've underperformed the market and be upset, okay, because there is always a trade-off. So what do you want? Now, I'm not trying to judge. This might be the right one for you, but there is a compromise being made and you need to make your peace with it. Motley Fool Money. For more, subscribe to the free newsletter. at fool.com.au forward slash listener.

42:34Of course, this is a great podcast. I love the deep analysis you guys discuss every week. Thank you, mate. I understand how you'd promote the idea of having all equities in your super while you were young. But what super mix would you have if you have one year to retirement? You're planning to withdraw a large lump sum to buy a house and then when your current house, fully paid off, sells, re-contribute that money back into super, a mix of downsizer and non-concessional contributions. I'd appreciate your thoughts, knowing that it would not be personal advice. Kind regards, Paul. So look how Paul's going to take some money out, buy a house, at some other point, sell the house he's currently in, and re-contribute that back to super, which is really complex, but I guess given the dollar amounts at stake, particularly with some non-concessional and downsizer contributions, there's some tax benefits there as well.

43:26One year to retirement, what super lump sum would you go with, Ram? I'm struggling with this one. That's a good question. I mean, there's probably a reason, but why buy, then wait, then sell? Like just when you're ready to move. Okay. I was going to say otherwise just wait. Yes. I would buy and sell. Maybe get a bridging loan if you have to. They're not great products, but, you know, it just – Unless there's a reason you need to buy now and sell it. And it may be because he's in the workforce and there's some opportunities to contribute to super or something. Yeah, you go. You go. It's a bit outside my wheelhouse.

44:09So, Paul, I think – this is hard, mate, because you're kind of having a cake and eating it too, the way I've read your question. Now, one year to retirement means you're still going to be 40 years retired, and so it's no big deal. But if you're going to take some money out now and they put back money in a year's time or take it out in a year's time and put back some money sometime after that, you're really kind of timing the market, right? I mean, the answer is I can't. There is no way for me to know. I can't tell you because if you need to take money out in a year's time. Sorry, I'll rephrase that so I don't look.

44:47I'm giving you advice. If I take money out in a year's time, I'd have it in cash. If I needed a million dollars in 12 months' time on the whatever of December and I had to have a certain amount of cash to buy a certain house, I'd have in cash for a year. Not because it's a maximum return, but because maybe the million dollars goes to 1.1 or maybe it goes to 900 ,000. And that's really consequential in terms of the house you could buy. So if you know how much you want to spend on the house, you've got a maximum budget, take it out, put it in cash. You'll forego the returns. You'll forego some really serious upside if the market goes really well in the next 12 months.

45:17I don't know. Maybe it does. you'll forego some really significant downside if it falls the next 12 months and who knows it might or maybe end up where you started. So even though it's in super, if your effective time horizon is 12 months and you need that money in 12 months, then cash. If you want to buy a house in about 12 months or 24 months or five years and if the stock market falls in the meantime and you've got the luxury of waiting, it doesn't sound like you do by the way because you want to buy and then sell your house and then re-contribute back in. So it sounds like kind of timing matters.

45:46if I was doing that, I couldn't meet any other than cash. If my wife said, look, honey, let's buy a house and we'll buy a house worth a million dollars over there and we'll do it in 12 months, I'd say, okay, cool. I'll take that much out. I'll put it in cash. Again, when I say cash, I mean interest-bearing cash in the bank across a number of financial institutions so you get the government guarantee. So, you know, if it was a million bucks, I'd have four$250 ,000 term deposits in four different banks just because there's no reason not to and I guarantee the money. And then I know it's going to be there in 12 months' time.

46:17And hopefully, having kept up or slightly been in inflation, that's the only way to invest it. So the fact it's in super or not is kind of irrelevant. Any lump sum I would need within three years, and probably five, frankly, if I needed and had a fixed date and a fixed amount, I'd be in cash. Yeah. It's a bitter pill to swallow though, right? Isn't it? It feels terrible. Like, I can't argue with it, but gosh, it sucks. Well, statistically, it'll suck to sit on the sidelines. Yes. Or you might feel like a genius. Well, you might get that one in three years where it goes down. You go, thank goodness I did that.

46:49Yes, and that's why you can't. That's why. Well, that's why I wouldn't take the risk because you don't know which one of those is going to be. Yeah. And if you've got to buy a$900 ,000 house rather than a million-dollar house because your money went down in that 12 months, you'll kick yourself. It's one of those situations where even if it was a 10 % gain or a 10 % fall, statisticians are going to say it's the same thing. Your expected value is still a million dollars plus or minus 10%. But we all know that a million-dollar house that's suddenly$1.1 or$900 ,000 is a very different story. Yeah.

47:19So the implications of that, because you get a one-off purchase at one point in time, I wouldn't be trying to play Funny Buggers, maximizing my returns. I would minimize my regrets to use the Jeff Bezos phrase. Yes. Hey, you'll like this question, Ram, because it gives you a chance to do a humble victory lap. Oh. It's not about Bitcoin, don't worry. Jared sent us an email. Hi, says, hi, gentlemen, which is very kind and only partly true. I thought I was a patient investor. but life has proven otherwise. It's a bit of a sting in the towel. Many, many years ago, just before the GFC, I bought my first ever shares.

47:53They were Sigma Pharmaceuticals at$2.40. Now, stay around and take a victory lap because this is one of the very first big winners you picked for us at Motleyfield Dividend Investor, as I recall. No, it was Priceline. Ah, sorry, API, Australian Pharmaceutical Industries. It was the competitor to Sigma. It was. My apologies then. I'll tell you a story on that later, though. You did well, though. All right. I just finished uni and read some investing magazine that said I should buy them. So I did. Even though I had NFI, which I think is no firm idea, why they were a good investment. I then watched the shares go down to 30 cents a few years later.

48:27Yeah, they didn't do well. Despite looking at a 90 % loss, buying that magazine wasn't a total disaster, as I kept it as emergency dunny paper when I went camping. Follow-up, Jared? Fast forward many years, and I started investing with more rigor. And with the support of Motley Fool Dividend Investor Subscription, I had another company I owned shares in, which I wanted to sell as my conviction wasn't there anymore, and capture the share price gain. So I finally sold my Sigma shares and used the loss to offset the capital gains tax on the other gain. What was the stock? Here's the kicker. He doesn't say, but here's the kicker.

48:58Six weeks later, Sigma and Chemist Warehouse announced their proposed merger, and then I watched the share price go up and up and up. I know that feeling. Who would have thought, waiting 16 and a half years or 199 months or 864 weeks, would have been impatient of me if only I waited another six weeks. FFS, which I think means for foundation's sake. Anyway, there's an actual question here. As an investor, are there signs or signals, whether in company presentations or elsewhere, that could indicate some possibility of an upcoming merger or company being acquired? I've had three companies I do own over that last three years, which have resulted in them being delisted from the ASX.

49:39They are, including API, Australian Pharmaceutical Industries, CSR, and APM Human Services. And I made a very nice profit due to the immediate share price increase following each announcement. Any wisdom or experience you guys could share would be very helpful. Thanks to the entertaining pod. Please keep it going. Cheers, Jared. I mean, I think sometimes when you look back in hindsight, you feel as though these things were seeable. but I don't think that they are. And there's also what they call the history of silent evidence. So you notice the ones where it was the case, but you don't twig on the ones that had the same setup but didn't go the way that you thought.

50:25Yeah. So it's very, very, very, very hard to do. I mean, on one hand, you could say if a company has a, the core of the company is good and it's cheap someone else will reach that conclusion it could be a competitor a rival and they they might choose to take advantage of that bargain um in which case you'd buy it anyway because you saw it was cheap and good anyway right like so it's sort of it's a bit circular and it's a bit hard i i wouldn't waste any time thinking about I mean, gosh, I feel your pain. How many times? Can I tell you one? I'll tell you one. Pro Medicus. Have you seen that thing recently?

51:15Yeah. It's stupid. The pricing is stupid. I'm looking at it. Let me do it. I have to do it. $220,$240, something like that, I think. $254. There you go. Yeah. So I bought it$0.85. I like to tell people that. They announced a$7 million contract, and the share price goes up at$84 billion. Yeah. It's just dumb. Yeah. Absolutely dumb. So the price to sales on this thing is$18. Yep. For tens of billion dollars. Anyway. By the way, I will say, I'm not saying I wouldn't short it. I'm not saying it's going to go down. I'm not saying it can't justify that share price. The odds of it are lengthening by the day.

51:50Yeah. I mean, I sold. I made a lot of money on that damn thing, but I sold way too early. And every time I sold, the gods went, ha-ha, and boom, boom, and it just flew up, right? And you're going, oh, okay,$100, maybe I was a bit too fussy. $150, surely. Okay, I'm selling that. $200, this is insane. And then blink, it's$254. So this thing's like the market is always going to screw with your head. Like it just is. And you just, I wish I could say, actually, Jared, just do this. And you'll always spot it. And I just, I can't offer any practical tips to do it. Other than knowing that when you buy, shares will almost certainly fall afterwards and when you sell, they'll certainly pump afterwards.

52:36It's just how it goes and the chase for perfection is a futile one and I wouldn't lose too much sleep on it. I just think, look, if there was any way to sensibly, rationally handicap things in a way where you could take advantage of some kind of signal that would give you some better than a coin flip odds on a takeover happening, then I would have pursued it. But I just don't know if it's there. And if it is there, it's such a niche corner of the market, such a niche strategy that it's unless you happen to be a hyper-sophisticated trader, which I think is an oxymoron, you just don't lose too much sleep on it.

53:30I wish I had something better to say. I don't, though. By the way, ProMedicus, to three days ago, we recorded this early December, three trading days ago, They announced a contract for$30 million a year in revenue. The market cap increased by$2 billion. Here's my theory. Go on. It's very tightly held. Yeah. So there's not what – get a little bit arcane here. There's not much what they call free float. So we have a many million shares on issue. But if a lot of them are very tightly held by insiders and there's restrictions on them selling, there's just less available in the market to sell. And so you have a phenomena where you've got this really diehard – A, you've got a lot of shares that just aren't available for trade.

54:17The others are held by, like, religious zealots who have just done incredibly well for this thing, who love it and will not let go. You'd have to pry it out of their cold, dead hands. Are we talking about Bitcoin? Well, actually, yeah. That's a factor. Absolutely, it's a factor. Sorry, Matt, go on. No, no. No, it's actually, I know you're joking, but it's a good point. And, except that's perfect scarcity, but let's not go there.

54:49And then you've got all the FOMOs and the MOMOs, you know, and all the momentum and all this kind of stuff. And I feel as though it's just one of these things that's going to feed on itself until it stops. But I wouldn't be buying it now. But then again, hey, I said that at$100,$150,$200. so what do i know but again look coulda woulda shoulda yeah i've still done okay you know i there's a bunch of stuff i missed out on you know i don't know any wise tech i don't know you know name gun superstar stock that's 10x over the last year i didn't own it you know and it's cool you know you just just you make your peace with that all you can do is play the cards you've been dealt fight the best fight that you can know that if you can do anything that's you know better than the average, that's actually success and you've won.

55:41Yeah, I think that's the best you can hope for. Other than back to Kenny Rogers, the best you hope for is dying in your sleep, which is probably an appropriate way to finish the podcast. Yeah, look, I think here's the – when – let me take it. I'm trying to work out how far to go back on this one, how much of a long run-up to take. When you're investing, you mentioned earlier in the pod, Ram, that you're looking for something different. If you do whatever else it does, you get the same results as them. So whenever you look at a company, you're looking for businesses that are underappreciated by the market, that are cheaper than they deserve to be for whatever reason.

56:16Maybe short-term issues, maybe markets under forecasting or under realizing long-term growth potential, whatever it is. You're trying to find a company the market's getting wrong. By the way, short-sellers do the same in reverse. They pick the big companies I think markets are over-exuberant about. Prometicus, for example. But no, so that's the starting point for investing, right? And so, Jared, your question is right, which is, hey, what can we see? What can we find? Now, in my experience, the problem with any of these potential insights is you have to be right, but also no one else has to see them either.

56:54And a lot of these questions where they're really, really, really great questions, questions that others in the market are also asking. and that if there was a reasonably easy and reliable answer to, would it be factored into the price? Why did Sigma shares jump? Because nobody knew there was going to be a takeover with Chemist Warehouse, right? So, I mean, someone might have speculated about it and someone will claim they knew about it and forecasters do forecasts like that. But you get what I'm saying. So the problem broadly is no one knows and if it was knowable, everyone had already know it, it would be priced in.

57:24So either way, either it's not knowable and you can't know or it is knowable and everyone knows it. The bit in between, which is it's knowable, but you're the only one or one of the few who know it, that's a really, really small sliver, right? Possible. Go on, Ryan. Possible. Well, but yes, but not very common enough. Again, like I say, you can throw a brick at a window and it could bounce off, right? Yes. It's possible. Exactly. So, yes. And the reason I say that is because it's a big investing takeaway, hopefully, which is I come back to the broader thing about what are we trying to find as investors?

57:59What do we think our edge is? How can we earn returns that are better than the market? And it comes down to a few things. One is potentially an informational advantage. And I'm also adding inside information to be very clear. Ram does a great job with some of the companies he's mentioned before. Ava Risk Group you mentioned a few times, mate. And that's one where you kind of – you just went, hey, there's a thing here. And the market seems to be missing it. The market's still missing it just between you and me. And so I'm looking at this going – Or I am. And that's always the question. that every time you see an opportunity, you're like, well, either they're wrong or I am.

58:32So you want to be really careful. But you've seen something like, you know what? I think the market's missed this and that's great. For most companies that are large enough for enough people to be looking at and covering, it's very unlikely. It's not like Woolies are going to, you know, you can see something in Woolworths that no one else can see. Yeah. What you can potentially do is, and so one is the informational advantage, just the literal shoe leather to use the old fashioned phrase, just do the work and dig and dig until you find something like Ram's done with Ava. The other option for most of us, and I think this is even true of Ram, but certainly across most individual investors, private investors, retail investors, dare I say, Ram, is the time horizon.

59:11Generally speaking, most – I'm going to go on a limb here, mate, just making random assertions. I would suspect most of an individual investor's outperformance over the length of their investing career is going to come from having a longer time horizon than other people. And we talked about that with Amazon. We talked about that with the stocks that we were talking about earlier, Ordinate and corporate travel and ResMed and whatever. The ability to kind of go, I will see this through. A fund manager's got to sell after six or 12 months because they need short-term performance to keep the funds under management around.

59:38So they've got to try and play funny. But it's a very hard thing to do. I don't envy them. I mean, I don't envy their pay packets. But you're trying to outguess the market over short periods of time. It's kind of madness, right? But if you're an investor, and I was going to say a long-term investor, that should be the same thing. if you're a genuine investor who has a long-term horizon, then you're saying, well, actually, do I think corporate travel grows at home in shares, grows over the next five years? Do I think Amazon does well? Do I think Woolworths is going to keep growing faster over a long enough period of time and the market is either missing that long-term growth or as I said before, under or overestimating the short-term issues and missing the bigger story?

1:00:12And so that, I think that is the opportunity, combination of temperament and time horizon is the answer, which is a long answer, Jared, to say that, no, I don't think we can find those opportunities or at least whatever speculation is already in the market or able to be made is already being made by others as well and so almost by definition um the odds of you being a better guesser than than the other people is really what we're talking about here and if you think you have a well you ask us i don't have the ability nor the confidence to believe i'm better at guessing from publicly available information who's going to be taken over and who's not so just don't play that game um if you think you are that person if you can do it well good luck to you um you know i don't mean that pejorative I mean, genuinely, if you can't have a go, go for it.

1:00:52But I don't know of anything we can find or know that gives us an informational advantage when it comes to potential takeovers. And by the way, if you know something that no one else knows because you've found out from insiders and you trade on that, you can expect to get a knock on the door and maybe spend some time at Her Majesty's Pleasure or His Majesty's Pleasure these days. So be careful what you wish for. Ram? Sorry, coughing attack. Oh, sorry, Matt. I was on mute. So what's the saying, quote, you know, the man who can do the ordinary when all else are losing their heads? Yes, yes, yes.

1:01:28Ah, it's somewhere great. Bit of Rudyard Kipling there? If you can keep your head when all about you are losing theirs and blaming it on you. You know, the weird thing is we only just – I reached down and grasped that a few weeks ago and couldn't find it and I've just done it again. But I think that's the edge that's in front of you. It totally is. That no one wants to hear. in the sense that you feel as though an edge must be something that's unfair. Like, you know, it's just like I'm just closer to the source of information or I've got more IQ points or I've got a better software. Yeah, maybe.

1:02:00Honestly, it's really just it's the person who can just do that thing. You know, the world has decided that obesity was cured because of Ozempic. Exactly. That's true. Yeah. Right? And one of the best performing companies on the ASX just fell off a cliff. Mm-hmm. Now, maybe that way. And it's recovered, by the way. Of course. Of course it's recovered. Jesus. Do you know? And by the way, before you go, oh, you must have made a fortune on that, Andrew. No, I didn't do anything with it at all. I just thought it was more, you know. But again. Can I humblebrag and say we did recommend it to a member about that time?

1:02:39Yeah. So I only just, yeah. I didn't bite myself either, by the way. I'm going to need it as well, but our members have made a bit of money out of it. But how easy does this, and how easy and how obvious does it sound in hindsight? Yeah. Incredible cash generating company, cash generating company. It's been around for a long time. Yeah. Huge track record, huge market share, massive tailwinds, growing industry, blah, blah, blah, blah, blah, blah, blah. Now, I don't want to pretend that this thing wasn't a threat. Yeah. Absolutely, right? But to assume it was existential on day one of this thing being released.

1:03:12And that was the most likely outcome too, by the way. Not that it might be, but that was the most likely outcome when we were going to price it accordingly. It might still happen. Yes, exactly. Maybe. Actually, although I've been reading some stuff recently. Who would have thunk? Life just ain't that easy, right? Yeah, the magic pill doesn't work. There are some side effects. And not to make this about ResMed, but this kind of thing happens all the time. And it's just a great illustration of the person who can do the ordinary when all else are losing their heads, which is something, hang on. What's wrong with this picture?

1:03:46Same thing when Cochlear had their product recall, you know, same thing when, uh, that's not a good example, cause I don't like them, uh, the current price anyway, but you know, when, when Woolies was getting a bit of ire from, from supposedly causing inflation, I can't even say with a straight face, and shares had a bit of a knockdown that day. It's just a matter of can you think independently and rationally and beyond the immediate and then do it even though at the time and for potentially many months afterwards, you're going to look like an idiot. That's a superpower. You're unstoppable. You're still going to make mistakes and get it wrong and things that seemed obvious to you and maybe…

1:04:29Yeah, totally. Yeah, obviously. You start talking like this and it supposes that, oh, well, I am so calm. I'm so calm and I'm so rational and I saw it all and I knew the future. I'm 100 % not saying that. But you would be surprised or maybe not how often these kinds of things sort of come along and you go, what's wrong with this picture? And if you ever find yourself in that scenario, it's like, it's your subconscious telling you something. It's like, maybe just keep picking at that a little bit there. Maybe there is something to be said there. Maybe all the lemmings running off the cliff are not, you know, it's a little counterproductive and you don't have to run that way.

1:05:10Yeah, you know. Leave you with a quote, mate. John D. Rockefeller. The secret of success is to do the common thing uncommonly well. Oh, I love that. And that's, I honestly think that's, we're going to finish up. I think that's honestly, if Buffett and Munger have taught us anything, it's just keep it simple and do the right thing over and over again. Don't step outside your lane, stay in the holy circle of competence. Just do the common thing on a common level. Again, I've said it many times, the Amazon thing or the Vanguard thing where I say, Vanguard charts up 13 times in 30 years, and people say to me, well, who would have stuck around for 30 years?

1:05:42I'm like, that's the point. That is literally what you're saying to me, but who would have done that? It's like, right, but if you had have, that's the lesson. That is the change in behaviour I'm asking you to make. That's the very common thing. If doing an economy was just hanging around, that's, can I say, I mean, it's about mailing it in. As investors, even picking stocks, buying ETFs, buying quality businesses, stay invested. It just shouldn't be that hard. Oh, man. Yeah, I was trying to find another thing that, quote that sort of, what was it? Something like, the secret to becoming successful is not being a super genius.

1:06:13It's just being able to recognize genius and get on their side early on before everyone else recognizes it. Oh, that's nice. Which is a little bit not related, but also kind of, again, it's that idea of you don't need to be a brainiac with 200 IQ points to do well. It's really just the uncommon thing done well. Sorry, the common thing done uncommonly. Yeah. I tweeted my investment ethos this week, and I can't find the exact tweet, and I wrote it better. If I had to boil down investment system in three words, Aesop was right. Yeah. Yeah. Honestly, like, don't... Is that it? Yes, that's literally...

1:06:52That is literally entirely, completely and totally it. Yeah, yeah. All right. I reckon we're done here. Mate, will you come back on Friday and chat again? Yeah. You know, I mean, you know I will. I go through the theatre every time because it's just fun. I can't think of a better way to finish the podcast. I'll go with that one. I'll go with something different. Maybe I'll get you to tell me a joke or sing me a song or something. No, no, no. Actually, now that you say that, I'm very good with the current question. listen on Friday and see whether Andrew does finish with a song or whether I just repeat the stuff I always say.

1:07:22Until we do that, until I hold you in suspenders, have a great week and full on. Have a good one. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.