Reduce Equities & Cash-Up! 

Recently BridgePoint Group hosted a select few clients for an interactive and informative session with one of Australia’s most knowledgeable and experienced equities analysts, Peter Leodaritsis. 

As with all BridgePoint Group events, the event was short, sharp and provided plenty of questions and interactions between everyone in attendance. Here are some highlights from the event.

(Please note if you would like to attend the next event, please send an email to info@bridgepointgroup.com.au and mention “events” in the subject line. We look forward to seeing you there.)  

Here are some of Peter’s insights and lessons from that session: 

Hard Work Leads to Success

“I worked in Dad’s fish-n-chip shop in Canberra from an early age. It was the greatest lesson in life. Hard work is the key factor in getting success, no matter where your journey starts. When you’re dealing with food you become aware of what people like and dislike regarding their food. It can be particularly difficult but importantly I learnt how to deal with people.”

More than the Numbers

“After finishing university, I moved to Sydney and started at Westpac before moving to Group Strategy at Advance Bank as an analyst. In preparing a bid to buy out a WA based Building Society, I learnt another great lesson in life. In presenting my evaluation of the business to the then CEO of Advance Bank, he immediately knocked 15% off the value, citing that the mortgage values presented may not be 100% accurate. He also asked that the figures be presented with three decimal places so it looks like it has been scientifically derived. That was the call of an experienced CEO. The lesson I learnt was it’s not always about the technicalities and analysis. There’s a lot more that goes into making good business decisions.” 

Back Yourself Despite the Odds

“You need to back yourself though. I’d made an assessment of one of Australia’s major banks. It flew in the face of the then market interpretation of the bank. The CEO of that bank was fuming and developed a vendetta against me. However, my assessment prompted the bank to conduct their own self-assessment. It turned out their own assessment was 30% more damning than my assessment. The lesson I learnt was to back myself even in the face of adversity.”

Liar Liar 

“I also learned that people will lie to protect themselves. I had a CEO of a major bank advise that everything was trading ok on a Friday afternoon, only to have a profit warning announced mid-morning Monday. That left me fuming as I had advised clients that it was a safe bet. I learnt that people will lie, despite their standing in business.”  

Value Not Price

“With 34 years as a financial analyst I know equity markets very well. The key is to understand value. As Oscar Wilde famously said, “everyone knows the price of everything but the value of nothing.” You need to ask yourself, is there fundamental value there? 

A Generation Free of Hardship 

“The current Generation has never had hard times. Depression, world wars…they just think you buy property and you make money, you buy shares and make money and make money from bonds. With that comes the old adage “Strong men create good times. Good times create weak men. Weak men create bad times.” That’s been our environment over the last 20 years. People have been high on cash. People have short memories and we now have a whole generation that has never seen hard times and doesn’t like listening to bad news. The world is a very different palace to what it was 25 years ago but what’s scary is that it’s a very, very different world to what it was two years ago.” 

Bear With Me

“We’re at an inflection point and we’re facing a real bear market – up to a 50-80% fall in the equity market. Supply chain issues are having a major impact at this point of time. As a gatekeeper for people’s wealth for 34 years, I’m scared. We’re not talking about a 20% loss. We’re talking 50-80% loss in equities markets. 

A Reserve Bank First

“Let’s look at the Reserve Bank lifting interest rates in the middle of a Federal Election. How’s the timing? In living history there’s never been an interest rate rise in a Federal Election. That’s alarm bells sounding that something needed to happen urgently. The Reserve Bank has taken control and the suddenness of the rate increases means the Reserve Bank can pull back the interest rate lever in six months’ time if inflation is under control. 

Margin Contraction

However, inflation is already biting and driving up costs “The increasing costs will logically mean margin contraction. This means reduced profits for major corporations. People haven’t placed a ‘real’ value on the money that they have up until this point. They’ve been spending wildly and extravagantly. There’s been too much money sloshing around which is now why we’re at this point. It’s really a case of “the emperor has no clothes.”

As You Age, it’s About Capital Preservation

“The macro levers have been on full boar over the last 25 years. Now we are starting to crank them back again and take responsibility for our actions. It could lead to a significant and prolonged downturn. If you’re in your late 50’s, it’s all about capital preservation. There’s no visibility in the market. It could take a long time to come back. There’s more downside than upside at present. Selectively reduce your exposure in equity markets. Choose wisely because as you age, it’s about capital preservation.

“It isn’t time to run to the bunkers, but just think about where we are at. We’ve lived through a golden age and now it’s all about capital preservation.”  

If you would like to be invited to the next BridgePoint Group Event, please email info@bridgepointgroup.com.au

Disclaimer: this is not financial advice. It is the speaker’s opinion only and should not be taken as advice. If you would like professional advice, please reach out to BridgePoint Group directly.

Click here to read Peter’s Bio.

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