SHARED WIS­DOM

IN­VEST­MENT CLUB TEAM­IN­VEST RE­LIES ON A COM­BI­NA­TION OF EX­PE­RI­ENCE AND ANAL­Y­SIS – AND A LIT­TLE HELP FROM WAR­REN BUF­FETT.

The Australian - The Deal - - Extra -

TEAM­IN­VEST CO-FOUNDER JOHN PRICE was head of the math­e­mat­ics depart­ment at a univer­sity in Iowa in the 1990s when he was given a copy of Roger Lowen­stein’s Buf­fett: TheMaking of an Amer­i­can Cap­i­tal­ist.

The Melbourne-born Price, who be­gan in­vest­ing in shares at the age of 14, de­voured the book and soon be­come a fan of War­ren Buf­fett, the bil­lion­aire value in­vestor who fo­cuses on sen­si­bly run com­pa­nies with low debt lev­els and pre­dictable long-term earn­ings.

“I felt that my back­ground as a re­search math­e­ma­ti­cian, com­puter pro­gram­mer, ed­u­ca­tor and writer came to­gether,” says Price, who has a Mas­ter of Science from the Univer­sity of Melbourne and a PhDin pure math­e­mat­ics fromthe Aus­tralian National Univer­sity. “I read ev­ery­thing I could get my hands on by and about Buf­fett. He be­came my re­search pro­ject.”

Price made the trip to Omaha in neigh­bour­ing Ne­braska to at­tend an an­nual meet­ing of Buf­fett’s com­pany, Berk­shire Hath­away, and grew even more en­thu­si­as­tic about Buf­fett’s ap­proach. “De­spite the fact that there were about 14,000 at­ten­dees, I had the feel­ing he was talk­ing to his fam­ily. His good hu­mour, com­mon sense and in­tegrity sup­ported his wise words on in­vest­ing in the stock­mar­ket.”

Price re­turned to Aus­tralia in 1999 and took up a post at the Univer­sity of NSW, where he over­saw a dou­ble-de­gree pro­gram in fi­nance and math­e­mat­ics and de­vel­oped a com­puter model to an­a­lyse shares based on Buf­fett’s in­vest­ment prin­ci­ples.

In 2008, hemet Syd­ney­based busi­ness­men Howard Cole­man andMark More­land, who had been hold­ing reg­u­lar cof­fee meet­ings with friends to dis­cuss share in­vest­ments. Price’s model could pro­vide a fi­nan­cial anal­y­sis of tar­get com­pa­nies, but he knew it needed an over­lay of ex­pe­ri­enced busi­ness skills to pass judg­ment on the qual­ity of boards and man­age­ment and to as­sess po­ten­tial risks. So the trio founded Team in­vest. The group opened to out­side mem­bers in 2009 and now in­cludes 425 high net­worth in­di­vid­u­als. Mostly aged over 55, mem­bers want to man­age their own money, rather than leave it with fund­man­agers or out­side ad­vis­ers, and they meet once amonth to dis­cuss in­vest­ing in spe­cific com­pa­nies. “Our mem­bers like to con­trol their money well, rather than pay oth­ers to do it badly for them,” Cole­man says.

Each mem­ber is ex­pected to con­trib­ute to the dis­cus­sion, al­low­ing the group to pool ex­per­tise. Cole­man says many mem­bers have run their own busi­nesses or been se­nior ex­ec­u­tives, and so have far more hands-on busi­ness ex­pe­ri­ence than the an­a­lysts em­ployed by stock­bro­kers and in­vest­ment banks.

“Our mem­bers have a lot of wis­dom. Their big­gest strength is prob­a­bly an un­der­stand­ing of what drives the suc­cess of a par­tic­u­lar busi­ness and how it ac­tu­ally makes money.”

While the Price model is the first fil­ter for iden­ti­fy­ing po­ten­tial in­vest­ments, the group as­sesses a com­pany’s out­look in terms of 16 risk cat­e­gories. As with Buf­fett, the Team in­vest ap­proach re­gards a trust­wor­thy man­age­ment as a core re­quire­ment.

While the group is an in­vest­ment club, it is up to the mem­bers to in­vest their own funds. “We do not touch any­one’s money,” Cole­man says.

Team in­vest prefers com­pa­nies with a 10-year record of solid earn­ings, but will con­sider com­pa­nies that have been listed for at least five years. Wool­worths and CSL have re­ceived the tick of ap­proval in the past. It ex­cludes in­vest­ment in start-ups, shoot­ing stars or com­pa­nies with chief ex­ec­u­tives who splash money around on risky takeovers.

How­ever, mem­ber­ship is not cheap – a join­ing fee of $8900 gives ac­cess to Price’s soft­ware and a monthly fee of $599 pro­vides en­try to the dis­cus­sions and ac­cess to re­ports on com­pa­nies.

Cole­man says mem­ber­ship is still grow­ing, but will be capped at 500. Many mem­bers have al­ready at­tended one of Buf­fett’s an­nual meet­ings and about 30 plan to be in Omaha next May.

the deal will use Price’s model and Team in­vest fil­ters to help as­sess com­pa­nies for its an­nual CEOof the Year award, an­nounced in the next is­sue.

Co-founders John Price (left) and Howard Cole­man ex­am­ine in­vest­ments through the prism of 16 cat­e­gories of risk.

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