As we broaden out the expert teams partnering with Montgomery, I take the opportunity to talk with Sean Sequeria the Chief Investment Officer and Portfolio Manager from Australian Eagle Asset Management. I lift the lid and see what makes the people behind the process, the blog posts and the numbers tick.
Profile: Sean Sequeira (Australian Eagle Asset Management)
What initially drew you into funds management?
I started working in financial markets in 1991 in the trading room of Citibank. I was very young and was drawn by the excitement and energy of the dealing room with traders yelling and screaming orders and prices. After working in that highly charged environment for a number of years, I realised that I preferred the greater level of understanding and insight that drives the longer-term nature of investing versus very short-term nature of trading.
After meeting Albert Hung at Tower Asset Management, I was lucky to be guided through the complexity and critical thought processes needed to be an effective portfolio manager. Funds management requires deeper levels of thought while also remaining within the excitement of the financial markets.
What makes a successful investor?
I believe that a successful investor must remain disciplined to their process. Investing requires a longer-term view and the ability to look through the noise and emotions of short term volatility that can disrupt the processing of important information.
With the advances of the internet, there is an extreme excess of information available to all investors now, and the trick is not to be the one with the most information but to be the one who knows what information to discard at the correct time.
Finally and most importantly, you have to remain humble and know that you are learning everyday. The minute you believe that you are somehow better than everyone else or know more than the market, the market will school you on how that is not the case.
What is the best piece of advice you have been given?
From my perspective, the best pieces of advice are ones that can be applied to all aspects of life. One of my key mentors has always reminded me to maintain focus upon best execution of a proven process and the results will take care of themselves. I think that this applies to life’s goals as well as investment. Do the correct things while striving for a level of excellence and the results will eventually come, but not without a level of volatility.
What is the biggest mistake that most investors make?
Not understanding the reason that you have taken a position in a company. Understanding why you have taken a position in a stock allows a clear justification as to why you will sell the position. If you do not have this clear reasoning then you can easily watch a stock go up and then give up all of your gains when things have changed and you won’t know what has happened.
Tell me about one of the best investments you have made on behalf of your funds?
One of the most satisfying investments we have made for clients also happens to be one of the most beneficial financially.
In 2015, we noticed that Fortescue was changing significantly. Their management of the difficult situation they found themselves in resulted in the improvement of the overall quality and risk profile of the business. In January of 2016, their production report highlighted a cash cost below that of BHP and a continued priority to pay down debt. Despite the extremely low prevailing iron ore prices, Fortescue’s improved cost structure meant that they could pay off their debt in well under 4 years and the danger of the company going under had already passed. As no one could have forecast the subsequent change in iron ore prices, the investment decision was not based upon a favorable iron ore forecast but rather a change in the business that reduced risk and allowed for the opportunity of significant upside should the pricing environment change.
The satisfaction comes more from the fact that when we told people of this at the time, not one person agreed with us. Since that time to now, the stock went from a price below $1.60 to a high above $25.00 and has paid over $9.00 in fully franked dividends.
If you weren’t the CIO and PM at a boutique funds management firm, what would you most likely be doing?
I think I would be doing something in the science or engineering field. When not reading about markets, I tend to be reading scientific articles and even journals across multiple disciplines.
So Sean, can you please share with our readers what you are working on at this minute and why?
Catching up on reviewing quite a number of companies that recently reported their financial results. The reporting season provides a wealth of information on how companies are managing the current environment. We like to have a good breadth of information across as many quality companies as we can to find signals of change.
What do you do in your spare time?
I am usually spending time with my family or training. I have done a high intensity martial arts class 3 to 4 times a week for many years. It requires a high level of commitment but I have an extremely understanding family.