Meet the Expert

Tim du Toit, the founder and editor of Eurosharelab, was born in South Africa in 1967.

When he started investing in 1987 he made nearly every investment mistake you can think of until he realised that investing was not a recent human activity and that there must be some good research and books about what has worked in investing. Not in the short term but over long periods of time in up and down markets.

So for over the next 30 years he did exactly that. Reading and studying every article, research paper and book he could find to help him improve his investment performance.

Something he still does.

In between his investment activities Tim completed a Bachelor of Commerce (cum laude) and Honours degree in financial management from the University of Pretoria in South Africa. And an MBA degree in finance and strategic management at Indiana University in the USA in 1995 where he graduated in the top 10% of his class.

Tim lives in Hamburg a city he says is the most beautiful (and unknown) city in Germany.

Tim’s Investment Journey in his own words:

1986

The year after I completed school I enrolled in a stock market correspondent course called Compushare.

1987

I invested my hard earned savings in an XT computer and a technical analysis program. Prices were downloaded after the market closed with a dial up modem. I also got to know Lotus 123 and spread sheets – one of the loves of my life.

1988

I pooled my limited funds with money from my father and started to apply my investment ideas in the real world.

1989

I lost a substantial part of the portfolio using technical analysis to purchase gold shares. This taught me two important lessons. One, be very careful of companies that have no control over the price of their products and secondly, technical analysis was not the Holy Grail I thought it was.

1990

In my quest to learn as much about what has worked in investing as possible I bought a book called ?Winning on the JSE? by Karl Posel an engineer and former Professor of Applied Mathematics. This book was my introduction to value investing. The book broke investing down into a logical process with the following steps:

If an investor does not know what he is doing then the stock exchange is no place to be
Purchase only after the announcement of interim or final results
Buy only where interim or final results indicate increased earnings per share and/or dividend per share
Only purchase shares where the calculated value is more than the market price using sector price earnings ratios and earnings per share
Realize that the price of a share can behave illogically and have the courage of your convictions to realise that logic will once again return to the market.
Do not purchase a company’s shares if its long term loans are more than 20% of its share capital and reserves
Do not purchase shares of a company where its pre-tax return on capital employed is less than 15%
Do not purchase shares that have a weekly trading volume of less than 20,000
Have some knowledge of the company concerned. Satisfy yourself about its history, track record and modus operandi. Read Managing Director’s and Chairman’s reports

When to sell

When the price earnings ratio or net asset value exceeds the sector price earnings ratio or share price is higher than its net asset value

The book made immediate sense to me giving me a framework that can be applied to my investment process. It also motivated me to study other successful investors and research studies that showed long term successful results over long periods of time.

1991

I completed my Bachelor of Commerce degree specialising in financial management.

1992

I completed my Bachelor of Commerce Honours degree. At this time I made up my mind that I want to complete an MBA in the USA. I thus needed a fourth year of study to get accepted at US universities.

1993 ? 1995

I completed MBA studies at Indiana University in the USA. I had limited investment activity in this time because of the work load and I needed all my saved funds to pay for my studies. All the hard work paid off as I graduated in the top 10% of the class. During my studies a friend (thanks Tom) explained the idea of contrarian investing. It fitted well with my existing investment framework. During this time I was also greatly influenced by “The Intelligent Investor? a book by Benjamin Graham. This book brought it all together for me.

Investing is buying a part of a business
The market is there to serve you
Buy when your downside is limited through a margin of safety i.e. the calculated value of the company is substantially more than the current price

1995 ? 2000

Back in South Africa I interviewed for positions with a large South African Bank and Templeton Investments. I accepted the offer from the bank. To this day I still wonder why as I am sure Templeton would have been the best choice for increasing my investment knowledge. I was eager to get back into active investing and immediately started saving as much as I could to build capital and I opened a brokerage account. My investments were focused on identifying undervalued companies. I made a lot of money by investing in undervalued conglomerates and investment companies. I daily scanned the list of the biggest losers, 52-week low prices, lowest PE and highest dividend yield companies to find investment ideas to research further.

2000 ? 2001

Having worked in various positions in international banking I thought it was time to make a change and accepted a position with Citibank in South Africa in strategic planning. Again I spent evenings and weekends researching companies and continued saving and investing. Using the same value-based investment strategy my investment capital grew slowly but surely.

2001 ? Today

At the end of 2001 a previous manager of mine returned to Germany and asked if I wanted to come and work with him again. So without having seen Germany and without speaking a word of German I decided to go.

I thought that for one year I could stand anything and it would be a great experience. So I sold everything and moved to Germany with only about 10 cardboard boxes. I also sold all my South African investments and transferred all my funds to Germany. Slowly, as I learned more about the markets in Europe I started to build an international portfolio. Again focusing only on under-valued companies. South Africa had capital controls which severely limited the amount of international investments a South African investor can make. After my move to Germany my investment universe broadened from about 700 to over 60,000 companies worldwide.

As I have said before. To this day I read everything I can find that has shown market beating returns over the long term. And with this news knowledge I keep on improving my investment process.