Written by William McInnes, Australian Financial Review
As the son of one of the legends of Australian value investing, it may have seemed inevitable that Dougal Maple-Brown would become a fund manager at the boutique his father, Robert, founded.
But despite both he and his brother holding senior roles at Maple-Brown Abbott, he says it wasn’t always the plan.
“I never wanted to go into the family business and work for Dad,” Maple-Brown says.
“He never put any pressure on us to do it and, in fact, it was the opposite – he wanted us to do our own things first, and I’m really pleased I did. I was basically 30 by the time I got here.”
Despite pursuing a different path early in his career, it seems almost inevitable in hindsight that Maple-Brown was always destined to follow in his father’s footsteps.
“Probably one of my earliest memories was down the coast with the family, and we used to get the newspapers once a week and we would test him with the stock prices,” he says.
“How the hell he knew what the stock prices were a week into the holiday, I don’t know, but it was good fun and we used to squeal with delight when he got the prices right.”
Maple-Brown studied law and economics at the University of Sydney and initially pursued a career in law before switching to investment banking in the late 1990s.
Being able to look around and seeing that process has worked through decades that gives us confidence, and gives us the reward when the market turns. — Dougal Maple-Brown
“It was good fun, but the way I describe it is that it was basically half valuation, which is what I liked, and then half being basically a glorified real estate agent,” he says.
“The hours were crazy. It was any time of day or night, Monday to Sunday and you’re on call always.
“I remember having dinner with the family one Saturday night and I got a call to go into the office at 8pm that night, and I remember Dad saying: ‘What the hell are you doing?’
“That made me realise how ridiculous it was.”
Maple-Brown joined his father’s firm in 2001, starting from the bottom as an industrial analyst, before becoming a portfolio manager in 2005. He became the head of Australian equities in 2009, a position he still holds today.
Doing it tough in value
As a value manager, the past decade hasn’t been easy for Maple-Brown.
“Nine of the last 10 years have been pretty horrible,” he says.
“But looking back, when value’s turned, we’ve been close to the top and sticking to our process through thick and thin is what sets us apart.
“To me, the herbs and spices is sticking to your process, particularly in the hard times.”
The Maple-Brown Abbott Australian Equity Trust has underperformed its benchmark, the S&P/ASX 300 Index, over the past five years.
However, in the 2020-21 financial year, the fund returned 31.3 per cent, beating its benchmark, which returned 28.5 per cent.
“You wouldn’t be human if you didn’t doubt yourself sometimes, and we ask ourselves a lot of questions on a stock-by-stock basis, thinking where could we be wrong. We query our investment decisions all the time,” Maple-Brown says.
“But we’ve been doing this for close to 40 years now and there’s been at least four decent shakeouts in this time.
“So there’s challenges through every cycle, but it’s being able to look around and seeing that process has worked through decades that gives us confidence, and gives us the reward when the market turns.”
Don’t buy Fairfax
His father’s influence has persisted, even after his death.
At his father’s funeral, Maple-Brown highlighted his father’s unwavering passion for stocks, saying his father was still talking shop just a week before his death.
“Whatever you do, don’t buy any more Fairfax,” the elder Maple-Brown had told his son at the time.
“We only bought more when it became Nine Entertainment,” the younger Maple-Brown says.
“Nine has done really well and we’re still shareholders today. Most of that value has been created by Stan, the streaming business, but publishing has definitely stopped the bleeding.”
Nine Entertainment is the owner of The Australian Financial Review.
Getting the rewards
In the past 12 months, there have been several good calls that paid off for the fund.
“Coca-Cola Amatil was a good example of a stock we’ve done really well out of,” Maple-Brown says.
“This was a reasonable quality company that stubbed its toe, got marked down, and that presented the value opportunity.
“Ultimately, it got taken out by the European bottler and that’s been a much better investment decision than taking a swing on a leveraged cyclical like BlueScope.
“We also bought Boral last year at $2 and last week it was at $7.40.”
A big bet on the banks when they were close to their lowest point last year also paid off for the fund.
“We’d been underweight on the banks for a few years going into last year and we went overweight on the sector as a whole about the third quarter last year.
The three cheaper ones – ANZ, NAB and Westpac – were all trading at a discount to net tangible assets.
“There was a lot of bad news in the price, and that’s the kind of opportunity we like. Of course we could see the issues but there was a lot in the price for that. Some of those stocks have almost doubled.”
Maple-Brown says the fund has been overweight on the miners for several years as well, taking up a big position in 2016 when many of the major miners were absolutely hated.
“They're the contrarian opportunities we like,” he says.
“Most of the money we’ve made has been those reasonable quality companies we think have been rerated too much and oversold.”
But there have been some painful moments for Maple-Brown over the past few years.
“One of our worst calls was AMP, and we watched as it went from $4 to $2 and lost half the clients’ capital,” he says.
“You can say we sold well because it’s now gone to $1, but it doesn’t take away from the fact that we destroyed half the clients’ capital before that.
“The hardest call, I find, is to sell a loser. Selling a winner is easy – you’re a hero and there’s back-slapping. But selling a loser is by far the hardest decision in investments.”
The fund has also done well out of Harvey Norman in the past 12 months. Maple-Brown says visiting the retailer’s corporate offices was one of his most memorable experiences as a fund manager.
“Harvey Norman regularly features as the absolutely worst governed company in the top 100. We can debate whether that’s the case or not, but that’s how the market treats it,” he says.
“A few years ago, just after the GFC (global financial crisis), we had our first meeting with them and Gerry [Harvey] treats institutional investors like jokers, like paper shufflers.
“They agreed to a meeting, and they set it at 5pm on a Friday night and they set it at their offices. I think they thought we wouldn’t go.”
Maple-Brown says instead of taking a cab that could take close to an hour, they took the train.
“Their office is in Homebush (in Sydney). So we got the train to Flemington at 4.45pm on a Friday night and got to the industrial park, after going under an overpass and ended up in this business park, trying to find their office.
“We went up a fire escape into a tiny lobby and then into a lift which could only fit two people. It is the worst corporate office I’ve ever seen.
“It left an impression. They run on an absolute shoestring and you almost have to see it to believe it.
“You see some absolute palaces on Collins Street elsewhere, and Harvey Norman couldn’t look anything like it.”
Reproduced under licence.