Tim du Toit

I was born in South Africa in 1967. Since 1986 I have been active in investing and experimenting with various investment strategies.

Through studying the results of long term investment studies I have come to the conclusion that a cheap (also known as value) and contrarian investing approach is the most profitable. I continue to study and expand my knowledge of these two investment approaches.

I am employed in the banking and fund management industry. I write for EuroShareLab in my personal capacity with approval of my employer. The views expressed are not necessarily those of my employer and I have taken organisational precautions in accordance with statutory and supervisory regulations to prevent a conflict of interest regarding my writings. My employer has full access to all my analyses.

I hold a Bachelor of Commerce (cum laude) and Honours degree in financial management from the University of Pretoria in South Africa. My MBA (Finance) degree was completed at Indiana University in the USA in 1995 where I graduated in the top ten percent of the class.

I live in Hamburg one of the most beautiful (and relatively unknown) cities in Germany.

My Investment Journey

1986

The year after I completed school I enrolled in a stock market correspondent course called Compushare while completing my national service in South Africa.

1987

I invested my hard earned savings in an XT computer and a technical analysis program. Prices were downloaded after the market closed through a modem. Also got to know Lotus 123 which introduced me to spreadsheets - one of the loves of my life.

1988

I pooled my limited funds with an investment 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 their products and secondly, technical analysis was not the holy grail I though it was.

1990

In my continued quest to learn as much about investing as possible I purchased 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 an 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. I have since used and expanded this framework to develop my own unique investment approach.

1991

I completed my Bachelor of Commerce degree specialising in financial management. I started my first year studying to become an accountant but the first auditing class convinced me that it was not for me and I changed to 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, thus needing a fourth year of study to gain access to the USA 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 explained the idea of contrarian investing. It fitted well with my existing investment framework.

During this time I was greatly influenced by "The Intellegent Investor” a book by Benjanin Graham. This book brought it all together for me.

• Investing is the 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 is substantially more than the current price
  

1995 – 2000

Back in South Africa I interviewed for positions with Absa Bank a large South African Bank and Templeton Investments. I accepted the offer from the Absa.

I was eager to get back into active investing and immediately started saving as much as I could to build capital. I then opened a brokerage account.

My investments were focused only on identifying undervalued companies. I made a lot of money by investing in undervalued conglomerates and investment companies. Daily I scanned the list of the biggest losers, 52-week low prices, lowest PE shares and highest dividend yield companies to find investment targets.

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 at Absa Bank returned to Germany and asked if I wanted to come and work with him again. So without having seen Germany and without speaking the language I decided to go. I thought that for one year I could stand anything and it would be a worthwhile experience. I sold everything and moved to Germany with 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, started re-building my portfolio, again focusing on under-valued companies throughout the world.

South Africa has capital controls which limits 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.

My research into various investment approaches, what has worked in investing and investment research studies by academics and practitioners is on-going. This allows me to continuously refine and improve my investment approach.