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What Hargreave, Pidcock and Doran learned from their first ever investments

17 March 2014

FE Alpha Managers Giles Hargreave and Jason Pidcock and bond expert Kevin Doran recall the investments that got them started.

By Jenna Voigt,

Features Editor, FE Trustnet

When it comes to making your first investment, the majority of investors choose to try their hand at equities – individual companies whose shares are listed on the stock exchange – hoping they have found the vital bit of information that means a company’s fortunes must be on the up.

That’s exactly what FE Alpha Managers Giles Hargreave, Jason Pidcock and bond fund manager Kevin Doran did when they first started their investment careers.

Each of them learned very different lessons from their first experiences, which they’ve shared with FE Trustnet.


Giles Hargreave

Legendary smaller companies fund manager Giles Hargreave, whose flagship Marlborough Special Situations fund is one of the best performers in the IMA UK Smaller Companies sector over the last decade, says the lesson investors can take away from his first investment is not to lose your nerve when shares go down.

ALT_TAG A good example is Threadneedle’s Richard Colwell “The first shares I ever bought were Poseidon, an Australian mining share in the boom of 1969,” he said.

Hargreave says the stock had gone up an enormous amount, so he and a friend decided to buy in not long after he’d started his first job at broker James Capel.

“We bought it and then the shares went down on the first day after we bought it, about 10 per cent or something,” he said.

Hargreave said his friend didn’t have a huge amount of capital to play with and lost his nerve, so they sold out of the stock, which ended up bouncing back.

“Almost as soon as we sold it, the stock virtually doubled,” he said. “We were very young.”

However, Poseidon would have been a volatile investment even if Hargreave had held on. After it made a large nickel discovery in the 1960s, when demand for the metal was high as a result of the Vietnam war, Poseidon’s discovery sent its share prices soaring, up from $0.80 to a speculative $382 per share within the year.

However, by the time the mining company actually started producing nickel, the price had fallen and the ore was not of as high a grade as expected.

Profits were not enough to keep the company running and it delisted in 1976. Operations were taken over by Western Mining.


Jason Pidcock

FE Alpha Manager Jason Pidcock, who runs the five FE Crown rated Newton Asian Income fund, says he knew he wanted to be a professional investor early on, and picked up his first shares at a mere 13 years old.

“The first shares I bought were British Telecom, now BT,” he said. “The company was privatized and the IPO happened on 20 November 1984 – nearly 30 years ago! I was 13 years old.”

“I bought them because they seemed good value and it appeared the government wanted the deal to be a success – i.e. for investors to make money from it.”

“The telecom sector was much different back then and BT had a virtual monopoly – it seemed like it should offer good growth – faster than overall GDP growth, which was picking up well by then after the recession of the early ‘80s.”

“As a 13 year old, that was about all I needed to know… luckily it worked out well,” he added.

BT is now one of the largest companies in the UK and its growth has continued as the firm has been expanding its broadband business.


Performance of stock versus index over 1 yr
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Source: FE Analytics

Over the last 12 months, BT stock is up 43.85 per cent while the FTSE 100 has gained 3.77 per cent.


Kevin Doran

Even bond fund manager Kevin Doran, who runs the Brown Shipley Sterling Bond fund, started out taking a punt in equities, which he says taught him some valuable lessons for his career.

“My first investment was Photo-Me International back in 1998 when politicians started discussing the need for kids to have their own passports,” he said.

“Having a young daughter of my own at the time, it seemed clear that there would be a surge in demand for passport-style photographs and on the side of just about every photo-booth I came across was the Photo-Me logo.”

“I bought at just under 40p and exited - thinking myself very clever - at 100p about a year later. Little was I to know, they would get caught up in the Internet bubble and go on to reach almost 400p by the end of 1999!”

However, Photo-Me’s meteoric rise was short lived. The stock plummeted in the early 2000s as the dotcom bubble burst.

It has slowly appreciated in recent years and if Doran had held onto the stock since 1998, he would have made 576.91 per cent, according to FE Analytics.

Performance of stock since 1998
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Source: FE Analytics

Doran says the experience taught him three key lessons which he’s been able to carry into his career as a bond fund manager.

You make (and lose) the big amounts of money when the situation changes significantly. Trade the change, not the noise.

Equity investors always overpay for growth by extrapolating the trend far too long into the future.

When things change, think about the second and third round effects.


Doran admits his investment in Photo-Me was down to good timing more than fundamental analysis at this time, something that fortunately worked in his favour.

However, he says that luck isn’t likely to hold out for any investor who doesn’t take the time to understand what they’re buying.

“These days, I’d have probably missed the first 10p of that trade by spending a week or so analysing the business and building a valuation model, but that discipline has also helped me avoid some of the banana skins along the way as well,” he said.

Looking back, Doran says the biggest situation that caught him out was Anglo Irish Bank, which defaulted in the Irish banking crisis after 2008 and went into wind-down mode after it was nationalized in 2009.

“As for what I wished I knew at the time, that’s got to be the Anglo Irish Bank experience which remains the one and only default I’ve suffered in 12 and a half years of managing the Sterling Bond fund,” he said.

“The lesson there would have to be don’t be so trusting when faced with charismatic management, though I take some solace in the fact that the senior team at Anglo are all facing criminal charges for their actions. Maybe there is some justice in the world after all.”

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