By James Thomson
David Paradice is one of Australia’s best stock pickers. He is also a triple cancer survivor.
In a revealing discussion for the Conversations with Future Generation podcast series, Paradice says his health battles have led the self-confessed stress-head to try to live a more balanced life, and accept that not everything is going to go his way.
“I feel it did make me focus a bit more. My mum calls me a bee in a bottle. I am quite a busy kind of guy,” Paradice explains.
“I have learned to try and get a much more balanced life. I love being with my family and I love being with my friends, and I love having a laugh, not taking life so seriously and not trying to make every single post a winner. Lose on some things and win on some things.
“But as long as I don’t beat myself up when I’m losing on one thing and as long as I’ve still got my health and my family and my friends and the business, then yes, life is not too bad.”
With an investment firm managing $17 billion, Paradice clearly hasn’t had too many losses on the business front at least. But like every investor, there are opportunities that got away, such as when he was offered a shareholding in Channel Ten many years ago.
“I didn’t have enough money to be able to do it or be able to share it with someone; I didn’t know anybody around at that point in time to be able to do that,” he says. “I think those guys ended up making 20 times their money or something like that, over a short period of time.”
Paradice’s three key investment criteria are simple: the quality of management, the strength of the business, and earnings and cash flow. He says what he most wants from management is a realistic vision and expectations, such that they can under-promise and over-deliver.
“It does come down to the company management and a company which has a guy at the helm who can see a vision, but it’s a realistic vision,” he says. “I’ve seen a lot of people come and see me and they’ve got these visions, but they’re just unrealistic, and that comes because management aren’t great at being able to pick out the vision and what can really happen. A lot of that is to do with lateral thinking and judging the tide of various economies.
“For example, Jeff Bezos many years ago decided that the internet was going to be a big thing for distribution and he’s built a massive business around that. That’s a vision. That was a realistic vision, and no one expected that thing to happen as it’s happened and he’s over-delivered, I’m sure.”
Paradice is full of praise for the way Australia has managed COVID-19 – “It’s such a pleasure to be able to feel that when you go anywhere, you’re safe. That’s creating economic stimulus and growth” – and argues cyclical value stocks are likely to provide a safe option for investors as economies rebound.
But he is wary of the strength in the Australian dollar given the strength of the iron ore price and the prospect – albeit distant – that a strong economic rebound will eventually put upward pressure on interest rates, particularly compared to the US, where Paradice argues the mishandling of the pandemic will require rates to remain accommodative for much longer.
The podcast also touches on Paradice’s leadership lessons (“I think we’ve done well in this business because at the end of the day, everybody wants to feel responsible that they’ve added value”), adopting his daughter (“It’s been one of the best things that we’ve ever done in our lives”) and his big regret (“I don’t like conflictual situations and I try to manage my way through those situations and probably kick things down the road a bit and stress out on those particular issues”).
But the best story involves meeting the Queen last year after winning a polo tournament against all expectations. As she presented Paradice with a sizeable trophy called the Queen’s Cup, she asked whether he was allowed to take it back to Australia.
“I said, ‘I don’t know, but I’m going to try and do it!’,” he said.
Paradice took it on the plane home as carry-on luggage and, unsurprisingly, security asked questions. That’s when Paradice pulled out his secret weapon: a polo magazine with a photo of his moment with the Queen on the front cover.
“The guy just goes, ‘Straight through, no problem, straight through’,” Paradice laughs.
You can listen to the latest episode of Conversations with Future Generation here.