Charting success: how to think like a pro investor - Michael Gable, Founder, Fairmont Equities

Well, hello and welcome to the diary of a successful investor. And when I talk about investors, I'm not just talking about investing stock investing in gold, investing in bonds. You could be investing in a business or property or even in yourself. The bottom line is the people who sacrifice money and time to invest invariably get a return on their investment. And I want to talk to a guy. He's clearly invested a lot of his time in building a business called Fairmont Equities. And there are a lot of investors who rely on the kinds of things he can see in those crazy squiggly lines which determine him or call make him be called a chartist. Meliss thanks Peter. How long have you been in the charting game for? I mean I started Fairmont Equities maybe 13 years ago now. Um so the business has been running for a while. Um charting only really a few years or so earlier than that. It's something that I've developed over time. It's not um you know early in my career I didn't know anything about Charlie. during your earlier parts you well I guess um I mean the first sort of big job I had was with Bory Bane present the GFC um working in their structured products division dealing with structured products and warrants all those sorts of things um your fingertips out of this great mccquary fundamental research and that's that's the way I thought it it was done you build research >> were you a mashnew at school Yeah, I was. Yeah, I was very good at it. I knew it. I was very good at maths and um you know, I studied engineering in uh in university as well as commerce or one of those you know 17 year olds that didn't know what to do with um so I did I did both backw. [Music] >> Yeah. So I've always been good with with numbers and recognizing patterns and and all those things. So McCory must have thought you were smart because in those days they would not hire dummies. >> Yeah. They they clearly thought I was smart but then the GSC came along and uh you know they had to to cut people. So that's when I moved on and and just got a chain. It's funny you used to have written GFC because not long before the GFC uh we used to publish a magazine for the institute of chart of accountants and uh Alan Moss who was your CEO at the time he was char was seen as a celebrator McCory has been a fantastic business so we did a the cover story on I went to Mafari and I interviewed him and he he he taught me a lot about what really great investors do. He confessed that I said, "What do you do every day when you come to work?" He said, "I'm given a report of where McQuary Bank's um financial position would be if Wall Street dropped by 10%. 20%, 30%, 40%, and went to 60%." And I thought very staggering. Now, of course, he retired before the GFC before the market dropped 50%. So he obviously well I don't know if he picked it but certainly gee that kind of information I thought is quite staggering that someone who's very good at investing and wants to know his position on a daily basis. Well it's I mean that has a lot of parallels with with trading because the way to approach before you open a position you don't think about the dollars and and how much you're going to make from it. It's how much will I lose if I get this wrong and I guess that's similar thinking. you know, how much could I lose today if things don't work out? So, yeah, interesting that yes, it was coming from from the other side of that. >> Um, what drew you to investing in the first place? >> We all like to make money, don't we? So, >> yeah, I give it a joy. I think we knew it. Yeah. >> Yeah. But I mean, yeah, making money for for clims and um just very interesting just a very interesting world. Um yeah, I mean it it you always a thrill. I car view a thrill. It's making money getting you making a call seeing it spike. They give you a bit of a dread. You have to love it. I mean you >> Yeah. Hey, I'm looking at my positions for for clients and you know my gold ETF's up three and a half% and the market's up 7 and yeah, my silver ETF's up 4% and my love back. That's that's been great. you know, and looking at the client accounts and and having a look at what the market's doing and yeah, you get a real kick out of it. >> How do you cope with negative periods? >> Um, yeah, look, I mean, you get that a lot. I mean, you're, you know, where you're investing in a range of of stocks, there'll be ones that that you lose money. >> Um, there will be people that that are unhappy. Um, I guess you just break it down into all there's things you can control and there's things needs that you can't and if you can control something, yeah, what can I fix for next time? But >> are are you good? So like you know when something you thought would do well you it's gone 3 months or 6 months and it's not the only are you good at accepting it or maybe wrong temporarily. >> Yeah. Yeah. And look how bad it does. Yeah. And that's something that you develop over time. um you know, we're all human and you know, you want to hold on to that that dog maybe one more day just in case it bounces back. But um look, it's like anything in life, you could, you know, you don't need to muster up a huge amount of sort of motivation to get something done if you could break it down into, you know, small little sort of achievable bite-sized um you know, actions. And um you know when it comes to selling again it comes back to and this is a lot of this has to do with with charting a trading before you buy something you should have a stop level it takes that emotion out of it. So yeah I don't need to sit here and and get all this willpower to sell something because I think it's dang wrong because by you coming into today that if this stock was going to trade under this number then that was going to be my cut off. So it just takes away that. >> Yeah. >> Yeah. a lot of that emotion. I know when I I'm talking to you for the TV show, you'll often come up with the word uh well stop. Explain to people how you use stops in your own personal investing and also for your clients. >> Yeah. So, it's it's essentially just a level, you know, try to keep things I try to keep things as simple as possible and that's a great thing about about charting because it gives you this this extra filter to to know whether to get in or out of something. And it especially helps when to get out of something. So a stop is essentially a level with that. Yeah, if it trades under this, I'm going to I'm going to get out. How you determine that depends on the individual. It might be a moving average. It might be previous low point. It might be a break even >> or or a simple percent or a exactly or a simple percent. Whatever works for you. But as long as you can have that number and you're consistent and you know there might be the days the odd day where you you find you do the wrong thing but if you could be consistent over 90% of the time then it it really does help. So that's all a stop is. So um yeah and a trailing stop is essentially a stop that moves up with your with your stop. >> For people who never done this before do online brokers provide opportunities to stops? >> Yeah. Yeah. So, a lot of online brokers allow you to move put these in. The problem with that is the market can move around and be high volatile so you won't get stopped out in the morning only for it to put out. So, you use an actual physical go to do it for your stops. No, I I just monitor the levels myself and I use your and you take the action. I use bit common sense around it. So, I might I might be just under a stop level. >> Um, but a stock might sort of stabilize for a day or two, had a rough day on the market, and if it bounces back up, then then all is okay. But I feel I can I can do that because I feel I've got to a stage where I'm Yeah. I'm not going to let it spiral into a 10% losses of 30 to 20% loss. >> Yeah. I was just thinking um were you in CSL where has big dropped recently and did you have stops there for CSL? >> Yeah, that's an interesting one. So I was in CSL and that that was a situation where it gapped well under the >> surprisingly it's just not a stock that you I never thought about it. Again clear of copper loss I'm hanging index I like stock. Um but yeah how long did it take to realize you had to get out? or no origin. No, I mean CSL. So with with stop losses been not perfect, right? >> So you will get situation where it might gap under a stop loss. So what I mean by that is it's not as though it's slowly come down into your stock level and you can sell it. It it it moves quite a bit distance to know then you need to make it call based on experience then you know then the stock fundamentals as well. Do I need to stay in this or do I take a bigger loss than what I first faced it in? And with CSL, we waited up. We thought, well, you know, with a if we get ourselves a certain time horizon, we'll get our money back. >> Yeah. And actually, and now it looks like a bias. >> Yeah. You can you can make money on it upside if you die across the average. U how you evaluate this there's a question I never ask you. I ask you where you think what the charts are. But how do you evaluate when we want to buy something or sell something? >> Yeah. Look, most of the time we start off, I guess, from the higher level sort of macro point of view. What areas of the market given everything else should do well. >> Yeah. At the moment, you're thinking, oh, the uranium. >> Yeah. Do you like those two? Then then you narrow it down. Um, so what we do is, you know, I talk about charts a lot, but we do combine the the charting and and the fundamentals. So yeah, I look at the areas I want to be involved in. Then I narrow down to strongest companies. Um, and then of course I I look at the chart to see if it's the right time to to get in. But sometimes it happens the other way where you see a chart, it looks really good. It just doesn't make sense that you should be involved in this area. Um, and then that what set me off into doing more research. But yeah, so when you see that, do you some think this could be been being bought by smarties who know more than market? We know it's against the law, but we also know people do know what's going on. Um, can you think of one uh investment? We saw that and there was no external information to make you really want to buy this apart. It had been sold off. It was doing really well, but there was nothing out there to make you think that. Is it one you remember? >> Oh, look, I'm sure there have been plenty. I mean, in terms of the last few months, um, you know, some of these lithium mains, I mean, you can make an argument of, oh, you look, it's over sold and blah blah blah, but on balance, it's a tough it's a tough sector. Yeah, it's there's no I think it's still a bit opaque as to what's happening with lithium supply and demand and they've been up but the charts were moving up before before we had the the mine closure in in China the COT or mine out um yeah it was you know the money was >> yeah do you think there could be Chinese people who knew they had a mining problem developing him store maybe we should buy our rivals this could be But that's logical. It's a case of the law to do that with that knowledge that I don't think the asset you'll be suing anyway in China. Well, it could just also be if you have a look at say mineral resources, it could just be as simple as um you know here's a business if you think back three months ago just you could come up with a shopping list of problems found everything everything's gay. So, you know, people out there smarter than me have done the numbers and just because this, you know, this thing is it's bad because of that. That's right. And the good thing about um you know, commodity stocks, it is um yeah, it's it's not like other businesses are much of war. So, a lot of these um resource companies, the reason why they're down is just because of the commodity price they just really depends what you what assumptions, what commodity number you plug in there are usually at the bottom. Yeah, all the armors are quite bearish and and they always seem seem expensive. They're very cheap when they've already um sort of topped out. So yeah, mineral resource is a is a classic. Um books that you've read or market thinkers have had a big influence on you. >> Oh look, I mean I' you're a mathematician. You're probably to read. Sorry. No, look, I I mean I don't have a name that that sticks out, but I I think a common theme for a lot of the good books is, you know, whatever strategy you have is you just need to be consistent with it. So, you know, the way I approach things where I combine charity and the fundamentals, that's that's not for everyone. Um, but yeah, I just try to be as consistent as possible with, you know, when I get into a stock, what I'm looking at on the chart where I have my stop levels. Um, and that consistency over time gets me a return and it might be the same return as someone who's a devalue investor and doesn't know anything about charts, but but they're really good at what they do. They're just consistent. So, I think I think that's the common thing that I hear. Has there been a time where you've invested in a company purely or primarily because the CEO you thought was a very impressive and was now lead this company to higher levels? I'm figuring if you lived in America or on Buffett might have been that the Belgium Bry have purely because of its track record. Have you ever been influenced that way? >> I I don't recall a situation recently to be honest. um you know maybe in the early days maybe when I was still you know in my early 20s and you just you know before the dip there and you know I I have nothing bad to say about worry when I work there of you know when I was the head I was in my early 20s and see all this amazing research and and you hear from amazing CEO so I might have been enticed into the story but why investment story yeah there's a lot of pre investment stories at GMC but but now that I look at at the charts and I guess I've got you a few more sort of years of experience now I yeah they they might spin up the story but we know the law was going to spin a bit >> yeah no I guess history might recall that back common uh was a really good selection because you know that Dona Murray was a famous one who I think they had a run of not quite as good CEOs but you know I think when CBO share price hit 190 m they're a little bit involvement in that but it is yeah you know I think I think even Buffett says you know the caliber of management is one of the characteristics you should look at when you are going to invest in a company >> yeah I mean it's it's hugely important that's for sure most are important >> yeah yeah but I but yeah I don't think I'd invest just because of who's who's running it um yeah all the other pieces need for me >> I swear Jerry Harvey be very disappointed about because he he actually blames Katie's wife company doing Well, um, okay. We're assessing a company or a What tells you that people are worth banging? >> Um, look, I suppose, you know, the track record, you know, counts for something as well. But, um, I just also just think you just need to be in the right sector at the right time as well. So there are a lot of businesses out there which you know if it's just not happening for you at the moment um then I guess there resources is a great example because that is a very cyclical business um and you could best CEO but if Yeah the wrong way or you could be Jerry Harvey he's he's had periods where share price has fallen down and it's just because yeah interest rates are going up and no one has any money so there's so much you do But at least you then know, okay, this this guy's great. He's doing a great job. Now's not the right time to actually do you often use by the dipst strand and and you look at the history and you make the judgment call. There's been insufficient major order changes to to turn that history around. Oh, look, in terms of buy the dip, it's it's more a dip within an uptrend. So if there's something that's in a longerterm downtrend, >> I just stay away from that. Um >> you are risk adversity. >> Yeah, look I mean especially because I'm managing clients maybe you need to be >> you know sort of extra careful. I mean, even even just my own personal investing, yeah, I might try to get in a bit earlier and might might take a bit bit more risk, but um look, it doesn't it doesn't have to wait for that uptrend to get established because we've seen some of the great um you know, stocks and moves they can make. It doesn't matter if you miss the the first 10 or 20%, you're on a rising trend. I've asked you about investing because we're good people. Have you ever invested in not investing it because you're worried about the people or have you actually liked the company but and been had question marks over the people? I think I'm thinking about why sticking a great company that occasionally it's founder gets question marks and every issues. Had that stopped you or you thought an opportunity for us to jump out essentially a good company? No, that is that is a good question because Weiss Tech was an example recently where um look we're in it now but there was a period of time >> um that we just stayed away because I was just worried I'd buy it and he I'd read and you announce the next morning in the paper that this there's something else going on but um but then I guess you you sort of switch modes and you think okay well if there's this much risk out there need to you know I need to pay for it to maybe get down to really cheap levels and then if it bounces at a cheap level, I've got I've got maybe more of a offer >> to um to buy to buy something that's that's already run pretty hard with all these other you know um some management issues in the background. >> How do you separate the noise from signal that was involved times? Oh, look. I think but charting is good at you know at doing that and there is a lot of noise out there. Um but if you could I think one of the mistakes I made early in my early days was you know I've got the chart in I've got the fundamentals and it's just trying to to figure out which should be the that sort of finer filter to say yay or n it'll do something. and I've realized and and the results have have sort of improved dramatically logistically by use the charting that final filter um then as I said we go so whether it's entering a stop or even exiting everyone might might love it but if the charts you saying no or it's going to stop um you know that's that's what yeah oh yeah so that's what I use you for I don't want charting I look at chart but I'm not an expert at But I always like it when you were in force of view that all the all the other reasons I want to buy. That's why I have you on the show. Personal best reasons. So what's a belief you hold about investing that many people might disagree with? >> Uh some people do right chish. Yeah. Yeah, look, I I guess with your charting, if you're following the trend, it means that you're following the flow of money, and that goes against a lot of people's insight to maybe try to be contrarian or or or think that they're finding an opportunity that no one else has found, but are they genuine believe that or they've got maybe an ego in that um they want to prove that they can get smarter than than the rest of the market. But I guess I you know I've realized over time that yeah maybe yep I might be smarter than the market that if all the money in the market's going in that direction I can't I can't force it the other way just because you know I think I'm smarter. So you know there's a flow of money at CBA great example. So yeah, how how long have an been negative on the on the share price of of CBA up until recently was CBA shareholders because the flow of money was that's where it was put, wasn't it? >> Yeah. Were you putting on putting stops higher as it went up? >> Yeah. And then we got stopped out um when possible. I think it was the highest 170. It wasn't the exact top. was somewhere above where we are now. But um and then we then we've moved on into other areas. So since since July, we've um we've been getting more more and more aggressive into the um resources space. So you know um sort of earlier years we we may have had some exposure to say BHP and some gold but but now there's quite a few resource exposures in our portfolio. There's been quite a bit of rotation happening in the last few months. Uh why do you think resources will do well? >> Oh, look, I mean with with gold there's there's a few sort of peculiarities as to light apps doing well, but but with resources in general, yeah, it's it's the same story as it's been for for 100 years. It's it's very cyclical because of um the way supply um I guess changes over time. So what I mean by that is, you know, you've got you get high prices in a commodity, a lot of supply comes on that kills the high prices and then the price doesn't recover until you you get rid of that supply. So you've got this this sort of ebbing and flowing of supply. >> Yeah. And with most resources, we've had this very long period now, potentially a decade where there has been a lot of underinvestment in resource, whether it's oil, whether it's uranium, lithium, >> you know, lithium's had that sort of classic sort of situation where there was not enough supply price shot up. All these little miners turned up with air mines, um, high cost mines, then they've had to close and that's why we'll get the reband. So, it's just that it's just that cycle and we're just in that part of the cycle now where I think people are realizing that um there just hasn't been enough investment because a lot of money's been chasing tech over the last 70 years. Um and there just hasn't been enough investment in in mine supply and and we're starting to realize that and I think 206 will be they're very excited with that. Yeah, great. I'm long combat already saying that. Finally, I'm looking into asking you what is your favorite player right now. But the mindset shift you would recommend for someone wanting to be better at and investing. So I guess what I'm saying is what is the prime mistake people make about investing and what would you recommend they do to get rid of that mistake? I suppose people try to front run what's what's happening at the moment. Um they try to yeah you do need to forecast but it's very easy to say okay well the market looks yeah the market's gone up what feels like a lot so therefore yeah we're in a bubble but whatever sector is doing well at the money so I'm going to shock the market now and try to position ahead of that and I think that's where a lot of people get get unstuck. So yeah, you really do need to stick with the market to an extent whether you like it or not. Um, yeah, at I think when it comes to trying to pick the extreme points, it's an easier way where the market gets sold off like April is a classic example where you could you could start and think, okay, well now it's gone to get get long down here because yeah, we've had this extreme event, but you know, the market on the way up as as they say takes stairs on the way up the elevator on the way down. And so as it's at the moment it's just creeping up creeping up. If you want to now short the market or sell everything here, you know, that's that's a big call to make that most of the time it will get wrong and then you're you're missing out on all these gains. So I think you just need to speed with it to an extent. Um and yeah, there's a lot of noise out there. How do you pick the top? Keep it as simple as possible. So what we do is again look at just the moving average. If you're above this moving average, I'm long. If I'm under it, I'm out. Just try to keep it as simple as possible so you don't get yourself all caught up in a knot trying to figure out whether you need some. >> Final question. What do you like now and why? >> Well, I like three things now. Um, so yeah, it'll go best. So for our clients, we've got buyer ETFs, exposure and gold, silver, and UAE. >> So they all we >> three different ETFs, three different three different ETFs. >> Um they're our top three forms at the moment. Um yeah, very excited about about where it's heading. Gold started moving um in March last year. It's got a lot more upside. So you've got you still got money being printed like there's no tomorrow. US debt staring up. The dollar's just dropping because of everything that's going on. You know, central bank spying dog. So these these people are stressed for interest rates are falling. Um a central bank in the US that's kind of walking away from what inflation is doing very unemployment and um and the economy. So you know inflation might be an issue next year that's positive for gold. So you don't get these these bull markets in gold very often. They might you might go through a decade of of nothing and then suddenly all the ingredients are there for gold to rally and and of course silver follows. Um and uranium I've spoke to that before the show. That's um a classic supply demand um mismatch that I've never seen a mismatch like this get formed. And um yeah, there's only one way to double that and that's through much much higher policies. So I'm really excited about those three sectors. That's stuff. Well, I'm very excited you've shared your insights. These are sort we've been hanging out together quite some time. We always sip with within stocks, but it's been great to catch up and see what's been going on in that mathematical header. Thanks. Thanks for coming on Gable from Ben Equities.