Chris Lee & Partners

[Dolcile]

Hi all, just wondering does anyone here pay for their Self-Managed Financial Advice and do you find it valuable?

The price of $595+gst PA seems relatively low cost for what they say they provide:

Financial Advice: We provide you financial advice and opinion on investments consistent with your investment policy (below).

Client Appointments: Free client appointments when we are in your area.

Reporting: Personalised quarterly reports and 24/7 access to your online client portfolio.

Portfolio Monitoring: Including up to date pricing, cash flow analysis, maturity profiles and industry classification.

Research: Access to our web portal to read our research and result summaries on most of the companies we recommend

Newsletters: Receive our confidential quarterly newsletters.

Administrative Assistance: Our staff can assist you with basic administration on your investments.

Buy and Sell Orders: Execute buy and sell orders for shares, bonds, and Exchange Traded Funds (ETFs) on the NZX & ASX

[BlackPeter]

Hi all, just wondering does anyone here pay for their Self-Managed Financial Advice and do you find it valuable?

The price of $595+gst PA seems relatively low cost for what they say they provide:

Financial Advice: We provide you financial advice and opinion on investments consistent with your investment policy (below).

Client Appointments: Free client appointments when we are in your area.

Reporting: Personalised quarterly reports and 24/7 access to your online client portfolio.

Portfolio Monitoring: Including up to date pricing, cash flow analysis, maturity profiles and industry classification.

Research: Access to our web portal to read our research and result summaries on most of the companies we recommend

Newsletters: Receive our confidential quarterly newsletters.

Administrative Assistance: Our staff can assist you with basic administration on your investments.

Buy and Sell Orders: Execute buy and sell orders for shares, bonds, and Exchange Traded Funds (ETFs) on the NZX & ASX

I used this service when I started my "career" as investor.

What I got was several meetings a year with Chris, reviewing my investment portfolio. Depending on your experience level, this might be a worthwhile feature. Chris asked good questions and had as well rather fresh research information (based on his previous link with Jarden, not sure how the situation is these days).

We discussed as well valuation methods for some specific examples for smaller companies, and I found this discussion useful.

What you get as well are his confidential newsletters. Personally they didn't give me that much (i.e. I can't remember a time when I made or changed my investment decisions based on the content of the newsletters), but for somebody who is putting less effort and time into their research, they might be a bonus.

What I found useful are his public newsletters - particularly when he mused about hybrid investments. He understands much more about these, than I did - and he was normally right when he pointed out that some of them are undervalued. Made me some good dollar, but this part of the service is free (and I am not sure, whether I read over the recent years a lot of relevant info in that regard).

I found his talks always useful (but they are as well public). Gives you from time to time a reset to look at the big picture instead of getting lost in any specific balance sheet.

Otherwise - his stock picking expertise (other than hybrid investments) does not seem to be better or worse than mine. I went during the relationship with him through at least two quite painful experiences (MPG dropping like a stone was one of them, and CBI surprisingly going bust the other). In both cases he knew about the investment I had but clearly didn't know more about the future of these investments than I did (and this was wrong) ... but hey, as I always say - nobody can predict future stock prices, and this obviously includes him.

So - if you are in the early stages of your investor career and need another pair of eyes looking over your portfolio, or helping you to set up some investment strategy, I think you will find his services useful and worthwhile.

If you are looking for a stockpicker, he is not better than you or I (or anybody else).

Another aspect about joining his schema might be thinking about the future.

In our marriage it is only me looking after the investments. If something happens to me, I am not sure how my wife would manage the financial aspects, she clearly would need somebody to manage them for her. So, this is one of the reasons I am currently considering "upgrading" my client account with Chris (or his company) again.

Anyway - hope this helps. I found Chris always open, honest and helpful ... but his crystal ball is not better than mine (and that is often cloudy).

[Dolcile]

Thank you, BP.  That is a very detailed and useful reply - much appreciated.   

[Basil]

Good stuff BP.  The other thing to think about is Chris Lee must be getting towards the end of his career.  Is his son Edward and others in the office as good, better or worse than him ?

Craigs, Forsyth Barr, Jarden, JB Were and others offer a full portfolio management service e.g. Craigs https://cdn.craigsip.com/media/uploads/2023/06/08160129/premium-services-brochure.pdf?_gl=1*sr11bz*_gcl_au*MjE1ODU3MzQxLjE3NDk1MDk2NTY.*_ga*MTcxODcyNjcyMy4xNzQ5NTA5NjU3*_ga_9BYKHSCZH3*czE3NTA0NzM0MjckbzIkZzEkdDE3NTA0NzM0NDMkajQ0JGwwJGgw

Service is generally available for anyone with $250K or more to invest. Fees are about 1% for up to the first $1m and a little bit less for each subsequent million.  Portfolio management fees are tax deductible.

You raise a very good point worth thinking about for the future.  If I encountered some serious health issue or died, my wife would have no idea how to follow my work.

[BlackPeter]

Good stuff BP.  The other thing to think about is Chris Lee must be getting towards the end of his career.  Is his son Edward and others in the office as good, better or worse than him ?

Correct, Chris is clearly reducing his involvement (fair enough ...) ... and I haven't really had a lot of contact with his sons / partners / staff (apart from a friendly "hi" when meeting them at Chris' events) - with the exception of Penelope who is obviously amazing, but just responsible for the admin (i.e. not giving financial advise).

I'd assume however my experience with Chris is transferable to his partners: They are as far as I see all financially quite competent (based on their CV's), I am sure they can help people with developing a good financial plan / stategy and give them access to recent research. I assume as well that their crystal balls are as cloudy as everybody elses.

[theBusinessman]

You raise a very good point worth thinking about for the future.  If I encountered some serious health issue or died, my wife would have no idea how to follow my work.

Basil, have you ever written any rough guide, even just for your own use, of the list of areas you review when considering a stock valuation? Considering your previous employment and backing yourself to do it personally I would be very interested in your specific tactics.

[Basil]

Welcome to the forum.   Might pen an article at some stage about investing for income in retirement.  Keep an eye out for it in the future " A dividend hounds guide to ensuring you remain well fed in retirement"

[Dolcile]

Welcome to the forum.   Might pen an article at some stage about investing for income in retirement.  Keep an eye out for it in the future " A dividend hounds guide to ensuring you remain well fed in retirement"

I'm looking forward to this !

[Buzz]

Welcome to the forum.   Might pen an article at some stage about investing for income in retirement.  Keep an eye out for it in the future " A dividend hounds guide to ensuring you remain well fed in retirement"

Please do, and don't wait until we're all really old. Legend investors who share their experience are few and far between.

[theBusinessman]

Welcome to the forum.   Might pen an article at some stage about investing for income in retirement.  Keep an eye out for it in the future " A dividend hounds guide to ensuring you remain well fed in retirement"

Thanks for the welcome, long-time lurker, first-time poster! Would appreciate your thoughts if you find the time.

[Basil]

Just very briefly, these are some of the key things I take into consideration with my dividend hound and value investor approach.

As I am sure you guys can appreciate with my long career as an accountant I am a numbers man and what matters most to me is earnings per share.  I believe in the long run share prices follow earnings per share, i.e. the market is a weighing machine not a voting machine.  (Ben Graham / Warren Buffet).

I put a heck of a lot of emphasis on recent past performance and the last 5 years with all the challenges over that period of Covid, the flow on effects from that and the almost endless recession here that's followed is a truly brilliant litmus test for how resilient a business is.  We may never get a better litmus test in our lifetimes.

I'm basically retired now, (although I keep my practice going on very much a part time basis and look after clients I have helped over the decades that I like, which keeps my mind active and keeps me in contact with likeable business people...complete retirement and doing no work at all is overrated in my opinion), but that won't last indefinitely and at some stage I'm looking to replace that remaining part time practice income with dividend income.  That's my focus area at present.

Looking at the last 5 years earnings per share for any company during this tumultuous period and their dividends per share gives you the perfect opportunity to test the resilience and reliability of a companies ability to continue to pay dividends.  Any company that has passed this litmus test with flying colours is worthy of further investigation...sadly there are not many on the NZX.

At my core I am a value investor, dividend hound and a show me the money sort of guy.  I want to pay as cheap as possible a price for growth companies (growth at a reasonable price).
My key filter I use is a derivative of Ben Graham's valuation formula.  I pay a no growth PE of 8.5 and then only 1 PE more for every 1% I forecast a company can consistently grow its earnings over the next 5 - 7 years.   I use the forward next years multiple, (FY26).  Ben Graham used historical PE multiple and paid up to 2 times the expected growth rate + 8.5 PE.   This deep value for growth approach sounds quite easy and prescriptive and of course it is prescriptive and rules out a vast number of growth companies on the NZX, but it ensures, as best as I can forecast it, that I am getting growth in EPS on the cheap.  Accountants are mean bastards and don't want to pay much for anything lol  The real skill here is of course determining how you think a company can grow its earnings over the next 5-7 years.  I look for factors around what are their key competitive advantages, what moat if any exists, what's driven the growth in the past and is that likely to continue into the future as well as looking at the stage of the economic cycle we are at and how that will affect earnings going forward.  How long is their runway for growth is also a key consideration.

Couple of worked examples might be useful.  HLG has a 5 year CAGR of 9%.  I believe with the runway of growth in Australia, (they have very low market penetration there with Glassons stores), they have a very long runway of growth at that sort of rate going forward.  I estimate circa 20 years.  To me this stock screens as extremely good value as its well within my valuation screening criteria.  It would be good value up to no growth PE of 8.5 + 9, 9% being the historical growth rate = FY26 PE of 17.5.  Brokers are forecasting eps of circa 76 cps in FY26 so its very good value up to 17.5 times that at $13.30 and therefore very, very deep value at its current share price of $9.  They have a very strong balance sheet with no debt and circa $1 per share in cash.  HLG is N.Z's oldest listed company and Tim Glasson has an 18% stake.  Execution with Glassons Au by James Glasson has been brilliant and he's obviously tied into the business with inheriting some of his father's stake in due course.  I have a large allocation to HLG.

Likewise Turners has grown EPS at a 5 years CAGR of 10%.  I see them doing similar for the next 5-7 years and deserving of a similar metric to HLG noted above.   My valuation screener says they're good buying up to no PE of 8.5 + 10 = 18.5.  They currently trade on a forward PE of 14.5 and are one of the  very. very cheapest GARP stocks on the NZX and have built an extraordinary track record of resilience and dividend growth over the last 5 years.  The board and management have a circa 30% stake in the business and a clear runway ahead for growth. Turners also commands a large foundational sized portfolio allocation and will be one of the key ways I enjoy growth in dividends in the future.

My view is once you start paying PE multiples over 30 for anything, you're leaving yourself wide open to that growth company disappointing you in the future.  Paying that sort of multiple or higher you're basically making the call that company XYZ is going to keep growing really fast for the foreseeable future.  This doesn't sit comfortably with my value and GARP M.O. at all.

If there's no growth its okay to me to buy a share for income if I think the company can reliably pay me a gross dividend of equal to or more than 5% above the official cash rate.  Ideally no growth companies should be on a no growth PE of 8.5, (which is the benchmark Ben Graham used) but cashflow is very much a factor here and if a company can reliably pay high gross dividends its worth owning for income provided you buy it at a good price.  Watch out for agricultural companies with wild cyclical swings in commodity prices, they're very risky, disease, pestilence, wild cyclical changes in commodity prices e.t.c.

Apart from the numbers I'm looking for what makes a business resilient.  What's their special sauce.  Watching the cash flow, are the earnings real or just on paper, how strong is the balance sheet and do senior management and directors have real skin in the game.  Overseas studies have shown where senior management / directors interests are aligned with shareholders and they have a serious stake in the business, those business's consistently outperform.

I put a hell of a lot of stock on past performance, probably 80-90% and 10-20% on what a company says they're going to do in the future..  Have management already built a track record of earnings per share over this treacherous 5 year period in business that impresses me ?  Have they earned my respect ?  I'm not really looking to take meaningful positions in companies where management might or might not earn my respect in the future.  This is a function of my age and lack of desire to invest in speculative positions.  Speculative investment should be kept under 10% of one's portfolio for someone in their semi retirement or full retirement in my opinion.

Dividend per share growth.  Its okay to keep holding companies that are paying less than OCR + 5% if they have a demonstrate-able track record of strong DPS growth, Turners a very good example, arguably the best example on the NZX.  Although the forecast FY26 gross dividend is only about 6.5%, it should keep growing at circa a CAGR of 10% per annum so only takes a couple of years to get back above OCR + 5% and after that all future growth is cream on top.

Of course there are exceptions to the above fundamental principles.  Two good examples are current significant positions in Tower and MCK.  Towner doesn't have a 5 year track record of earnings and dividends that impresses because of the extreme weather events of the summer of 2023.  Sure extreme weather like that could happen again but I believe the very high yield I am forecasting and significant changes in their business model in recent years makes this a great emerging dividend payer.  I see it as somewhat speculative and high risk so my portfolio allocation is less than 10%.  MCK is a takeover play pure and simple and I think there's an excellent chance there's another takeover attempt coming in 2026 at a significant premium to the current share price.  Index inclusion events are another favorite place this hound looks for a feed.

Watch out for certified B Corp companies and any company that runs amuck with ESG.  Any company that puts people and the planet on exactly the same footing as shareholders and spends vast amounts of management time meeting all the requirements for that...just run for the hills.   Such a company has lost sight of the very reason they exist to put shareholders interests first and foremost.  Sure, respect the environment and be fair to employees and other stakeholders but shareholders come first and I always look at a companies culture to make sure they really know what they're there for and who they are serving.

This is just a very, very brief overview of some of the key ways I go about being a value investor.  One day I might write a book but that will be years away if it ever happens.  In closing, there are many ways to skin a cat and others have done well using different approaches to mine and that's fine.  This is what has worked well for me over the years and what I feel comfortable with.  Happy to answer any questions or expand upon any topic that you want me too.

[Shareguy]

Just very briefly, these are some of the key things I take into consideration with my dividend hound and value investor approach.

As I am sure you guys can appreciate with my long career as an accountant I am a numbers man and what matters most to me is earnings per share.  I believe in the long run share prices follow earnings per share, i.e. the market is a weighing machine not a voting machine.  (Ben Graham / Warren Buffet).

I put a heck of a lot of emphasis on recent past performance and the last 5 years with all the challenges over that period of Covid, the flow on effects from that and the almost endless recession here that's followed is a truly brilliant litmus test for how resilient a business is.  We may never get a better litmus test in our lifetimes.

I'm basically retired now, (although I keep my practice going on very much a part time basis and look after clients I have helped over the decades that I like, which keeps my mind active and keeps me in contact with likeable business people...complete retirement and doing no work at all is overrated in my opinion), but that won't last indefinitely and at some stage I'm looking to replace that remaining part time practice income with dividend income.  That's my focus area at present.

Looking at the last 5 years earnings per share for any company during this tumultuous period and their dividends per share gives you the perfect opportunity to test the resilience and reliability of a companies ability to continue to pay dividends.  Any company that has passed this litmus test with flying colours is worthy of further investigation...sadly there are not many on the NZX.

At my core I am a value investor, dividend hound and a show me the money sort of guy.  I want to pay as cheap as possible a price for growth companies (growth at a reasonable price).
My key filter I use is a derivative of Ben Graham's valuation formula.  I pay a no growth PE of 8.5 and then only 1 PE more for every 1% I forecast a company can consistently grow its earnings over the next 5 - 7 years.   I use the forward next years multiple, (FY26).  Ben Graham used historical PE multiple and paid up to 2 times the expected growth rate + 8.5 PE.   This deep value for growth approach sounds quite easy and prescriptive and of course it is prescriptive and rules out a vast number of growth companies on the NZX, but it ensures, as best as I can forecast it, that I am getting growth in EPS on the cheap.  Accountants are mean bastards and don't want to pay much for anything lol  The real skill here is of course determining how you think a company can grow its earnings over the next 5-7 years.  I look for factors around what are their key competitive advantages, what moat if any exists, what's driven the growth in the past and is that likely to continue into the future as well as looking at the stage of the economic cycle we are at and how that will affect earnings going forward.  How long is their runway for growth is also a key consideration.

Couple of worked examples might be useful.  HLG has a 5 year CAGR of 9%.  I believe with the runway of growth in Australia, (they have very low market penetration there with Glassons stores), they have a very long runway of growth at that sort of rate going forward.  I estimate circa 20 years.  To me this stock screens as extremely good value as its well within my valuation screening criteria.  It would be good value up to no growth PE of 8.5 + 9, 9% being the historical growth rate = FY26 PE of 17.5.  Brokers are forecasting eps of circa 76 cps in FY26 so its very good value up to 17.5 times that at $13.30 and therefore very, very deep value at its current share price of $9.  They have a very strong balance sheet with no debt and circa $1 per share in cash.  HLG is N.Z's oldest listed company and Tim Glasson has an 18% stake.  Execution with Glassons Au by James Glasson has been brilliant and he's obviously tied into the business with inheriting some of his father's stake in due course.  I have a large allocation to HLG.

Likewise Turners has grown EPS at a 5 years CAGR of 10%.  I see them doing similar for the next 5-7 years and deserving of a similar metric to HLG noted above.   My valuation screener says they're good buying up to no PE of 8.5 + 10 = 18.5.  They currently trade on a forward PE of 14.5 and are one of the  very. very cheapest GARP stocks on the NZX and have built an extraordinary track record of resilience and dividend growth over the last 5 years.  The board and management have a circa 30% stake in the business and a clear runway ahead for growth. Turners also commands a large foundational sized portfolio allocation and will be one of the key ways I enjoy growth in dividends in the future.

My view is once you start paying PE multiples over 30 for anything, you're leaving yourself wide open to that growth company disappointing you in the future.  Paying that sort of multiple or higher you're basically making the call that company XYZ is going to keep growing really fast for the foreseeable future.  This doesn't sit comfortably with my value and GARP M.O. at all.

If there's no growth its okay to me to buy a share for income if I think the company can reliably pay me a gross dividend of equal to or more than 5% above the official cash rate.  Ideally no growth companies should be on a no growth PE of 8.5, (which is the benchmark Ben Graham used) but cashflow is very much a factor here and if a company can reliably pay high gross dividends its worth owning for income provided you buy it at a good price.  Watch out for agricultural companies with wild cyclical swings in commodity prices, they're very risky, disease, pestilence, wild cyclical changes in commodity prices e.t.c.

Apart from the numbers I'm looking for what makes a business resilient.  What's their special sauce.  Watching the cash flow, are the earnings real or just on paper, how strong is the balance sheet and do senior management and directors have real skin in the game.  Overseas studies have shown where senior management / directors interests are aligned with shareholders and they have a serious stake in the business, those business's consistently outperform.

I put a hell of a lot of stock on past performance, probably 80-90% and 10-20% on what a company says they're going to do in the future..  Have management already built a track record of earnings per share over this treacherous 5 year period in business that impresses me ?  Have they earned my respect ?  I'm not really looking to take meaningful positions in companies where management might or might not earn my respect in the future.  This is a function of my age and lack of desire to invest in speculative positions.  Speculative investment should be kept under 10% of one's portfolio for someone in their semi retirement or full retirement in my opinion.

Dividend per share growth.  Its okay to keep holding companies that are paying less than OCR + 5% if they have a demonstrate-able track record of strong DPS growth, Turners a very good example, arguably the best example on the NZX.  Although the forecast FY26 gross dividend is only about 6.5%, it should keep growing at circa a CAGR of 10% per annum so only takes a couple of years to get back above OCR + 5% and after that all future growth is cream on top.

Of course there are exceptions to the above fundamental principles.  Two good examples are current significant positions in Tower and MCK.  Towner doesn't have a 5 year track record of earnings and dividends that impresses because of the extreme weather events of the summer of 2023.  Sure extreme weather like that could happen again but I believe the very high yield I am forecasting and significant changes in their business model in recent years makes this a great emerging dividend payer.  I see it as somewhat speculative and high risk so my portfolio allocation is less than 10%.  MCK is a takeover play pure and simple and I think there's an excellent chance there's another takeover attempt coming in 2026 at a significant premium to the current share price.  Index inclusion events are another favorite place this hound looks for a feed.

Watch out for certified B Corp companies and any company that runs amuck with ESG.  Any company that puts people and the planet on exactly the same footing as shareholders and spends vast amounts of management time meeting all the requirements for that...just run for the hills.   Such a company has lost sight of the very reason they exist to put shareholders interests first and foremost.  Sure, respect the environment and be fair to employees and other stakeholders but shareholders come first and I always look at a companies culture to make sure they really know what they're there for and who they are serving.

This is just a very, very brief overview of some of the key ways I go about being a value investor.  One day I might write a book but that will be years away if it ever happens.  In closing, there are many ways to skin a cat and others have done well using different approaches to mine and that's fine.  This is what has worked well for me over the years and what I feel comfortable with.  Happy to answer any questions or expand upon any topic that you want me too.

Great post Basil, thanks for posting.

[Dolcile]

Thanks for taking the time to write that up Basil.

I'm curious what is your thinking around the Dividend Irrelevance Theory? And rather than focus on dividends, why not just create you own dividend by selling shares (or units in a fund).

Cheers

[Basil]

You're welcome.  With my growth at a reasonable price (GARP) stocks I'm looking specifically at my age for companies that are not only great value for the growth on offer but that can also pay out excellent dividends and still grow very well at the same time and obviously HLG and TRA are standout examples of that but Tower is  also an emerging company that meets that criteria too.  At my core, my belief is that all companies should pay out a decent proportion of earnings by way of dividend provided they can attach imputation credits.. 

I'd go so far as to say I think its a bit arrogant for any company making decent EPS not to pay a reasonable proportion of that out.   Do directors really know better than their shareholders how to invest their fair share of earnings ? 

In terms of handing over some control to the likes of say the PIE funds Australasian growth fund, that's a work in progress for me because its probably a bit of an occupational hazard to me to stay inside my comfort zone.  Old habits that work well feel comfortable.  Why change ? I do have some Discovery fund units that have performed exceptionally well.  Its not a huge portfolio allocation though.  These sort of funds do add a lot of diversification and PIE funds, (notice how the owners have a lot of skin in the game themselves just like with Discovery) their long term track record, (I always try and avoid excitement about high one year returns) is sound at around 15% per annum.  Discovery's track record in the last three years has been phenomenal. 

Yes, selling down some units from time to time in lieu of dividends from these sort of funds is a sound strategy.  I'm nervous about the sort of multiples these funds are buying stocks on though, in some cases for example, with the likes of Life 360, no earnings at all.  Tech is lots of fun until the music stops.  Remember the dot.com bust of 2000 ?  It took the Nasdaq 10 years just to recover the massive losses of that era.  Some of the valuation excesses in the tech area at present, in particular with US stocks remind me a lot of that era.  Maybe we're not that far off another period of reckoning ?  Who knows...but it worries me when there's not sound underlying earnings at reasonable metrics underpinning a stock's valuation.  Maybe I'm old fashioned that way but I have no need for risky strategies these days.  Each to their own though and as I said earlier, there's many ways to skin a cat and accumulate wealth.    I think maybe tech is better for those a bit younger than me who have more time on their side if there's another big correction in that sector.

[theBusinessman]

Basil, thank you, this kind of summary is very helpful for anyone with your investing style and risk attitude.

I think plenty of kiwis are familiar keen on the idea of paying less than something is worth! It's nice to see some metrics that are tried-and-tested *in our market* and I am definitely going to analyse my investments with your numbers as a sanity test.

I think your accounting background probably makes you comfortable considering a wide range of businesses because you have a good feel for numbers. What are your thoughts on investors being recommended to "stay in their lane" with regards to being well informed on the industries they invest in?

For example, my background is tech, but if my portfolio is full of tech stocks only that's great during the boom, but terrible during the bust. Should all investors be familiarising themselves somewhat with certain defensive types of industries? Or simply buy an ETF if you want exposure to something you don't have a good level of familiarity with?