The Argo cult that opened the batting as the Don called it quits
The legacy of Bradman lives on in an Adelaide investment institution, writes Eli Greenblat.
The legacy of Bradman lives on in an Adelaide investment institution, writes Eli Greenblat. FOLLOWING in the footsteps of the late Sir Don Bradman, either on the cricket pitch or in business, is not to be taken lightly. And when your fans are 70,000 rusted-on fiercely loyal shareholders who have been paid a dividend every year since 1946, the degree of difficulty increases in line with the high expectations of success.Such is the responsibility today of an engineer and stock analyst, Jason Beddow, 42, who is the chief executive of the Adelaide-based Argo Investments, the nation's second-biggest listed investment company, with $3.5 billion-plus invested in the sharemarket on behalf of investors."I feel a little but humbled by that," says Beddow from his Sydney office. "It's a really great story from that perspective, great history, and having Don Bradman's involvement does put a little mystique around it."Beddow, who grew up in Newcastle, goes to Argo's headquarters in Adelaide every month to keep in touch with directors, administration staff and the shareholders, and is only the third chief executive in Argo's near 70-year history. He became boss in 2010, replacing the long-serving Rob Patterson, who in turn was appointed to the top position after the departure of Argo's founder, the chartered accountant Alf Adamson, who began Argo as a boutique investor in 1946."It's not easy. People have a lot of respect for what Rob Patterson did, and I guess the other thing Argo has is a good name, so that's quite an honour, really, and it does create a level of expectation they are big shoes to fill."Those big shoes include Sir Donald, who was a director of Argo for 30 years (the Don was a stockbroker after retiring from cricket) and a chairman of the Adelaide investment institution for two years."Because we have had only two managing directors before me, the culture is that we work hard for the shareholders," says Beddow."Our relatively small shareholder base of 70,000 put their faith in us and to manage a component of their wealth."They are looking for fully franked dividends, and that's an important component of investing in listed investment companies, one of the reasons they choose us is to maintain and over time grow a fully franked dividend stream and capital growth is important, too, but conservative growth."I think that's really the mantra, and I think the culture at Argo would be that we do genuinely care about the shareholders, and they have been good supporters of the company over time."After turning his back on a career in mining and wearing overalls at work he jumped the fence to become a mining analyst for Deutsche Bank, then a stint at Hartley Poynton, before a working relationship with Argo turned into a job offer in 2001 to join their small analyst and investment team.There is no doubting his passion for the job and his concern for the welfare of his shareholders, but at 42, Beddow is still relatively young and at odds with the sometimes staid, quiet and earnest nature of the listed investment company space. Argo is a long way from the high-flying world of merchant banking, with its corporate jets, massive bonuses and plush offices heady with testosterone-fuelled traders as they punt their way to million-dollar bonuses."For me, I was never in that stream of investment banking, chasing the big deal," says Beddow."I got in because I enjoyed doing the research on companies, meeting the guys running companies, seeing the company's assets, making a call if it was a good investment over time or not."And even though we are a different flavour and we are slower at Argo, the fundamental analysis side of the business is still something which I enjoy."At the end of the day, my analysts and everyone here needs to pick good stocks and better investments so we will grow our profits and dividends and that's a bit of a reward in itself. I think to work at a listed investment company you are slightly a different person than someone who wanted to work, for example, at a Macquarie Bank." Thankfully for his shareholders many of whom are retired or facing retirement Beddow seeks his thrills outside betting big on the next hot company, and is an avid bike racer."I'm pretty active, and spend a lot of time mountain bike racing and adventure racing," he says.Not for him the middle-aged man squeezed into lycra outfits with silly European brand names stamped all over them. But just like road racing, it is a growing popular sport."The numbers in mountain bike racing have swelled," he says. "You use to turn up at events and you could enter on the day, and now they book out six months in advance."Argo's $3.5 billion equities portfolio is dominated by the kind of stocks you would expect from a conservative investment fund, and the kind of companies in which its shareholders can have a certain degree of trust will pay fully franked dividends with the added hope of some capital gain over time.Its biggest shareholding is $253 million worth of BHP Billiton shares, followed by Westpac ($186 million), ANZ ($160 million), Wesfarmers ($145 million) and Commonwealth Bank ($137 million).But Argo is not adverse to making some short-term trades on speculative stocks as well to top up its investment returns. But it will always be a small part of its large portfolio.This means that in its time Argo has held shares in companies that have since collapsed, and it held a number of positions in Australian companies that were wiped out by the global financial crisis five years ago."We had positions in ABC Learning and Babcock & Brown, but got out early," Beddow says about two of the better known collapses after the GFC."Overall, we were OK. Now, relatively, it doesn't make us feel any better, but we weren't left holding the bag on any meaningful positions of any of those disasters."Importantly, Beddow and his team have learnt some valuable lessons for the next boom, namely the ability of debt to turn from a virtue to a vice. And to do so incredibly quickly."I think debt was mispriced for a long time," he says about the GFC."And, of course, it's easy in hindsight, but having been through it, some debt is good, some gearing or a bit of leverage is fine, depending on your business."But there is a limit as to what level of gearing should be attainable, and you have got to get risk priced correctly."So with ABC Learning, for example. I think they changed, and quickly. I think while it was a domestic business it was actually a sound business, relatively simple, relatively good cash flow, and I guess from a structural perspective made a lot of sense."But then very quickly there was massive acquisitions and capital raisings in the US and here. Not only did the whole business model get a whole way more complicated, it had more debt suddenly sitting on it, and trying to manage across different jurisdictions and different regulations."Another lessoned learnt is that during a booming market all companies can look good, but it's not until the tide goes out that the real failures make themselves known."In the good times, everything does pretty well, and it's probably a lot more difficult to pick flaws in business models in boom times, because everyone is doing well."But in this environment that we are in now, it's tough," he says."The good businesses are still grinding out earnings by cost saving or efficiencies. They might not be earning much, but holding their own. I think the lesson is to dig deeper into businesses."And that's ultimately what the investors of Argo, and other listed investment companies want: safe, dependable and conservative investment strategies with some sizzle, but not too much to risk the farm.It's a slower pace, but not exactly a sleepy hollow which suits Beddow."I love snowboarding, and as I've got a bit older and a bit more responsible I've had less time," says Beddow. "But I quite like the action sports."Maybe that's why I'm happy to work at a listed investment company."
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