Over the years, I’ve become less interested in what most of the so-called investing greats are up to.
I’ve seen too many fall from said greatness to hang on their every word any more.
Maybe I’ve also come to understand that what matters to a billionaire US hedge fund manager isn’t necessarily what should bother a humble British DIY investor.
But I do not ignore other investors’ pronouncements entirely. It’s all grist for the mill.
And I do still have my favourites. Fund managers and investing veterans who I want to learn from.
When Peter Spiller says he’s found an exciting opportunity, for example, I stop and listen. Whereas you might reasonably stop and ask: “Peter who?”
So first, a quick biography.
A capital record
Peter Spiller is the fund manager who’s headed the Capital Gearing Investment Trust since 1982.
Between then and April 2022, he multiplied Capital Gearing’s share price by 280 times.
What’s more, Spiller achieved that return with only one down year. That’s remarkable!
Even more impressively, Spiller’s investing style – and Capital Gearing’s mandate – is to go anywhere.
This isn’t a fund that happened to find a hot trend and surf the wave to riches, in other words.
Rather it is truly actively managed, with fluctuating holdings of equities alongside cash, gilts, US treasuries, other investment trusts, and gold – varied according to how Spiller sees the world.
Indeed, when the trust was first established, equities were cheap and its managers chose to borrow to invest on favourable terms to increase the portfolio’s return.
In contrast, in recent years the trust has used no debt – no ‘gearing’ – at all, judging most assets too expensive.
Which points to another reason why I closely follow what Mr Spiller has to say.
Listen to interviews with Japanese fund managers or small-cap specialists, and you’ll hear how Japanese shares look attractive or smaller companies are an opportunity.
But because Peter Spiller invests in everything, he has no particular dog in the fight.
Of course, in the wrong hands this freedom of action would be disastrous. So-called ‘style drift’ is a red flag for asset allocators.
But Spiller’s record speaks for itself. He can drift as much as he likes as far as I’m concerned.
Guilty secrets
After all that, perhaps you’re now as keen as I was to hear the one thing that Peter Spiller was buying in size during the turmoil that followed Liz Truss and Kwasi Kwarteng’s Mini Budget?
The investment opportunity that the level-headed 73-year-old went so far as describing in his latest quarterly report as ‘exciting’?
What do you reckon? Perhaps a high-flying software firm whose shares were smashed by the bear market? Or maybe an energy producer overlooked among this year’s dash for resources?
Alas, having built this up, I must now let you down.
Because the one asset that set Spiller’s pulse racing was… gilts.
Aka UK government bonds.
Yes, the most boring asset around. Beloved of pension funds and market wonks, but about as heart-fluttering to the rest of us as money-off vouchers for Morrisons.
Even worse, I’d say the moment to pounce on this sleep-inducing asset has already passed.
All very disappointing! Tipping the next Tesla Spiller most definitely is not.
However, I still wanted to bring his latest foray to Fools’ attention because of what it tells us about how Spiller has multiplied his investors’ money so impressively over the years.
There are valuable lessons here.
Winning ways
This is what Spiller says in his latest interim report about the object of his affections:
…Our only additions of consequence have been to our gilt holdings. Fortunately, we did not hold UK index linked bonds of any duration before the gilt market explosion. During the last few weeks, we have added 4% to our gilt holdings, mostly at reasonably short durations. That said, we have invested as long as the index linked 2050s, albeit in small size.
It is exciting to be able to invest into the gilt market again, after many years of being priced out. It is a natural asset for a conservative sterling investor to hold. However, our excitement is tinged with a sense of regret that the recent disruption will have long term negative consequences for the UK.
In this one passage, we see many of the elements behind Spiller’s long track record.
Firstly, he is sensitive to valuation. Spiller plainly likes gilts – a ‘natural asset’ to hold – but not at any price. So Capital Gearing held none when the sell-off began.
Compare that to the pension funds and others who had bid up the price of government bonds in the years leading up to 2022 – to the extent they had negative yields and were priced to eat your money. Spiller was having none of that.
We see this often with equities, too. For instance in the stay-at-home stock market boom, the shares of many tech firms soared to nose-bleed valuations on ambitions for the future. Many are now down more than 90%. Spiller owned none of them.
The next thing to note is Spiller’s opportunism.
So many people get bearish on an asset class – and then stay bearish. Think of the pundits for whom no crash is ever deep enough. Always waiting for a final, final dive that never comes.
But Spiller is a pragmatist. The UK bond market went bananas (that’s a technical term) after the Mini Budget. Yields on a 10-year UK government bond went from 3% before Kwarteng got up to speak to 4.5% days afterwards, as prices in this ‘risk-free’ asset cratered.
So Spiller swooped. Even as the Bank of England stepped in to ensure an orderly market in gilts as pension funds reeled, Spiller was buying. While others ran away from the fire, he ran towards it.
Finally, notice how the manager laments the chaos that gave him this opportunity – but took advantage for his shareholders anyway.
Again, you see so many investors whose biases confound the best investing decision. Think of all those who missed out on the rally under the early years of President Trump, for example.
I did it his way
Feeling inspired? Alas, the moment Spiller spotted amid the Westminster mayhem has passed.
The yield on the 10-year gilt is back below 3%, following a strong rally on the Bank of England’s intervention and the appointment of Jeremy Hunt as chancellor. And all but the longest-term index-linked gilts sport a negative yield again.
But never mind. My point isn’t that we should simply follow clever investors like Peter Spiller – not least because as this episode shows, their latest idea is usually stale by the time we hear about it.
Rather, we should aspire to be as alert to opportunities a septuagenarian fund manager who clearly still loves the game after four decades.
Of course, we’re long-term investors at the Fool – so mostly is Spiller, incidentally – and I’m not suggesting we turn into day traders.
But we should have a watchlist of companies we like, and be ready to pounce on good prices.
We might also want to consider learning about sectors or even asset classes outside of our comfort zone, widening our lens on the investing landscape.
You never have to wait long very for a crisis in investing. Next time, maybe ask yourself: “What would Peter Spiller do?”
