In the years since leaving his legal career to become a professional investor, Peter Johns has developed a knack for finding smaller companies that other fund managers don’t have the capacity to explore.

A value investor at heart, Mr Johns scours through reams of ASX releases looking for businesses that he describes as “unusual, unnoticed or ignored”.

“I look for those stocks and find them, generally, just through the incessant daily reading of ASX announcements. It’s just the bulldozer approach,” he told Reach Markets.

Often, these businesses are so small that other funds are unwilling or unable to take a stake – leaving good-quality businesses to be snapped up by Mr Johns at attractive prices.

“They’re ostensibly cheap on a value investing basis, on a price-to-earnings basis,” he said. 

“Now, the P/E can be entirely misleading and you have to dig right down to make sure that it’s a sustainable company, that they’re travelling okay and ensure they’re not a value trap.”

“But the best explanation [for their price] seems to be that it’s an illiquid stock, it’s tightly held, it’s too small for any fund of size to even care about or take an interest in, but it’s sufficiently liquid for someone of my size, with a bit of patience, to slowly build up quite a reasonable stake in it.”

Although Mr Johns’ first forays into investing were based primarily on decoding the numbers published by businesses – an art he had to learn “from scratch” – in more recent years he has begun to utilise the skills he developed as a lawyer, too, to cut past the noise and spin and to assess business leaders’ reliability, honesty and ultimately their company’s staying power.

“It’s an art form; it’s very much an inexact science,” he said. “[But] it’s generally helped me move towards companies that are more dependable longer term.”

So far, the strategy has outperformed the benchmark. By the end of January, it had delivered an annualised return of 29.7% since inception – well above the ASX 200’s total return index’s 9.1% over the same period.

Join Peter Johns this Friday, 25th February, at 12pm (AEDT) on our weekly The Insider: Meet the Fund Manager webcast to hear him talk about his favourite stocks, investment strategy, market insights and more. There will also be an opportunity to ask questions during the session. To book yourself in, click here.

Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets’ position

Sources

• Westferry Investment Group, About