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If you’re a small business owner, you may look at the idea of investing and wonder: is it the right move for me? Where do I even begin? Investment expert and Fat Tail Investment Research editor Murray Dawes knows the landscape from the top of the market to those up-and-comers the rest of us haven’t heard of yet.
Through his publications Australian Small-Cap Investigator and Pivot Trader he’s helping novices and experienced traders alike work their own way into the market. We’ll look at Dawes’ own expertise, and why it makes sense for small business owners to understand the market — for investment and business success.
A precocious investor from the start, Dawes began his career on the futures floor with Swiss Banking Corporation (now UBS) trading three and 10 year bonds and options. “That’s where my interest in understanding market psychology and price action and that sort of thing really came from; seeing immense volatility and the news coming out, markets flying all over the place and everyone freaking out in the pits,” says Dawes.
From successes amongst chaos on the trading floor, Dawes spent time trading hedge funds for the wealthy Smorgon family in Melbourne and brokering boutique hedge funds for high net-worth clients. It was here that Dawes refined his personal philosophy and trading rules.
“Technical analysis I see as risk management where you’re managing your emotions and you’re planning trades because really, the markets are flying all over the place,” says Dawes. “You’ve got to have a really strong set of rules and a way of objectively looking at things and working out how you’re going to plan your trades.”
Following the 2008 financial crisis, Dawes moved into small-caps (generally companies with a market cap under $2 billion AUD), and started sharing his knowledge through publications.
For those just getting started, the world of investment can be intimidating. Having a guiding hand through Dawes’ publications can make dipping your toe in the water that much easier.
“People who don’t have that experience and who really don’t have the time to devote to getting that experience, I can come in and share decades of experience with them so they get to jump the gun, really, and get those lessons given to them rather than having to go and do it themselves.”
For small businesses in particular, there’s more to investment than just financial gain — it’s an insight into the success and landscape of the business world.
“A small business owner, if I was to send out a tip saying ‘this is a great company worth buying’, they might look at that and go ‘hey, that’s really interesting, that’s the sort of thing that my business needs,’” says Dawes.
Take Dawes’ latest tip — a small business with a heavily integrated IT service offering. Dawes thinks they’re a good investment, but the background is just as interesting from a business perspective.
“It’s keeping abreast of what’s out there, what innovation is out there,” says Dawes. “As a small business owner you need to be on top of it. What is the tech at the moment? Is it going to supersede my business? Do I need to invest in that? Do I need to update myself?”
Dawes sits on a couple of publications which both offer different approaches. Pivot Trader is more about depth of understanding and learning Dawes’ technical analysis, while Australian Small-Cap Investigator [ASCI] is more about long term strategy — where the market is heading and understanding how to invest accordingly.
With ASCI, Dawes is really looking closely at the shape of the market, and the businesses with potential over a longer time frame — businesses primed to disrupt the market. For instance, Dawes has been looking into significant shifts within the ageing Flash memory sector.
“Flash memory, it’s sort of nearing the end of its life [and] the opportunities of the new tech from memory is huge,” says Dawes. “It’s a trillion dollar industry. I’m finding these stories, and I’m using a bit of my technical method, but most of it is a real fundamental look at these huge themes that are under way and looking for the big picture, multiple year returns that are very large.”
Small-Cap balances true investment advice with industry insight, using Dawes’ experience to help navigate the market.
Take one recent win: “We bought Afterpay and got a 1448% return,” says Dawes. “So this is the idea, we got into Afterpay very early and rode it and it’s a multiple-year investment.” With Small-Cap, Dawes sends out one case study per month, with twelve across the year.
“[Readers] might only decide that there’s one that they love out of that whole twelve, but if that one was Afterpay, that’s well worth the price of admission.”
Beyond the rate of return, it can be vital for business owners to simply understand the market, says Dawes. “I can see the logic for SMEs — business owners especially. It can be a great thing to just keep your fingers on the pulse.”
As part of Australian Small-Cap Investigator, Dawes has recently named the seven stocks they’re backing to deliver big returns in 2021 and beyond. Click here to learn more.
Fat Tail Investment Research provides unbiased research, ideas, and recommendations to help free-thinking, independent Australian investors make smart decisions with their money. Because we know that money is simply a means to an end. That end is whatever you choose it to be. But you only get there with better research. That leads to better investing. Better investing leads to financial independence. And financial independence allows you to live a better, richer, and freer life.
