Unlocking Value Beyond Consensus in Gold, Energy & Aussie Markets | Michael Goldberg
Insights: Value Investing and Generational Wealth with Michael Goldberg
In today’s ROCast, Murdoch is joined by Michael Goldberg, Co-Founder, Managing Director and Portfolio Manager of Collins Street Asset Management. Michael’s flagship fund, the Collins Street Value Fund, has returned 14.85% over the past 12 months and 13.5% per annum since its inception in 2016. Join us as Michael shares how his background, shaped by early lessons in his family’s business in the rag trade and his unconventional path into finance has brought a fresh perspective on identifying deep value opportunities in the Australian Share Market. We also discuss his perspective on value investing, building inter-generational wealth, and the strategies for current markets.
A Different Path to Finance
Michael’s journey to the world of finance is anything but typical. Growing up in Melbourne’s Jewish community, he was immersed early in the entrepreneurial spirit, watching his father run a retail business at the iconic Queen Victoria Market. These formative experiences shaped his understanding of negotiation, resilience, and the value of hard work.
A Bar Mitzvah gift of CSR shares marked his first step into investing. Combined with his academic pursuits at Monash University and a transformative year at a seminary, Michael’s non-linear path instilled a unique perspective that now informs his work at Collins Street Asset Management.
Collins Street: Investing with Clarity
Founded nearly a decade ago, Collins Street Asset Management operates with a clear mission: to uncover value in a crowded market. The firm’s flagship fund, Collins Street Value Fund, as of the time of recording, has delivered approximately 14% annualized returns since inception, outperforming the broader ASX by 4-5%.
Michael emphasized the firm’s disciplined approach to value investing. “We look for opportunities where $1 of earnings or assets can be purchased for 50 cents,” he explained. This strategy is rooted in meticulous research and avoids the speculative traps that can derail long-term success.
The Metcash Turnaround: A Case Study (ASX: MTS)
Metcash, the parent company of IGA supermarkets, became a textbook example of Collins Street’s approach to value investing.
The Challenge: Facing skepticism from the market, Metcash’s share price plummeted to $1.60 amid concerns about its ability to compete with giants like Coles and Woolworths.
Collins Street’s Strategy:
Investigating the company’s price-matching strategy.
Examining store refurbishments funded jointly by Metcash and independent owners.
Assessing staff retraining initiatives designed to improve customer experience.
On-the-Ground Research: Michael and his team visited 15 IGA stores across Victoria, speaking directly with store managers to gauge the success of these efforts.
Outcome: The share price recovered to over $3, validating their investment thesis and highlighting the power of hands-on research.
Gold Stocks: Steady Gains in Uncertain Markets (ASX: WGX; ASX: CYL)
Gold stocks form another critical pillar of Collins Street’s portfolio. Rather than speculating on rising gold prices, the firm focuses on companies with solid fundamentals that perform well even in stable markets.
Key Drivers:
Declining global production.
Increased central bank purchases.
Reduced exploration activity.
Investment Insight: By targeting companies with low operational costs and robust margins, Collins Street ensures resilience regardless of broader macroeconomic trends.
Examples of Holdings:
Westgold Resources (ASX: WGX).
Catalyst Metals (ASX: CYL).
CSL: Biotechnology Excellence (ASX: CSL)
CSL, a leader in plasma-derived therapies and vaccines, is a favorite in Michael’s household, even earning a spot in his children’s learning portfolio.
Why CSL?
Its reputation for consistent innovation.
Strong global demand for its life-saving treatments.
Key Metrics:
High P/E ratio reflecting its premium valuation.
Robust return on equity driven by cutting-edge research.
The Lesson: CSL demonstrates the importance of backing companies with a clear competitive advantage and a proven track record.
Incitec Pivot: Fertilizers and Beyond (ASX: IPL)
A crucial player in Australia’s agriculture and mining sectors, Incitec Pivot has long been on Collins Street’s radar.
Core Focus:
Manufacturing fertilizers essential for agriculture.
Producing industrial explosives for mining operations.
Performance Factors:
Steady dividend returns.
Cyclical growth tied to commodity demand.
Investment Takeaway: Despite market cyclicality, Incitec Pivot’s dominance in its niche makes it a reliable long-term bet.
Woodside Petroleum: Energy Transition in Action (ASX: WDS)
Woodside Petroleum, Australia’s largest natural gas producer, exemplifies strategic positioning in a shifting energy landscape.
What Sets It Apart:
Significant global LNG market share.
Focus on cleaner alternatives to coal.
Key Metrics:
Strong cash flow from long-term contracts.
High dividend yields supported by consistent earnings.
Why It Matters: As the world transitions to cleaner energy, Woodside’s LNG expertise positions it for sustained growth.
Carnarvon Energy: A Small-Cap Success (ASX: CVN)
Carnarvon Energy represents Collins Street’s willingness to engage with smaller-cap opportunities.
Initial Issues:
Previous management decisions caused inefficiencies.
Collins Street’s Role:
Advocated for cost-cutting measures, leading to a 40% reduction in overheads.
Refocused efforts on high-value projects like Dorado.
Valuation Insight:
Trading at $0.16-$0.17 per share, while cash and saleable assets were valued at $0.30-$0.35 per share.
ResMed (ASX: RMD)
Context of Discussion:
The Collins Street team debated the potential impact of increased usage of dietary drugs like Ozempic, which are known to aid in weight loss, on ResMed's business. ResMed primarily serves patients with sleep apnea, a condition closely associated with obesity.
The discussion revolved around how ResMed might adapt or thrive in a market where obesity rates might decline due to such drugs.
Outcome:
ResMed was ultimately placed in the "too hard basket," as there were significant uncertainties about whether these market dynamics would help or harm the company. This reflects Collins Street's cautious approach to investing in companies with unclear future trajectories.
Ramelius Resources (ASX: RMS)
Context of Discussion:
Listed as a part of Collins Street's portfolio, Ramelius Resources was included in their 20% gold stock allocation.
Ramelius is known for its gold mining operations, and its inclusion reflects the broader thesis Collins Street has about gold as a hedge and an opportunity amidst declining production and increasing central bank purchases.
Strategic Positioning:
Ramelius Resources complements the portfolio's focus on high-margin, low-cost producers in the gold sector. This aligns with Collins Street's value investing principle of minimizing reliance on macroeconomic factors such as gold price increases.
Generational Wealth: Lessons from the Goldberg Family
A strong advocate for financial education, Michael involves his children in stock selection, teaching them to analyze businesses and understand investment fundamentals. He and Murdoch also explored how families can foster intergenerational wealth while avoiding entitlement.
Takeaways for Every Investor
Focus on Fundamentals: Value lies in what is measurable and tangible.
Do Your Homework: Direct research leads to informed decisions.
Educate and Empower: Build a legacy by teaching the next generation.
Stay Collaborative: Leverage diverse perspectives for better outcomes.
Final Thought
Michael Goldberg’s insights reflect a deep commitment to thoughtful investing and responsible wealth management. As he reminds us, “Investing is not just about returns; it’s about sleeping well at night.”
For more stories from industry leaders, visit York Wealth Management Insights.
Written by,
Murdoch Gatti
Private Wealth Manager | MComm Fin
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