Christopher Rees has made the right buy or sell call an astonishing 80-per-cent of the time for his “10STX” portfolio.denphumi/Getty Images/iStockphoto
When Christopher Rees left home in 1966 at the age of 16, his parents thought he would be back in time for dinner. But he ended up wandering the world for several decades, working at jobs in difference places, including as a tailor in Afghanistan, a cook in India, a carpenter in Switzerland and a charter-boat captain in the Caribbean.
The thrifty Mr. Rees is also a self-taught investor who has invested his savings well enough to establish a track record better than his hero, Warren Buffett. He has made the right buy or sell call an astonishing 80-per-cent of the time for his "10STX" portfolio, registered since 2000 on Marketocracy.com. The return on his personal portfolio averaged 21 per cent a year over the past 25 years, as recorded on Tenstocks.com. Mr. Rees has appeared in publications such as Forbes, SmartMoney, The Times of London and The Globe and Mail – and was featured in Matthew Schifrin's 2010 book, The Warren Buffetts Next Door: The World's Greatest Investors You've Never Heard Of.
The Globe recently caught up with Mr. Rees to get an update on how things have been going since we interviewed him in 2008.
Is your investing approach still the same?
I haven't changed anything. My focus is still on trying to find companies selling at a discount to tangible book value, and/or special situation investments, while running a concentrated portfolio of around 10 stocks. I am often investing in companies that 97 per cent of investors would not touch with a bargepole. Sometimes, my portfolio can look like an undesirable collection of rotting fish-heads and dumpster debris. When I am buying, almost nobody agrees with me. I like it like that.
What are you investing in these days?
Currently my portfolio is focused on energy- and commodity-related investments. I think it's the only part of the market where there is still some value to be found. It's very unusual for me to be so concentrated in a single sector. Usually I diversify across sectors, currencies, and geographies. This concentration introduces a great deal of price volatility in the portfolio. I'm used to a lot of price volatility but this current sector concentration amplifies it even more. In the face of extreme price volatility, I focus more on the value of the underlying investments rather than day-to-day price gyrations. Those who invest alongside me don't always enjoy the ride. A strong stomach is required.
What are your top holdings?
The top five are Obsidian Energy, Vale SA, Chesapeake Energy preferred D shares, Suncor and Capital Product Partners. My biggest position is Obsidian Energy (OBE-TSX, OBE-NYSE), formally known as Penn West Petroleum. I've owned OBE several times over the years, including selling a chunk as high as $34 (U.S.) a share in 2008. Since then I've been to hell and back multiple times. But OBE is now a smaller, more compact company and I'm bullish on the long-term price of oil. Demand is increasing, and I think the supposed production threat from U.S. shale is way overblown. John Brydson, a director and board member, has been accumulating OBE stock for some time, his most recent, a purchase of 250,000 shares, was at $1.60 back in April. Mr. Brydson spent close to 15 years managing a $2-billion portfolio at Credit Suisse. He knows his stuff and he's on the inside. David French, the CEO, has also begun nibbling at OBE shares, with several buys in August and September at around a $1 a share. Obsidian Energy is my best idea.
What's your take on the stock market these days?
I am basically in a holding pattern, waiting for higher oil and commodity prices to sell stocks and raise cash. I really don't like this market. In my opinion, risk is way too high and reward is way too little. I'm currently 7-per-cent cash but would like to see it rise to the 40-per-cent range sooner rather than later. This market is toppy, overvalued and high risk. I want no part of it. I suspect in the next crisis of over-confidence there may be no place to hide. People will likely be forced to sell what they can, not what they want. The best place to be may be sitting on a lot of cash to be a buyer when some fear returns to the market.
You were in the Dominican Republic when we spoke in 2008. Where are you now?
I have relocated to a small beach town in Thailand. My 13-year-old daughter is fluent in Spanish, English and Thai – and is currently learning Mandarin and Japanese. One reason I moved to Thailand was because I was intrigued by [billionaire investor] Jim Rogers moving with his family to Singapore. His reasons for doing so made a lot of sense to me [in interviews with journalists, Mr. Rogers has said that he wants his heirs to grow up and live in Asia because he believes that's where the best opportunities will be over the next century].
This interview has been edited and condensed. Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com.