The “Don Bradman” approach to investing

Montaka is a global fund born in Australia. And at this time of year, Australians spend much of their summer watching one of their fondest national sports: cricket.

For readers that are unfamiliar with the game, it’s similar to baseball in that there is a batter and a pitcher (known is cricket as the “bowler”); and the batter hits the ball and with the intention of: (i) not being caught by one of the opposition players in the outfield before the ball bounces; and (ii) running to score points (known in the game as “runs”).

One of the key differences between cricket and baseball is that, in cricket, there is no limit to how many runs you can score before another batter takes a turn. (In baseball, obviously, a batter either scores a home-run, or gets out). As long as you don’t get out in cricket, you can continue batting almost indefinitely.

The other key difference is that, in cricket, if you hit the ball over the fence without it bouncing, you get an automatic six runs – known as a “six”. And if the ball goes to the fence after bouncing, you get an automatic four runs – known as a “four”.

Now let’s wind back the clock to August 27, 1908. Born in a small country town called Cootamundra (also the birth town of your author’s esteemed mother), was a baby boy named Donald George Bradman. As a young boy, Bradman fell in love with the game of cricket. Practising every day with just a stick and a golf ball, Bradman went on to become the greatest batter the sport of cricket has ever seen.

To illustrate just how good Bradman was, take a look at the chart below that illustrates the top test cricket batting averages of all time. Not only is Bradman at the top of the list, he stands head and shoulders above the competition.

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What makes this record all the more remarkable is that Bradman scored total career runs of 6,996 by hitting only six sixes! This equates to just 0.51% of Bradman’s total career runs being scored by hitting the ball over the fence without bouncing. (For comparison, many of the names on the list above scored approximately 10% of their total runs from sixes).

So why didn’t Bradman score more sixes? He had a clear strategy: never hit the ball in the air – for that’s how you get caught! Bradman focused on scoring twos and threes by hitting the ball along the ground between the opposing fieldsmen.

The Montaka strategy, in many ways, seeks to mimic Bradman’s wisdom. Our strategy and risk controls are relatively conservative. We operate at very modest levels of leverage; we limit maximum position sizes to conservative levels; we limit the universe of investable stocks to highly-liquid names; we limit concentration levels within industries, regions and underlying exposures; and most importantly: we seek to buy assets for less than they’re worth and sell them for more than they’re worth.

Essentially, Montaka is aiming to score a large number of “twos and threes” consistently and sustainably over a long period of time, to use the cricketing metaphor. We are not trying to hit sixes – we are not swinging for the fences.

We believe Don Bradman’s batting strategy can teach all investors something about long-run average returns.

Happy new year.

Screen Shot 2015-11-11 at 12.08.48 pmAndrew Macken is a Portfolio Manager with Montgomery Global Investment Management. To learn more about Montaka, please call +612 7202 0100.

1 thought on “The “Don Bradman” approach to investing”

  1. Andrew, you started out explaining what is cricket. Here’s another description apparently attributed to the MCC.

    Cricket Explained to a Foreigner
    You have two sides, one out in the field and one in.
    Each man that’s in the side that’s in the field goes out and when he’s out comes in and the next man goes in until he’s out.
    When a man goes out to go in, the men who are out try to get him out, and when he is out he goes in and the next man in goes out and goes in.
    When they are all out, the side that’s out comes in and the side that’s been in goes out and tries to get those coming in out.
    Sometimes there are men still in and not out.
    There are men called umpires who stay out all the time, and they decide when the men who are in are out.
    Depending on the weather and the light, the umpires can also send everybody in, no matter whether they’re in or out.
    When both sides have been in and all the men are out (including those who are not out), then the game is finished.

    I trust that Montaka will remain in and it will be a long time, if ever, before it’s out.

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