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J#12: Ten million shares of Jupiter Mines bought by a single, individual investor this week. What does this mean for us?

The chairman of Jupiter Mines, Brian GilbertsonJupiter Mines, our second free recommendation, this week announced to the Australian Securities Exchange that Brian Gilbertson had paid AUD2.9 million dollars for an additional 10 million shares.

Gilbertson is the Chairman of Jupiter Mines (and the former CEO of BHP Billiton).  His purchase is a positive for Jupiter Mines and further supports our buy recommendation.  Whenever a Chairman invests his own money, it shows how confident he is on the future of the stock.  It also strengthens the alignment of his interests with those of other shareholders. 

At Double Digit Dividends we place great importance on analysing the quality of the management team and how strongly management and shareholders’ interests are aligned.  We like to see management having a personal stake, as a shareholder, in the companies that they run. Just as I take a personal stake in the companies I recommend.

We continue to recommend buying Jupiter Mines up to AUD0.35 and with a 20% allocation to our portfolio.  This buy up to price yields 13.6%.  Jupiter Mines’ closing price as at 31 July 2020 was AUD0.295 with an offer price of AUD0.295.  Purchases at the offer price would yield 16.1%.  The yields quoted are net of withholding taxes for non-Australian residents. There aren’t any withholding taxes.  All the dividend income is paid in full to non residents as “conduit foreign income.”

Double Digit Dividends Investment Selection Process – Management and Ownership Analysis

As you can see from the commentary above, “Management” and “Ownership” are two components we look at and monitor in our investment selection process.

As promised in my last journal, listed below are the questions we ask ourselves when choosing a company with great “Management” and “Ownership”.

Management:

  • Is the management team competent?
  • Is the management team ethical not just in business, but in life? 
  • Are they the sorts of people you would do business with privately, on a handshake?
  • Have they got a track record of doing what they say they will do for shareholders?  
  • Do they communicate with shareholders and welcome their questions?
  • Do they have a shareholding in the company?  Is it of material size? 

Ownership:

  • Who else owns a part of the company we are investing in?
  • If they are controlling shareholders, are their interests aligned with ours, and do they treat minority shareholders fairly and respectfully? 
  • Are there enough shares that are not closely held to make the company’s stock sufficiently liquid?

Usually the two hardest questions to answer from the list above are: Is the management team ethical in business and in life, and are they the sorts of people you would do business with privately and on a handshake? Without knowing them in person for an extended period or speaking to people who know them well, it is usually a hard question to answer.  What we do is we search and read published public information regarding that person and, if we know people on the ground, such as our brokers, we canvass their views.

There are six other components to our investment selection process and I would like to share them with you in my journals ahead.

A Message for My Children

Someday soon, you will be making your own business dealings and my hope is that you get to use these journals as your guide to making great investment decisions. Both your parents would be very happy to see you develop your business skill sets.

Do you agree that a person’s ethics and character set are important factors in determining whether to do business with them?  More importantly, do you apply the same standards to evaluate your own self?