Article originally written by Julie-ann Sprague, and published by The Australian Financial Review on August 20, 2018.
Patrick Grove is one of the nation’s 100 richest people. Ranked 89 on this year’s Financial Review Rich List with an estimated worth of $850 million the 43-year-old pocketed a small fortune when he sold his iProperty business to REA Group in 2016. The former accountant is busy building online and mobile streaming service iflix, which aims to be the Netflix of Asia.
What do you look at when investing?
Firstly, the TAM (total addressable market). How big can this become? Is your target market 100,000 or 100 million? For us, the bigger the better.
Secondly, the team, do you have what it takes to go big. Anyone can dream big, but not everyone can scale and execute big.
How do you measure the value of a non-income producing growth company?
You look at say three to five years in the future, and see what the income would be then, assuming revenue grows faster than expenses. The five biggest companies in the world today (Amazon, Google, Apple, Tencent, Alibaba) all had long periods of ‘non-income’.
Do you think we are on a fintech bubble?
Not at all. The big four banks still occupy such a huge percentage of total market cap in Australia. There is still a lot of disruption to come.
There are plenty of stocks trading on hefty multiples. Do you think the market is currently over valued?
Not at all. You have global interest rates at an unprecedented all time low, which means multiples should be higher. You have huge tax cuts in the US which means earnings will be higher and tech innovation continues to make inputs and costs lower for most smart companies.
Which stocks are catching your eye?
All the big tech leaders will continue growing faster than anyone else. If you can buy Facebook or Google at under 25x earnings, why would you buy any other blue chip? I’m very bullish the big consumer tech companies because as an insider, I see the moats around their products and its insane and just keeps growing with very little effort.
What is the dream company you’d love to own (on the ASX) indiscriminate of its valuation?
Companies that we are proud to be associated with, Frontier Digital Ventures (ASX:FDV) and iCAR Asia (ASX:ICQ). Both are in tech (not blue chips yet, but working hard on it!), have great leadership teams executing a solid strategy and probably undervalued by the market. I think a big re-rating in both is just around the corner.
Do you think value investing will make a comeback?
It never goes out of fashion. By the way, I think you can start to find ‘value’ investing in tech. The recent pull back in stocks like Facebook is providing a great value investing opportunity.
Property markets are softening in Melbourne and Sydney. What’s your expectations for the market over the next 12 months?
Best bit of advice you can give someone with $50,000 to invest?
Depends what your goal is. If it’s to be safe, buy a great rental property. If you want to maximise it hard and fast, start a tech company.
Worst investment you’ve made?
E-commerce!
Do you have an investment idol or someone you admire?
Warren Buffett. Been a fan since I was kid and was lucky to attend his AGM a few years ago in Omaha. It was funny to hear him say his only regret was ‘not buying shares in Google’.