Getting to know Equities Analyst, Nicholas Vidale

Nick Vidale

Nicholas Vidale

Equities Analyst
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Nicholas Vidale is an Equities Analyst covering banks, financial services, developers and contractors and gaming.

Nicholas joined Perpetual Investments in May 2017, having previously been at GLG Partners (Hong Kong) for 4 years, where he was a Portfolio manager and analyst for the Asian Financials and Property Long/Short Equity Portfolio.

Prior to GLG Partners, Nicholas’ career included time as an Analyst and Portfolio Manager within the Deutsche Asset Management Australian Equities team, Analyst and Portfolio Manager for Arnott Capital’s Asia-ex Japan Long/Short Equity Strategy, and CLSA (Hong Kong) doing Regional Equity Sales.

Nicholas holds a Bachelor of Commerce (Actuarial Studies) and Bachelor of Applied Finance from Macquarie University and is a Chartered Financial Analyst.

What was it that initially drew you to this type of work and what has kept you here?

When I was young, I saw owning equities as a way to participate in the ownership of a business without needing a lot of money. I liked the concept of being able to invest in many businesses as a way of wealth creation, and by the time I was in high school I was investing into mutual funds with money I had been making working part time.

As my education progressed and I started working within the industry, an increased understanding and technical knowledge of how stocks were valued and how equity markets worked increased my interest levels further, and I continued to increase my ownership in equities. With the benefit of hindsight, I think it’s fair to say I had probably become over confident in my ability to pick stocks, as I think about the size of some of the positions in stocks I held in my twenties and I can’t imagine ever having position sizes that big again!

Institutional investors get enormous access to information and people. This makes the role incredibly interesting, especially as things are always changing. Personally, I am very numbers orientated. Having an excellent grasp of numbers is the back-bone to my investment decision making. However, within this, there is a huge amount of qualitative work that goes in to thinking about how numbers take shape. It’s not like an accounting role, where the numbers are very black and white. In investment management, it’s more about what could be, and using numbers to help understand business models, and what the future holds. This means meeting people and networking is also incredibly important, as the challenge is turning what I learn about the world, companies, and the people I meet, into a financial roadmap for investing.

It’s also worth adding that being trusted as an investment manager comes with huge responsibility. Being entrusted by people to manage their wealth is a very big motivating factor. The position can never be taken for granted as there is both a professional and personal commitment to deliver the best results for any client.

Who has had the biggest influence on your career?

I have been fortunate enough to have worked in many different parts of the investment management industry value chain, and with many very talented people over time. When I think back on my career progress, there was often one person at every point who has had a very big impact on my professional direction and development, either by way of providing me an opportunity for career development, or through being taught new skills.

However, regardless of the country I have worked in, the sector or stocks I have covered, or the firm I have worked at, my decision making process for investing is still dictated by free cashflow, as fundamentally I believe a company’s value is a function of both its balance sheet and income statement, not just earnings.

This being the case, the most influential person on my career is Vince Pezzullo, Deputy Head of Equities at Perpetual, as my free cashflow financial valuation modelling framework was developed under his supervision when we both worked at Deutsche Asset Management. I like to think my financial modelling skills have advanced since then, but there’s no question what I learned back then was the foundation for my investment process over the last 20 years.

What was your very first job?

Kitchenhand Burger King at 14 years of age.

What’s the best piece of advice that you have received?

Anything my mother says. She’s always right.

What is something most people don’t know about you?

By way of family heritage, I am half Greek and half Russian. My mother’s family has a very interesting family history. My great grandparents actually used to own gold mines in Russia and used to sell gold to the Czars. The Russian revolution which overthrew the Russian Empire meant my mother’s family had to flee the country. At the time, they fled to Shanghai, and settled in what is now known as the French Concession. My aunty and uncle were both born in Shanghai, and my uncle even served in the communist party army for a brief period. However, on invasion of Shanghai by the Japanese, my mother’s family was forced to seek refuge again, and this is when they emigrated to Australia.

The move to Australia brought safety, but it meant they were starting life again with nothing across the other side of the world. I can only imagine what this must have been like after being in such a prominent part of society and having such enormous levels of wealth, and then having nothing. My grandmother used to tell these amazing stories of what life was like in Shanghai and conceptualising the huge amounts of wealth that existed within the Russian community was always fascinating. Prior to moving back to Sydney in 2017, I was living in Hong Kong for 7 years. Fascinated by China and how quickly it was changing, I was also keen to learn more about my family history, so one year I organised a holiday to Shanghai one year with my mother and sister, so see where our family used to live. The residential apartments and school are all still present in the French concession, and even one of the Russian Orthodox churches my family used to attend still exists. I should also add that post moving to Australia, my uncle studied at Sydney University and then went on work for the CSIRO, where he invented the Ultrasound. He was awarded an Officer of the Order of Australia in 1999. I think this experience so accurately depicts how Australia’s fortunes have been built by hard working immigrants who came here looking for a better life.

Which stock excites you the most at the moment?

I think we are starting to see some really big valuation opportunities emerging as extreme sentiment, stock specific issues, and market dislocations all increase at the same time. Within my coverage universe, I note all the outsourcing stocks are starting to look very attractive. In Australia this is both Link and Computershare, and in the UK, it is Equiniti. We are shareholders in all three of these names.

Link has just experienced an earnings reset, and the stock has de-rated far more than the earnings adjustment. If the company can prove that FY20 earnings have stabilised, then the market should start to re-rate what should be a steady growth and defensive business. More interesting is Link’s 44% ownership of PEXA. I believe the market under-estimates the value of this business, and will underestimate the earnings upside that will emerge as the business reaches scale. Quasi-monopoly network businesses, like the ASX, command very high valuation multiples, and given PEXA is in its infancy, I see this as being under-appreciated by the market.

What do you see as the biggest challenge for the next 12 months?

The same challenge any fundamental has faced in the last 10 years. Investing in an environment of unorthodox monetary policy. Central banks continue to distort the real cost of capital, and this makes disciplined investing very difficult.

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This analysis has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426.It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider, with a financial adviser, whether the information is suitable for your circumstances. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.

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