Today’s post is a profile of Investor Guru Peter Gyllenhammar, who appears in Guy Thomas’ book Free Capital. His manager is called Corporate Engineer.
Peter Gyllenhamar is one of the (mostly) anonymous investors in Guy Thomas’ book Free Capital.
- The scale of his investment activities and his distinctive Swedish background meant that Peter abandoned his usual anonymity.
Peter was born in 1953 in a famous family in Sweden.
- A distant relative headed Skandia, Volvo and Aviva.
His own father was first an army officer and then a property manager for a Swedish merchant.
Peter interest started investing at the age of 14, having inherited several stocks from his grandmother.
- He later discussed the investment with his school wood teacher.
Peter is still based in Stockholm and has a staff of two investment managers.
- One looks after the property, the other deals with Peter’s British companies.
He spends the summer on his yacht in the Baltic, keeping in touch with the markets via satellite broadband.
At the time of the interview with Guy, Peter was 56 years old, having left his last full-time job at the age of 43.
At 20, he dropped out of Stockholm Business School to start an investment management business (Trend Invest) and later worked as an analyst and worked in corporate finance.
- He has earned a reputation for spotting undervalued companies.
He also went bankrupt twice before reaching the age of 40.
Microscopes of Great Britain
In 1996, Peter began investing in UK microcaps.
- He likes them because they are too small for most institutions and the level of family control is lower than in his native Sweden.
In less than 10 years, Peter turned £50,000 in the UK into tens of millions.
I have never felt that investing is like work. It’s more like ten parallel games of poker or chess.
I’m not trying to build a stock portfolio around an index benchmark. I always look at core businesses and think about what can be done to create value in them.
Peter buys companies that trade below net an asset value, and takes “negative control” – meaning he owns 25% and can block special resolutions that require 75% to pass.
- It then re-engineers the firm to release value.
I find troubled companies intellectually more interesting. I like restructuring and creating value.
The guy writes:
By owning more of the company, you can influence events more decisively. You can change corporate strategy, change management or negotiate a merger or an asset to dispose of themselves, thus directly creating value rather than passively waiting for events to occur.
Often these are companies with institutional investors whose shares Peter can buy.
- Sometimes companies will be delisted, but he may retain control/ownership.
I am good at looking at many companies and developing a concept of what needs to be done. I’m not very good at implementation, and I’m certainly not a good manager of people.
Peter used to use a lot leverage – that’s why he went bankrupt twice.
- Now that he is rich, he does not spend leverage and his portfolio became more diversified.
He still has debt in his Swedish real estate portfolio, but it is secured only by the property.
The chapter includes several case studies of companies that Peter has invested in – sometimes over twenty years ago as I write.
- I couldn’t find much in them that would attract today’s private investors in the UK.
A common theme seemed to be freeing up negative working capital that could then be reinvested in other special situations.
Peter uses advisers only when the rules force him to do so.
In addition to advisers for takeover proposals, we are required to use advisers when we implement investment strategies for pension funds, publish audited reports, etc.
But often the advice is a tick and rubber stamp of what we’ve already decided to do, rather than a real contribution to our decision. And in some situations, the best course of action will be to wisely ignore the advice.
Peter explains his mistakes with three main reasons:
- Bad research.
- Poor management or supervision.
- Too much debt, including the pension fund deficit.
I realized that it is not wise to have a large share and put myself completely in the hands of management.
Peter often encounters opposition when trying to get a seat on the company’s board of directors.
- The UK system means directors are appointed by a committee of existing directors – what Peter calls “a bunch of back-scratching insiders”.
UK regulations are good for job creation for consultants. They are less good at empowering shareholders to influence corporate decisions.
There isn’t much here for the private investor and I really wonder if Peter should have been included in Guy’s book.
- He’s undoubtedly a shrewd analyst, and he’s willing to put his (and other people’s) money anywhere.
But his strategy is too high risk and high stakes for most people.
- He is more of a corporate raider/an asset stripper than the typical “ISA millionaire” from Guy’s book.
Until next time.