Enjoying the sense of independence

IT seems stockmarket analyst David Franklyn always has smile on his face.

This could be attributed to the strong showing of Wesfarmers on the ASX boards, given the former Hartley Poynton number cruncher labels the WA stock as one of his favourites.

But, then again, Mr Franklyn has plenty to be happy with as he starts a new stage in his 15-year career in company research – going it alone as an independent analyst after seven years with WA’s biggest brokerage.

He believes his decision to go freelance has been aided by the fact that few who start working as analysts stick with it for long enough, instead they are lured by the dealing desk, leaving a vacuum of experience.

“There are not a lot of senior analysts in Perth, I think these skills are not readily available,” Mr Franklyn told Business News.

“It is rare to find an analyst who can read the market. Generally analysts in broking firms don’t stay as analysts long enough.

“Basically there is a good market there.

“If you can set yourself up offering confidentiality, it helps. If someone wants a quick view on a transaction, they don’t have to go to an accounting firm or a law firm.”

Mr Franklyn has been at the heart of the Hartley Poynton research team for years, graduating to be head of research for three years until he stepped back from the management side in 1998.

He started work in 1987 after studying economics, and worked at DJ Carmichael when it was taken over by Roach & Co.

Being part of a national group, he was sent to Brisbane to establish a research department at Henderson, a Queensland brokerage Roach had taken over.

After two and a half years, Mr Franklyn shifted to Sydney but Roach’s owner Elders ran into trouble and he was coaxed back to Queensland after the former partners in Henderson bought the business back.

In 1991, Mr Franklyn shifted back to Perth to work for Eyres Reed. A few years later he moved to Hartley Poynton, a strong broking house but yet to become the dominant force in WA that it is now.

Working from home and enjoying some time with his family, Mr Franklyn said he was still considering his options to some extent but remained committed to a consulting position with Hartley Poynton, where he will help establish infrastructure for funds management products at the technology division JDV.

He also is looking at the possibility of taking up a directorship but expects the best part of his new working day to be dominated by the funds management sector, having agreed to play a role with Erik Metanomski’s South Australian-based MMC Asset Management, a $60 million fund.

“The difference between working as an analyst in a broking firm and an analyst for a funds manager is you spend all your time doing what you do well rather than spending so much time marketing,” Mr Franklyn said.

This, he said, was due largely to the institutional side of the broking business.

“Institutional work is 70 per cent marketing,” Mr Franklyn said.

“You have to be on the phone and in their face. They are bombarded by so many different brokers and so much research you have to get in the door.

“Retail clients are looking for recommendations, whereas insti-tutions are looking for information.

“What is good about retail is that it is very direct. You write a report and put out a recommendation and you are proven right or wrong very quickly.”

Mr Franklyn believes his new funds management role, based in Perth, will provide a chance to focus on the value approach to analysis.

“You are not constrained by covering a sector or a region, you can look at anything that looks good,” he said.

He has already started applying this theory to a small fund he established with friends in recent years.

Called Hornet Securities, the fund has about $1 million in funds under management invested, part in unlisted securities, but Mr Franklyn said he was not ready to launch this vehicle to the public.

“You have to demonstrate a track record before you raise money,” he said.

Meanwhile, at MMC, he will be looking for a more immediate impact.

The fund management fees at MMC are largely performance-driven, something which has helped the fund average around 20 per cent a year for the past five years.

Taking options over equity in the fund manager, Mr Franklyn has tied part of his remuneration and his reputation to the continuing perfor-mance of this eight-year old fund.

“We manage it as if it’s our

own money,” he said.

Mr Franklyn said recent volatility in the stock market had reinforced his belief in the value approach to research.

“The tech boom was an analyst killer.”

“The problem was the relationship between share prices and value was non-existent.”

“For a fundamental analyst like me it shows that there is (a relationship), that is the encouraging thing.”

“You have to go against emotion prevailing in the market and centre on value.”

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