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Taking stock of the things that count in trading

BARELY a year has gone since Tony Barton stormed back into WA’s investment scene with his new company’s purchase of a half share in stockbroker DJ Carmichael & Co.

After a sabbatical year, WA’s best known stockbroker, and formerly the biggest stake holder in Hartley Poynton, Mr Barton, is back brimming with enthusiasm for WA in general, resources particularly and, most specifically, those stocks in which his newly listed investment vehicle Australian Heritage Group (AHG) has taken an investment position.

Resource investments in AHG have taken a high profile with stocks like Platinum Australia, a potential Halls Creek platinum/palladium miner, enjoying a rise of 400 per cent five months after floating on the ASX.

Other investments, such as the biomedical stock, VRI Biomedical Ltd, confirm that the focus is not just on hot rocks.

With his personal stake in Amity Oil continuing to enjoy top returns on the back of good news from its Turkish gas finds, it should not be surprising Mr Barton believes that more than a couple of decades of experience closely watching resources plays should eventually pay handsome dividends for his newest batch of shareholders.

Three weeks ago, AHG’s half-yearly result revealed an after-tax profit of $1.26 million and it also outlined the company’s position in several fledgling stocks and venture capital positions which had already registered strong gains.

According to the company, the $1.25 million stake in VRI was worth $5.4 million, a $321,078 share in Compass Resources was worth $834,804, and a $657,456 holding in Platinum Australia had jumped to $1.2 million.

Mr Barton admits it may be hard to keep up that sort of growth for the rest of this financial year and is, instead, turning his attention to establishing a funds management presence in WA and building up DJ Carmichael & Co, a small but well known independent Perth brokerage.

The intial priority is finding a replacement for the current managing director, Michael Stewart, who is looking to take a well-deserved break from the day-to-day hassles of running a stockbroking outfit.

Carmichaels now looks set to be embarking on a whole new course, with all divisions of the firm implementing innovative new strategic initiatives.

One significant drive is the targeting of new dealer recruits in the 35 to 45-year-olds without stockbroking experience.

“People straight out of university can often lack the required maturity to deal effectively, and sometimes honestly, with clients’ interests,” Mr Barton said.

“They are not really thinking about where their career may be in five years’ time.”

Instead, he believes a mature person who has owned a business or managed a business, even a McDonald’s store, will typically better understand basic relationship and business issues.

“They are more likely to display the professionalism that is required to make it in stock broking — an industry they may previously have felt shut out of,” he said.

“We are going to train and explain to people that the main things that count are high integrity, knowledge and being able to manage and present yourself professionally.”

Training will be intensive, he says, and no broker will be allowed to go “live” until they have completed the eight-week course.

It is certainly a new approach for an industry, including Carmichaels, that has had problems in the past with unreliable and renegade brokers of the young brash type or the older ones that have done the circuit.

Mr Barton believes that most retail broking firms have in the past thrown rookie dealers in at the deep end, without adequate training and with few opportunities to learn from some of the more experienced successful operators.

Instead Mr Barton, along with some experienced colleagues, has opted play a key training role in this new process.

“I think the normal broking business risks will have to be reduced by this.”

“I am prepared to be hands on and still feel I should have some skills to enable the rookies succeed quicker, a better service for the clients and faster rewards for the dealers.”

Mr Barton appears to relish the task of building Carmichaels into a major second-tier firm, on the back of this new recruitment strategy and a focus on WA special situations.

He claims the ownership structure of Carmichaels, split with 50 per cent of the company owned by the full-time executives, is an incentive for new and established dealers in their broking careers.

The special structure gives the top 14 performers equity positions and diplomatically forces non-performers to reduce their equity levels, allowing space and adequate incentive for new blood coming through the firm and reward for those key employees that have achieved.

After a year of settling in, he believes Carmichaels is now well positioned to take up the challenges of growing in this current tough broking environment.

“It may not be too dissimilar a situation to Hartley Poynton and Co. in the early ’80s,” he said.

“When I joined Hartley Poynton in 1987 they had approximately 43 staff, a very solid reputation, but in market-share terms the company may not have been quite the biggest firm in town.

“What appeals to my sense of adventure today is to pick up an established name like Carmichaels and try to elevate it to a much higher status in Perth, in terms of market share, profitability and reputation.

“We are however not trying to turn DJ Carmichael into a conservative adviser like JB Were and Co, we are deliberately WA-focused, and are unashamedly aggressive in some of our special situation broking opportunities.

However, while Mr. Barton wants to increase the aggression at Carmichaels, he also wants to tame some of the very short term trading qualities of his clients and the firm.

“Some of the clients are much more aggressive than we would ideally require, taking smaller but fast profits on some of the best winning situations, and missing out on a bigger share of the real fruit.”

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