Ann: Change in substantial holding, page-6

Moelis have been buying QMS. He's using the same logic regarding multiples in the private transactions.

An idea from The Economist

Another stock he likes is outdoor advertising company QMS Media, an idea that came to him after reading an article in The Economist about how digital billboards are so successful internationally.

When he began to think about why they are doing well, of course Garrett turned to the wisdom that had guided Berkshire's Charlie Munger, an author named Robert Cialdini.

Munger gave Cialdini a share in Berkshire, attributing his book Influence to making him hundreds of millions of dollars.

Reading this author's newest book Pre-Suasion, Garrett came across a passage about how the human mind can only focus on one thing at a time which is difficult when faced with change.

"And I look at these billboards and they are powerful because you're driving along the road and before it used to be static, and now something flashes up and it's change." This led him to confirm that QMS had a good product, the first test for a good business.

"Then the process is well let's go back and have a look at what they've done over a period of the last five years," says Garrett.

For QMS, "everything that the CEO said that he was going to do, they pretty much hit all the numbers".

He started buying the stock at 90¢; it closed at 71¢ on Friday.

Despite this, Garrett still believes in its long-term growth prospects. He says that in private transactions, comparable media companies are being bought for 12 to 13 times the EV to EBITDA multiple, QMS is sitting at 5.5 to 6.

"I sit there and I say OK, here's an opportunity. I can buy a stock at like [a] 40 or 50 per cent discount to where the private market is," says Garrett.

He is still trying to figure out why it is trading below private market multiples.

Perhaps part of the reason the share price hasn't recovered from its 2018 high of $1.16 is that poor market performance at the end of 2018 caused asset allocators to rush out of small caps, selling their positions at any price. They haven't recovered.

"When you've got to sell stuff and you have money pulled out, you might not sell what you want to sell, you sell what you can sell," says Garrett.

"A number of the stocks that we bought in November and December, we started buying and they kept falling and some of them would've fallen 10 per cent after we bought them," says Garrett.

He is still hopeful in his decisions. "You make a lot of money in bear markets, you just don't know it at the time."