Last Thursday I made a trip out to Bristol to meet with a small insurance broking company. To be honest, my hopes were not high. Insurance – yawn! Broking – dull! How could this be the sort of exciting small company that I look for?
A few hours later, my mind was changed. I was enthused. The guys I met had energy, they had original ideas, they had drive and ambition. In short they had the X-Factor – the fierce energy that is essential if a small company is to succeed.
Not for the first time I heard some damning comments about the giants of the insurance industry. ‘Idle’, ‘complacent’, ‘still living in the 1940s’ were just some of the uncomplimentary epithets cast in the direction of these goliaths.
The message was clear. If you have a bit of get-up-and-go you can run rings around the establishment. And when it comes to penny shares, finding those fired up people can make all the difference.
How to spot a Penny Tycoon
Recently we were watching Dragon’s Den and my son asked me if my job was similar to that of the five ‘dragons’. And yes, it is certainly something similar.
I spend hours talking to business people. I look for common sense and bit of savvy. Business is not complicated: money comes in from sales and goes out in costs, and so long as the former exceeds the latter then you have a going concern. I expect executives to be able to tell me exactly how a business spends its money, and exactly how and by whom it gets paid. I expect them to be able to tell me how the business will grow. You would be surprised how many cannot answer these basic questions.
But on top of these basics I look for real passion. I look for the sort of person who is driven to succeed, who jumps out of bed early, rolls up his sleeves and does not rest until the job is done. I look for a competitive spirit and a willingness to take calculated risks in pursuit of success. I look for people who are happy to get their hands dirty.
One executive whom I met recently was Dave Paxton of Vatukoula Gold Mines (LSE:VGM). This once-struggling Fijian gold mine has been transformed since Dave and his team took over. I asked him how this had been achieved.
“We get involved. We don’t simply trust the reports of underlings. We see for ourselves what is going on and what needs to be done”, he told me. “We go underground and see what is happening at the rock face. The miners had never seen the previous management.”
I heard a similar story recently about another venerable mine, this one producing not gold but emeralds. And after meeting the chief executive, I’m now convinced this miner has every chance of making a remarkable turnaround.
The emerald miner that could double your money
The simple truth about this miner is that it should have been earning a fortune – but it hasn’t.
The mining operation has been allowed to become more and more costly, employees have been pocketing valuable gems and walking out of the gate. Mom and pop mining operations have been springing up all over the mining lease with no attempt to control them. No attempt has been made to extend the resource base and life of the mine. And the emeralds themselves have not been marketed. Parcels of emeralds of uneven and unpredictable quality have been sold at auction to buyers who have little idea of what they might get. It’s been a disaster.
But now this mine has a new chief executive. I met him and his passion for the business was obvious. Showing an attention to detail that eluded the previous management, he has improved the mine’s efficiency, set about finding new reserves and given emeralds the marketing push that they deserve.
Thanks to his efforts emeralds are making a comeback. Once they were sought after by royalty and prized by the rich and famous. Through sheer bad management emeralds have fallen from favour.
But now they are recovering, and the company that owns the world’s largest emerald mine, and is now run by a man with the X-Factor. I think the share price could double.