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Welcome to Quality Share Surfer.

This is a UK focused investing blog, where I regularly set out my thoughts on investing strategy, economics and behavioural finance and chronicle the decisions I make for my own portfolio. My goal is to bring clarity to complex ideas and provide original insight you won’t find elsewhere.

My investing style is ‘behavioural’ in that it aims to take advantage of systematic errors made by other investors. The idea is that these errors lead shares with certain attributes, e.g. value, quality and momentum, to tend to outperform the market. My strategy is focused primarily on exploiting two such attributes in combination: a) the tendency for high quality businesses to outperform over time and b) the tendency of shares with momentum to continue to do well. You can find out more about my strategy following the menu above.

I hope you find the blog useful. Please leave comments if you find this interesting or would like to ask questions or discuss related topics.

Quality Share Surfer

Dog’s breakfast

The latest round of Parliamentary voting on Brexit has left the ultimate outcome entirely unresolved, with two weeks to go before we are due to leave. All possible outcomes are still on the table. This includes not only the indeterminate extension to Article 50 that has been voted for but also Theresa May’s deal, which refuses to go away despite it being resoundingly rejected twice by some evidently not-so-meaningful votes, and no-deal, which remains the default despite Parliament voting against it. Continue reading

Impulse control

I expect you’ve heard of the Marshmallow Test. It’s the one where you leave a four-year child alone for a few minutes in a room with a marshmallow on the table, promising further rewards if they can restrain themselves from eating it. After initially trying to hold out for the reward, most four-year-olds find the immediacy of the marshmallow too much to bear. The interesting part of the original Marshmallow Test, carried out in Stanford in the late 1960s, is that the children who gobbled up the marshmallow generally went on to do worse in life according to various measures. Like many psychology experiments, there is a fair amount of controversy around what the Marshmallow Test actually shows. It could demonstrate that an ability to be patient and exercise self-control is a crucial life skill, or alternatively it may be that some other unobserved factors were at play (e.g. socioeconomic background, intelligence, trust). I don’t think it takes a huge leap of faith to believe that patience is an important life-skill. One area where I’m pretty confident that gobbling up marshmallows is likely to cost you is in investing. Continue reading

Swings and roundabouts

The spectre of economic and market meltdown continues to recede after the panicky final quarter of last year. We now have an accomodating Fed, better than expected economic growth in the US, progress in trade negotiations with China and an imminent no-deal Brexit looking less likely. Valuations for high quality shares are becoming pretty demanding in some cases but not outlandishly so. I’m becoming more confident that 2019 is likely to be a good year for equities. There’s certainly been quite a steaming run so far. I’m pleased to be up about 10% but this doesn’t seem to be that special – the S&P 500 is up 12% after one of the best starts to a calendar year ever! Continue reading

Benchmarks for valuing growth

When making investment decisions, I focus much more on whether a business is high quality than on its valuation. However, I don’t think this means that valuations should be ignored entirely. Sometimes even high quality businesses become overvalued. In practice I am often put off buying businesses where the valuation doesn’t seem to be justified by the growth prospects. But I’ve found this very hard to judge – am I getting it right? Continue reading

SYK bought

It’s been a very positive start to 2019 for stock markets on both sides of the pond. There has been a fairly relentless rise since the Christmas Eve low. It’s starting to feel like the worst of the correction may be behind us. However, in the short term we seem to be near a point of inflection, with the US indices bouncing around near the 200 day moving averages and the FTSE not far behind. As ever, it could go either way from here. Either way, I’m feeling vindicated in my decision to remain fully invested through the recent volatility. I might have gained in the short term from selling out but it would have been bloody hard to decide when to get back in. Continue reading

Are corporate profits sustainable?

Next time your investments are on a roll and you catch yourself feeling the familiar symptoms of overconfidence, I recommend you check out the Hussman Fund’s market commentary. I’ve found the relentlessly bearish perspective put forward in all of Hussman’s articles to be a sobering antidote to any euphoria I might be feeling at the time. I disagree with some of the reasoning and certainly with the conclusions, but he does raise an issue that piqued my interest and is the subject of this post. Aggregate corporate profit margins are about as high as they’ve ever been. How sustainable is this?

Continue reading

Unforced errors

Part of the rationale for starting this blog was that it would provide some discipline against acting impulsively and making unforced errors. I’m far from immune from fear and greed and the powerful impulses to act these emotions can generate. In the past I’ve occasionally succumbed to bouts of panic or impatience and made some pretty bonkers decisions as a result. Committing myself to record all of my trades and justify the rationale behind them publically provides a mechanism to restrain myself – it’s much easier to behave like an idiot when you think no-one is watching. Continue reading