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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

JD bought

Everything seems to be looking up in the markets at the moment, at least it does from my particular vantage point. My portfolio has risen pretty relentlessly so far this year and is almost back at its all time highs, something I  didn’t expect to happen nearly so quickly back at Christmas time. Many of the other investors I follow on Twitter have also been posting high-teen YTD returns or better (well done if that’s you). As I mentioned in my recent portfolio review, I think the macro picture currently seems fairly benign for investors in high quality equities. What could go wrong I wonder? Continue reading

Portfolio review: April 2019

The last three months have seen a fairly spectacular bounce in many stock markets across the world. After the US markets had their worst year since 2008, they’ve now had the best first quarter since 1998. The S&P 500 is up almost 15% so far this year. The UK markets are not doing quite so well but have still seen a pretty decent bounce. My portfolio has had a fairly satisfying bounce along with everything else, benefiting significantly from its exposure to US Tech but being held back a bit by ‘air pockets’ in some of its smaller AIM investments. Continue reading

Do acquisitions really destroy value?

This post was prompted by an article I stumbled across, describing a recent presentation by Aswath Damodaran. I found a version of this presentation here, though this version may well be a bit out of date. In it, he argues that there is clear evidence that acquisitions tend to destroy value for the shareholders of the acquiring business. I’ve heard this plenty of times before but haven’t thought much about the consequences for my own investments. On reflection this seems negligent. Base rates matter. I should really have a better idea of what the evidence actually says.

Continue reading

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