This week I came across an article referencing the recent Shareholder Letter of Longleaf, a value investing fund. This letter contains a familiar treatise on value investing vs growth investing and I wouldn’t say was particularly notable. However, I was struck by a couple of things in this letter. There is a strong emphasis on how value investing is contrarian and unpopular. There is nothing unusual about this view, but unlike other times I have seen it expressed, quality investing was characterised as the ‘popular view’, against which value investing was contrasted. As a self-described quality investor and contrarian, this made me sit up a bit and question: ‘who’s the real contrarian here?’ Continue reading
Nine years into a bull market following the financial crisis, I think many investors are wondering whether the next market crash is imminent. I for one have been fairly preoccupied about this since the end of last year and have been planning to write a post sharing my musings on market timing for quite some time. Can the timing of the next market crash be predicted with any precision at all? Is there anything that can be done to prepare for it, or is it just not worth worrying about?
The ‘Nifty Fifty’ was the moniker for a set of popular blue-chip US stocks in the 60s and 70s. They were widely regarded as high quality businesses whose growth prospects were so solid that they could be bought and held forever. Well they were until their subsequent crash and underperformance in the late 70s and early 80s. After that, with the benefit of hindsight, the conventional wisdom became that they were an example of a speculative bubble.
I’ve decided to have a look back to see what lessons there are from this experience that can be applied to the current market environment. This has been prompted by some recent commentary. Back in December, Neil Woodford likened the current market environment to the market environment when the Nifty Fifty ‘bubble’ burst, prompting him to warn in no uncertain terms of the impending doom for those holding high quality ‘bond-proxies’. More recently, I’ve read another blog post, which looked at the performance of a few Nifty Fifty constituents since the height of the bubble and found that they didn’t actually underperform over the long term despite the high prices prevailing at the time. Intrigued by this apparent conflict in perspectives, I’ve decided to have a look myself… Continue reading
You are at the doctor, and you have just been told the disturbing news that you tested positive in a routine blood test for a disease you know is rare but typically fatal. But surprisingly the doctor has suggested that you should not worry – the test is ‘only’ 95% accurate. Continue reading
I normally choose what to buy from my watchlist based primarily on share price momentum. This is for good reason – momentum is a proven phenomenon. However, this may mean I am neglecting occasional opportunities to ‘buy the dip’ in the less well-performing shares on my watchlist i.e. buying shares when their prices have (hopefully temporarily!) fallen. A number of the shares on my watchlist have recently successfully recovered from temporary dips. Buying the dip could be a useful addition to my arsenal, so I’ve thought through whether and when I might employ it. Continue reading
Since I started writing this blog, I’ve written a lot of posts about the mechanics and implementation of my strategy. I wanted to write something more high level about what I think it takes to be a successful private investor. A post more about the principles, or way of thinking, rather than how any particular strategy should work. I’m not a hugely experienced investor so take what I say with a pinch of salt – though hopefully my ideas are at least thought-provoking.
For those not very familiar with investing it is natural to assume that an amateur private investor must be at a big disadvantage to the professionals. After all, stock-picking is a zero sum game. Surely it must be difficult to win at this game at the expense of the people who do it for a living. These people have greater knowledge and expertise, have spent much more time honing their skills and benefit from better access to information and to company management. Continue reading