Skip to main content

Posts

How I pick shares- Part 4 (Return on Capital)

The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine. - Warren Buffett
Apologies first to regular readers* for the delay between publishing part 3 and this part 4 of How I pick Shares- I'm not entirely sure where the last month has gone? Perhaps the sheer novelty of being able to escape the house finally has started to eat up time that I previously had? I even went to Wales to see family last weekend! Anyway I'm sorry- normal posting every other week is being resumed.
Many years ago, I remember my father teaching me a valuable lesson about buying things for the house. He recalled that when he and my mother were first married that they had very little money indeed. My mother had won a Bride of the Year competition (!) and part of the winnings was a deposit on a new home. So beyond their wildest dreams, they shared a lovely new home, but hardly had a stick of furniture to put…
Post a comment
Read more
Recent posts

How I pick shares- Part 3 (Hidden Value)

Value investing is at its core the marriage of a contrarian streak and a calculator.
- Seth Klarman
Thank you for the encouraging comments that I've received in the last couple of blogs*. It's nice to find out what I write is of help to people.
Just to recap, in the first part I looked at how gathering knowledge is a good thing to start with. In essence the better researched that you are, the better chance you have of success. As Peter Lynch put it memorably, Ifyou don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
In the second part, I began to look at value and how you can start to find those undervalued companies that have a decent chance of growing into their true value.  You actually need to train yourself to think independently of the herd, because if everyone else had thought they were undervalued and had bought the stock, the price would be a lot higher than it is. This is why it pays to be…
Post a comment
Read more

How I pick shares- Part 2 (Value)

The person who turns over the most rocks wins the game. Peter Lynch
This is a timely post* in the United Kingdom as for the first time this week in a while, Markets have paused for thought and stopped their relentless rise upwards. Coupled with that, football (soccer) fans, very much including myself, are excited by the prospect of the return of the sport at a competitive level for the first time in 3 months this week. This blog talks of the strange marriage between football and shares.
I wrote a fortnight ago the first part of my series on how I pick shares. In that article, I focused on Knowledge, applying the principles from the post I wrote back in January on how Fantasy Football taught me how to gain an edge in share investing. 
Well I'm now going to build on the concept of Knowledge with a further principle- that of Value. This from my Fantasy Football article:
Value
(4)  Being constantly on the lookout for “value”. There is an interesting trend in Fantasy Football that after abo…
Post a comment
Read more

How I pick shares- Part 1 (Knowledge)

On the other hand, investing is a unique kind of casino — one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favour.” Benjamin Graham, The Intelligent Investor
Each investor has their own approach and methodology as to how they pick shares. I thought it was time that I shared mine. I intend to write this over several weeks*.
I started my investment journey in the hills of the double-dip that took place back in 2011. We'd had the most horrible crash in the Stock Market in 2008-2009. I was very lucky as I went from a place professionally where I could have lost my job (the US business I worked for was planning to close down my office) to being part of a management buy-out that saw a premature promotion to a senior position and relative job security. However the rosy glow of the initial optimism of 2009-2010 was now in the rear view mirror. 2011was brutal as we nearly wobbled back into full recession and some stocks had taken …
Post a comment
Read more

If Carlsberg did Stock Exchange Announcements...

"The creation of the joint venture is an important step forward for our UK business. The joint venture's brand portfolio will allow us to offer a significantly stronger beer portfolio to our UK customers. In addition, the combined business will bring our customers wider choice, greater capacity, product innovation and marketing and distribution efficiency benefits." Cees 't Hart (Chief Executive of Carlsberg Group)Friday 22nd May saw an incredible share price rise for Marstons plc (MARS)*. The British Pub Company had seen its share price hammered by the Corona Crisis, as it was forced to close all its pubs in mid March 2020. From 70p a share on March 11th, it was trading at 32p on May 21st. The jump to 66p on May 22nd was little short of remarkable. Only Carlsberg could script such rises for a major listing....This week also saw a great rise for Dart Group (DTG), the airline, package holiday and logistics company. From a price of £4.72 on May 15th, it now trades at £…
Post a comment
Read more

Value Investing in the Current Climate

All investing is value investing; the rest is speculation Joel Greenblatt
Value investing has been back in the headlines this week. I'd like to think that it was in direct response to the article that I* wrote last week, but I suspect not! It has become relevant because value shares have been battered in the recent Market sell-off.
People are bemused because there is a generally held belief that every few years "value investing" has its place in the Sun. The problem is that it's taking a heck of a long time to get back to get back into the spotlight.
I've always considered that the art of investing is the ability find shares that are under-valued, buy them and hold them until such time as the risk premium of continuing to hold them is too high. That risk premium is often because those shares have become over-valued- too many people have piled into them and the price has been bid up to a silly level. 
A great example of this was a company called Lo-Q (now called A…
Post a comment
Read more

If you could hold 5 stocks for 5 years....

Our favourite holding period is forever (Warren Buffett)
Like many of you I suspect, I tuned in* to to hear the latest pronouncements of the Sage of Omaha last weekend, as Warren Buffett gave his verdict on the situation in which we now find ourselves. Even at the age of 89, Buffett's analysis remains as sharp as ever. 
There were three themes that struck me:
Confidence in the American Economy long-term For regular readers of his letters to investors, this is a common theme. That is why for many investors he advocates considering investing in a simple Index Tracker of the S&P500 as opposed to betting on individual shares. He is a big fan of the ingenuity, creativity, diligence and resilience of the US economy . It is encouraging to see that this latest crises has not shaken his view.The importance of cutting losses He admitted mistakes in his recent purchase of airline stocks- and in his case it wasn't just three grand of Easyjet (EZJ) shares. When you take 10% stakes in the …
Post a comment
Read more