Share Sleuth Digest: Share Who?
It's a little self indulgent, but should you wish to know more about me and the roundabout way I came to manage the Share Sleuth and Nifty Thrifty portfolios, here’s an interview that explains all.
The interviewer was The Market Mogul, a site that gives student analysts, the financial professionals of tomorrow, a platform to demonstrate their abilities.
What was the career path that took you to becoming a portfolio manager and companies editor at Interactive Investor?
After University my ambition was to become a magazine writer, but I also wanted to work in a developing country so first I trained and worked as a history and geography teacher, in England and then in Tanzania. In Tanzania I edited a publication on development, which was the beginning of my writing career. When I returned I joined a publisher in Cambridge. It was my personal circumstances that got me into investing. My wife and I bought a house and started a family and despite our best efforts to ignore financial matters, inevitably one of us would crack. I subscribed to a correspondence course called Successful Personal Investing (it still exists) and set up an investment club at work. It was the height of the dot com boom and in 1999 I got a job as an editor at a dot com company, Interactive Investor. Amazingly I still work there. Now I describe myself as a writer and portfolio manager.
What does your typical day look like?
I start the day by scanning full-year results. I’m looking for stable, profitable companies which make a useful product or supply a useful service. If a company might fit the bill I add it to my research list.
Then I read any regulatory news stories about companies in the portfolio, or companies on my watch list, to see if I can add anything to my knowledge-base about the fundamental characteristics of these companies and how closely they meet my criteria.
Then I research, writing and publishing as I go. I maintain a small financial model and a thirteen item checklist for each company I follow, including all those in the Share Sleuth portfolio, from which all my decisions and articles flow.
Of course, there are meetings, correspondence, and so on, which I wrap the research day around, sometimes I have editing duties, and every month I have three columns to write for Money Observer magazine.
Could you tell us more about Share Sleuth? Which criteria make your checklist when investing?
Broadly a company must be trustworthy and stable and the shares must be good value to join Share Sleuth. Curiously I’ve just posted on this subject on the Interactive Investor site.
Can algorithms outsmart humans in the investing process?
It depends on the algorithm… and the human. I think some of the claims made by advocates of quantitative investing systems are suspect. It is said they take the emotion out of investing and stop individuals from exuberantly buying when prices are high and selling when prices are low. In fact investors can buy a strategy high and sell it low, just as they can individual shares. The main advantage of quantitative systems, as far as private investors are concerned, is once you have set them up; they take less effort than individual stock picking. However to stick with an algorithm you need to be confident in the system, and the data that powers it. That takes considerable work up front, researching, designing and testing the algorithm, for example.
How do you feel the equity markets have changed over the past few years and which direction do you view the markets to take in the future?
Valuations rise and fall, and sectors go in and out of fashion, but the basic characteristics of equity markets don’t change. I remember being heavily into auto stocks during the credit crunch. Now its defence. I try to direct my attention to where the value lies.
What did you want to be when you were growing up?
I wanted to write for the National Geographic Magazine.
If you weren’t at Interactive Investor, what would you do instead?
Let me see… I’d be investing. I might run my own newsletter. I’d probably do a bit of teaching because I loved it. Maybe I’d write some fiction. Investing, writing, communicating, it would involve some or all of those.
What would you say has been the proudest moment of your career?
I hope that is yet to come!
What was the toughest challenge in your career?
Managing the conflicts of interest. I champion unpopular companies on low market valuations. Often they are companies that have lacklustre prospects in the short-term which cause traders to overlook their underlying qualities. These companies do not make good headlines. Publications thrive on drama, the popular shares that set the bulletin boards alight. They generate the hits that are one measure of success as a writer. However, almost to a stock, they would also generate poor returns, hence my goal of being a popular writer is at odds with my goal of being a successful investor. The way around this conflict of interest is to develop a reputation, and to say interesting things about unpopular companies. It’s hard!
What advice would you give Analysts at The Market Mogul in regards to writing exceptional articles?
If you’re struggling to explain something in terms your audience can easily understand then you may not understand it yourself. Shut your laptop, pick up a pen and scrawl all over a piece of paper until you have worked it out!
Analysts at The Market Mogul are the thought leaders and financial professionals of tomorrow, thus looking back, which attributes should they develop to make them as successful as yourself one day?
Having met some of them, I think they are already very successful. They are ahead of the undergraduate me! Be curious. Ask questions, and answer them as simply and honestly as you can.
If you could recommend one book whether fiction/non-fiction, what would it be and why?
Surely You’re Joking Mr Feynman? Richard Feynman was a brilliant theoretical physicist, but this collection of reminiscences is about a brilliant person. James Gleick’s biography of Feynman, Genius, is also wonderful, and heart breaking.
If you were holding a dinner party and could invite any 3 people in the world, dead or alive, who would they be and why?
Having mentioned Feynman, it’s tempting to invite three intellectual heroes. Maybe you could resurrect the prolific writer Isaac Asimov as well, and Benoit Mandelbrot, the inventor of fractal geometry. I interviewed Mandelbrot once. It was a career highlight, but I’m afraid I put intellectual heroes like these up on a pedestal so perhaps I’m better off with their books. I want to relax and enjoy dinner so I’m going to invite my dear cousins who live on the other side of the world. I don’t see them often enough.
If you were on a deserted island, what 3 things would you take with you (not including your Blackberry)?
A science fiction anthology, a blade sharp enough to cut the coconuts open with, and insect repellent.
Investment checklist: Xaar
Digital printhead designer and manufacturer Xaar has gone from being a jam today stock to a jam tomorrow stock in six months.
Xaar - Aaaargh!
The staged collapse in Xaar’s share price seems to have thrown up a glaring value opportunity. The company’s volatile business model makes it difficult to love though.
A video of fund manager Peter Lynch articulating the first lesson in investing in 1984: Know what you own.
A review of Tobias Carlisle’s Deep Value, says the book is a tour through every shade of value investing. It’s joined my reading list.
Tesco’s competitive advantage was its ability to find property in a scarce market. Now the Internet has decimated the high street and property is cheaper and abundant, the giant supermarket may be disadvantaged.
Everything you need to know about net-nets (companies trading below a rough estimation of their liquidation value) on one page.
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About the author
Richard is companies editor of Interactive Investor and a columnist at Money Observer magazine. A keen private investor through his Self Invested Personal Pension, he manages two virtual portfolios. The Share Sleuth portfolio is a hand-picked collection of mostly small-cap value shares, while the Nifty Thrifty is a mechanical portfolio designed to pick large, successful companies at cheap prices.
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