In the article Other sources of investment ideas I mentioned Richard Beddard and his Interactive Investor blog. Richard is without question the best source of investment ideas for small UK based companies on the internet. And best of all… His ideas, portfolio and analysis is all completely free. This article is an exclusive interview with Richard Beddard where he explains his investment approach, his biggest investment mistake and life as an investment blogger. I trust you will gain as much from the interview as I have.You can find Richards blog here: http://blog.iii.co.uk/. His column in the Money Observer magazine can be found here.
Richard Beddard: One of us had to work out what to do with our savings, and my wife wasn’t showing much interest so back in the mid nineties I subscribed to ‘Successful Personal Investing’, a correspondence course. It was on paper, and I believe it still is. Soon after, I set up an investment club at work with friends, and although we stopped investing together in the dot.com meltdown some of us still meet once a month. We even talk about investing occasionally!
Can you talk about your investment approach and how it has developed over time?
Richard Beddard: It’s always been based on company fundamentals and financials as I don’t really see how you can be an investor if you’re not trying to understand businesses; how they make money, and what makes them go bust. I briefly dabbled in charting in the early days, but couldn’t make any sense of it. I describe my method as ‘screening plus’. I screen the UK market for companies that look cheap and financially strong and then investigate them further, mostly by reading their annual reports going back ten years. Different numbers tell different stories. The combination of a low valuation and high financial strength (improving profitability and leverage ratios, for example) are signs a company is recovering.
Sometimes I’m looking for recovery, and sometimes consistent profitability and financial strength, which I might be willing to pay more for. Looking back ten years, I’m trying to establish whether the story the numbers are telling me is true and enduring, or just an artefact of creative accounting or the result of a particular, temporary, set of circumstances. I describe my approach in more…
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