It’s been five years since Paul Scott kicked off the Small Cap Value Report on Stockopedia. Recently he’s been joined by Graham Neary, and together they offer up a daily assessment of company news with the sort of quality and forensic detail that you just can’t find anywhere else.

Regular readers will have at least some idea about their backgrounds and careers, but there are always more questions. So at a recent get together of everyone in the same place at Stockopedia HQ in Oxford, I took them to a bar and invited them to answer as many as possible. If we didn’t manage to cover your question, we will be doing this again in the future. It’s a long read, but it’s really interesting stuff and hopefully the Q&A format makes it easy to navigate...

Ben: First of all, let’s talk about your investment style and how it has changed over time?

Paul: Well I started out with a very much value-focused approach, just looking for pricing anomalies in small-caps. The beauty of the small cap space is that it’s an inefficient market. You get more pricing anomalies than you do with mid- and large-caps because far fewer people are looking at them and researching them.

Like most people, my approach has changed over time and I’m gradually learning more as I go along. I also adapt my approach depending on whether it’s a bull market or a bear market. Given that we’ve been in a strong bull market in the last two or three years, it dawned on me that actually a value-based, low-P/E, high dividend yield approach really wasn’t working. In fact, it was often picking up bad companies that were value shares because something was going wrong for any number of reasons.

It was the same with asset-backed situations, which are the other strand of value, where you’re looking for low P/E, high yield and high net tangible assets. In a bull market, people aren’t really interested in the net asset value of a company and whether it has got freeholds or not. They don’t care because they’re looking for growth companies.

Ben: Graham, how about you, what’s your background and how would you describe your investment style and how it has changed?

Graham: Well I’d been doing internships in economic research and investment strategy and then I took a full time position doing technical analysis…

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