It has become hard to tell the difference between silly season and the realities of what Brexit (especially a ‘no-deal’ Brexit) might actually be. This week we’ve had eye-catching scare stories about stockpiling food and medicine and the prospect of motorways being turned into permanent lorry parks...
With less than eight months to go before the official leave date, the more clarity that emerges about Brexit the more mind-boggling the exercise seems. Far from an orderly process, it feels more like a political barroom brawl. And considering that there could be far reaching consequences for at least some UK shares, the uncertainty (and the hysteria) is likely to ratchet up considerably in the coming months. So how can you prepare?
The art of ignoring noise
The issue for stock market investors is that the outcome and consequences of Brexit are hard to predict. One assumes that fund managers up and down the land are modelling various outcomes and considering how they might position themselves accordingly. But for individual investors, this kind of forecasting is a difficult and very possibly futile exercise.
In the uncertain months ahead what might make more sense is to tune out the market noise altogether. In ‘The Little Book of Behavioral Finance’, the analyst James Montier insists that worrying about much of this stuff is a waste of time. He writes:
“It is far better to focus on what really matters, rather than succumbing to the siren call of Wall Street’s many noise peddlers. We would be far better off analyzing the five things we really need to know about an investment, rather than trying to know absolutely everything concerned with the investment.”
A good example of how this works in practice can be seen in the checklist-approach used by Keith Ashworth-Lord, who I interviewed a couple of summers ago. He runs the Sanford DeLand UK Buffettology Fund, which over the past five years has achieved an impressive cumulative return of 128.7%.
As the name suggests, Ashworth-Lord’s fund is inspired by the US investing legend Warren Buffett. But more precisely, his modus operandi is based on something called Business Process Investing. Simply put, he has a strict checklist that each stock has to pass if it’s to make it into his fund:
Their business model is easily to understand;
They produce transparent financial statements;
They demonstrate consistent operational performance with earnings being relatively…
