Relephant

Private Investor, Other

Joined 2 May 2011
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Biography

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Investment strategy

I follow a QGARP investing strategy very much along the lines suggested by Prof John Price - author of "The Conscious Investor". I look to invest longer term in quality understandable companies likely to have some form of economic moat and which have had predictable and high growth rates in earnings and sales over last 6 years, consistent high ROE and ROC, and low debt levels that I estimate are trading at a discount to current price (preferably with PE lower than normal for the share) and which I estimate will return at least 10% pa over next five years under Margin of Safety modelling and at least 15%pa and preferably 20%+ pa if recent performance over last 5-6 years continues as it has. I prefer management to act with shareholders' interests at heart rather than only their own. I will sell if I reckon my initial reasoning for buying was wrong, or signs of problems, or if company appears grossly overvalued (perhaps buying back later if prices come back down to reasonable levels to justify investment again). If my shares go down I may cull them or if I reckon the fundamentals and prospects are still sound I may increase my stake. I diversify across different markets and sectors but have most in the US and also have exposure to companies from elsewhere in the world that are also listed on US markets. I don't care about modern portfolio theory and share price volatility and rather prefer to focus on my aim of outperforming the local index in each market I invest in. I am aware that I need to protect myself from a whole number of psychological and behavioural biases that could threaten my performance. Thus I find behavioural finance interesting. I am wary of DCF valuations as they are so sensitive to tweaking input parameters and it also seems daft to try to predict longer than about five years. For companies with more consistent rates of growth I prefer to value based on estimated likely return over the next five years. Probably been most influenced by teachings/books of Warren Buffett, Charlie Munger, John Price, Pat Dorsey, Peter Lynch, Phil Town, Nicholas Taleb, Bel Monte, James Montier, Robert Hagstrom, Lee Freeman-Shor, Terry Smith, James O'Shaughnessy, Daniel Kahneman, Charlie Tian and Bruce Greenwald. Markets have been going up or sideways without a major correction for many years, and a correction at some stage is probable. Therefore, I have increased my cash holdings and partially anti-fragiling my portfolio with a long Put Option on the S&P500 to have some "dry powder" to invest when the next major correction or market crash happens and creates good buying opportunities. I benefitted from investing heavily in June 2009 and hope to do the same in the next crash. I don't to diworsify and tend to hold between 10-15 shares in my portfolio (fewer as I get older). The longer I have been an investor, the more I am prepared to be patient and practice assiduity (Charlie Munger's term for sitting on your hands and doing nothing). I am prepared to be patient and delay gratification, usually letting winners run and run (unless business fundamentals change or the share becomes crazily overpriced relative to my estimate of its intrinsic value) with the majority of my holdings up by 100's of %. On occasion in the past I have taken a Darwinian approach to adding new companies and may for example buy smaller amounts of 10 or so, but as I learn more I am likely to cull some perhaps leaving 3-5 which I most likely will hold for the long term. Have also now added writing options as part of my long term investment strategy and envisage these will contribute to enhancing the QGARP strategy I adopt.