...is a book by John Lee which was published last year. As I finally got around to reading it recently and it is the weekend, I thought I would do a quick review for you.
The Author - if you are not familiar with him is a former MP and now a Lord as well as a long time investor who has also written regularly over 14 years in a column for the Financial Times. He also gained some notoriety when he disclosed in his column that his PEP/ISA's had grown to be worth over £1 million by 2003 from contributions of £126,200 since PEP's were first introduced in 1987. While he acknowledged that his status as a financial writer probably made it easier for him to arrange meetings with companies, he is also a big fan of going to Annual General Meetings to read the body language of the board etc.
The Content - is quite interesting but I have to say it is quite a slim volume at 141 pages and much of the content is reprints of his columns from the FT over the years with a few short update comments. I also found that some of the anecdotes therefore got repeated as a result.
He generally favours small cap stocks with strong balance sheets and tries to buy these on low valuation (sub 10x P/E backed up with a decent yield). He then also advocates patience and long term holdings to allow the magic of compounding to work and also to enjoy re-ratings if the company delivers and comes to the attention of a wider audience. He has also been keen on family owned / run businesses and property or asset backed companies too. His Twelve guiding principles can be summarised as follows:
1. Buy cheap stocks with yields and at a discount to assets if possible.
2. Ignore overall market levels and macro economics, focus on your stocks prospects.
3. Be prepared to hold a position for a minimum of five years.
4. Understand the businesses that you invest in.
5. Ignore minor price moves as value will out in the long term.
6. Seek established businesses with a record of profitability and paying dividends and avoid start ups, bio techs and Oil E&P stocks.
7. Look for recent positive statements from Chairman / CEO's.
8. Seek conservative, cash rich or lowly indebted companies.
9. Ensure directors have a decent stake and a clean reputation.
10. Look for stability in the board and advisers.
11. Face up to poor decisions - he has come to use a 20% stop loss after admitting some of his earlier mistakes.
12. Run your winners don't try to be too clever by trading out and hoping to get back in.
Summary & Conclusion:
I found it an entertaining read as his philosophy is quite similar to my own and I have also invested successfully in a number of the stocks he mentions or is this confirmation bias on my part? He makes the point that to be a successful investor, like other things in life, you need to be dedicated to it and passionate about it. If you are not then you should probably invest in trackers or pay for an actively managed fund or account.
It is all quite sensible advice although he does acknowledge that it is probably harder today to find the sort of opportunities he has availed himself of over the years. However, with today's increased ISA allowance, if you can afford to save that sort of money each year then you too could make a million slowly if you have the patience, the inclination and some luck too. if you want to get a copy you can see more details at Amazon by clicking the image above, although other book shops and sites are available. Or if you want to save some money to invest in an ISA then I would recommend getting it from you local library if you can. Or get it for free by signing up for a one month free trial of Amazon's - Kindle Unlimited.