Value Invest

November 2012

London Value Investor Conference 2012
The organisers of the highly successful inaugural event in April this year have put together a superb line-up of speakers, including Howard Marks (see video below), Anthony Bolton (featured in our March edition), Michael Price, David Harding and Richard Oldfield.

In addition to the day-long conference on the 9th May, delegates will also be invited to the Peter Cundill Reception, which will be hosted on the evening before (8th May) and provides a great chance for delegates to meet and network prior to the main event.

There is an early bird offer on tickets to the event:Click here.

Is Tech now ok for value investors?
Ever since Warren Buffett announced his investment in IBM, there has been a marked shift in the interest of value investors in this sector. We have believed for some time now that there are some technology businesses which have got such a strong lock into their customer base, that there is sufficient predictability of revenue to value the business. In the last 4 years, a material part of our out-performance has been from investing in undervalued software and technology businesses. In this article (which was published 3 months ago in the FT so the PE ratios are a little out of date), David Stevenson sets out the case for some of the huge tech companies and their undemanding valuations.  We do not agree with all of his recommendations but Microsoft is a holding, Apple was a holding until September and technology stocks are just over 30% of our portfolio today.

Trust cash cows rather than herd instincts
Luke Johnson, writing for the FT, explores the importance of quality of earnings in investment.  The article asks why high cashflow but low growth listed companies appear to trade on lower multiples than those paid in private equity buy-outs.  One major issue is that the herd instinct to which he refers puts pressure on listed company CEO’s to focus on growth, which is often achieved through over-priced acquisitions. Under PE ownership management are more constrained than on public markets. Although we use a similar valuation methodology to PE acquirers, we are very wary of ex-growth companies that have management with poor capital allocation discipline.

Reports of the death of equities have been greatly exaggerated – GMO
This excellent article makes the case for the long-term attraction of investing in equities.

More on Keynes
This article sets out the path Keynes took to becoming a value investor. After losing a lot of money in the 1929 crash, Keynes figured out for himself that the most successful approach to investing was to make concentrated investments in a relatively small number of stocks, on the principle, later adopted by Warren Buffett, that “it is a mistake to think that one spreads one’s risk by spreading too much between enterprises about which one knows little”. As he wrote in 1934 “As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.”

An interview with Howard Marks
In this excellent interview by Oliver Mihaljevic, of the Manual of Ideas, Howard Marks, one of the highlights of next year’s London Value Investor Conference, discusses the huge challenges of finding an information edge in investment. The video covers a broad range of topics, working through some of the points in his excellent book, “The Most Important Thing”.

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  • “It’s very much the Rolls-Royce of the investor conference market”
    Paul Scott, Stockopedia
  • “The people in that room were a more powerful cadre of the powerhouse of investment than has been gathered for a very long time”
    Jonathan Ruffer, Ruffer LLP
  • “It’s kind of like Glastonbury isn’t it, for the Value Investing community”
    Nick Train, Lindsell Train
  • “What I like about it is that it is a practitioners conference and it’s an opportunity to come and hear from your peers about the work that they are doing and how they see value investing”
    Hassan Elmasry, Independent Franchise Partners
  • “I think people really look forward to it and enjoy it. There’s a good bunch of people here who have travelled a reasonable way – the speaker after me was from Hong Kong and there’s a big Canadian crew and a big US crew – people come from around the world to see this”
    Nate Dalton, Affiliated Managers Group
  • “If somebody’s already been through that process of seeing what the conference is about and then is willing to pay their money for the effort of coming here, that’s a great filtering process.”
    Gary Channon, Phoenix Asset Management
  • “The conference has become a part of the furniture of the London scene. You can discover that is what lies inside you – that you are innately a value investor.”
    Richard Oldfield, Oldfield Partners
  • “I do speak at a fair number of conferences to investor bases, this one is really quite a good list – some very, very good investors present and some very interesting speakers”
    Jon Moulton, Better Capital
  • “Definitely worth it and I know a number of people who have ‘ummed and arred’ about coming along and I’m sure that they will be regretting that they didn’t come today – and it’s only going to get better as far as I can see”
    Tim Green, Private Investor
  • “Having sat through the whole day as I wanted to come and hear all of the speakers – I’ve been really impressed by the quality”
    Anthony Bolton, Fidelity
  • “I’ve got a bunch of business cards to add to my collection and some folks I’ve been looking forward to meeting, plus some firms I didn’t even know existed but sound really interesting and I’m looking forward to building on that relationship base”
    Mason Morfit, ValueAct Capital
  • “You couldn’t find that anywhere else really, where you’re speaking to the principals who have been voted on to the Board [of Microsoft] to effect change”
    David Shapiro, Willis Towers Watson
  • “What I was impressed with is, because the subject is very similar, value investing, they found a variety of ways of attacking the same subject. I was also very impressed, having done this in another location, of seeing them stay on target time-wise so that it moves along at a great pace and I think the audience is greatly rewarded by that discipline”
    Don Yacktman, Yacktman Asset Management
  • “Very well organised and it was a treat for investors like us to hear some great speakers”
    Roli Saxena, Drona Capital
  • “I came last year and I liked it so much that I have been looking forward to today ever since”
    Dominique Levy, Sonian Capital
  • “We’e got a very sophisticated audience who are used to value investing – I think this is a good audience”
    David Samra, Artisan Partners
  • “The profile of the speakers is one of the main reasons that I came”
    Niels Borgen, Private Investor
  • “When you look at the ideas speakers have put forward in previous years and how they have performed over the last few years, they’ve done very well – if that performance continues it would be quite remarkable. It does show that you can pick up some good ideas at a conference of this sort”
    Jonathan Mills, Metropolis Capital
  • “I came last year as well and I thought that it was the most outstanding event that I have been to”
    Leon Boros, Equity Strategies