Invest for the long term, advises student of the Sage

A STUDENT of the investment techniques of the Sage of Omaha, Warren Buffett, yesterday advised Yorkshire people to be armed with an “elephant gun” when hunting firms to buy shares in.

Keith Ashworth-Lord, who is an expert on ‘Buffettology’, also warned that there was roughly a 50 per cent chance of a double dip recession.

Mr Ashworth-Lord, a director of Sanford DeLand Asset Management, told the audience at Redmayne-Bentley stockbrokers in Leeds that they should invest meaningful amounts of capital in relatively few companies and aim to receive more in value than they pay in price.

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He added: “My ideal investment is a company that has relatively stable economics, and it’s fronted by a volatile share price. That way, you get the best of both worlds. You’re buying into a stable, enduring franchise and you’re getting the opportunity to buy in at a good price.”

He said the FTSE 100 had been through its most volatile period for 13 years, but added: “If you can’t stomach this volatility, you really shouldn’t be investing in equities in the first place.

“It’s almost like loading your elephant gun. You’ve got to know what you want to bag. You’ve got to invest for the long run.”

He described the philosophy behind the Premier Sanford DeLand UK Buffettology Fund.

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Sanford DeLand recently signed a 10-year licence to use the Buffettology trade mark in the UK and Ireland for fund management. Buffettology is a study of Mr Buffett’s investment techniques.

Mr Buffett, who is behind the Omaha-based conglomerate Berkshire Hathaway, has a personal fortune of around 40bn US dollars.

Recently, President Obama said he was including the ‘Buffett rule’ in his deficit reduction plan, after Mr Buffett argued that the ‘mega-rich’ should pay more income tax.

Buffettology is also the title of a book written by Mr Buffett’s former daughter-in-law Mary Buffett and her investment partner David Clark.

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“I got to know them (Ms Buffett and Mr Clark) from going to Omaha for the Berkshire Hathaway AGMs,’’ said Mr Ashworth-Lord. “Both of them were looking for somebody to launch a fund over here using these tenets. They knew I talked the talk and walked the walk. Buffettology is about how you find those really good businesses to invest in. There are a whole lot of checklists we use to find those businesses.”

Mr Ashworth-Lord said: “Traditionally, volatility on this sort of scale, usually marks a top or a bottom of a market.

“I sincerely hope we’re at the bottom of the market because there’s such a lot of fear out there, and capitulation. That’s more consistent with forming a bottom than forming a top. In terms of the fund that I manage, we’ve been taking advantage of this volatility to invest in companies that we like.

“Equities have traditionally been the best long-term investment.”

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Mr Ashworth-Lord outlined the fundamental tenets of his investment strategy. He told the audience that investment is a business venture and not a gamble. It is the companies owned that make money for the investor, not the stock market,’’ he said.

“Real risk comes from investing in the wrong businesses, not share price volatility,’’ he added.

He said investors should seek companies where management delivered transparent financial statements.

The ideal company should also have a business model that is easy to understand, according to Mr Ashworth-Lord.

He added: “You should run a mile from accounting trickery.”

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Investors should also look for companies with high returns on capital and equity and a strong balance sheet, he said.

Mr Ashworth-Lord also believes that organic corporate growth is preferable to an acquisitions spree.

He also stressed that Mr Buffett never endorsed any investment management business.

Redmayne’s helping hand

Leeds-based Redmayne-Bentley stockbrokers is holding a series of seminars and events in October across the UK and Ireland to help investors make wise choices.

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On Tuesday October 25, from 2pm to 4pm, the Redmayne-Bentley office at 9 Bond Court in Leeds is hosting a seminar to introduce investors to Junior ISAs, which are going to be launched in November.

For more information visit www.redmayne.co.uk

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