Category Archives : Investing Theory

A list of articles on the theory of investing. Articles that give you the knowledge on how to invest. Looking at the Invest Money tab to find out what to invest in.


September Monthly Stock Purchase – Fidessa DMGT Advantages Of Technology Stocks

Technology has been the driving force behind the progress made in he 21st century. So in this regard, it is really strange that the London market has barely any world leading technology companies listed on it. And the few that are listed, they are normally undervalued compared to peers worldwide – just look a ARM and Aveva for examples of this and they have duly undergone a takeover and a merger. Fidessa is one of the only truly global technology companies we have left on our main UK market and I believe its valuation at 20x earnings is cheap for a company of its quality. If Fidessa was trading on […]


A Masterclass In Capital Allocation – Imperial Brands Case Study

Investors in Imperial Brands have done extremely well over the years. If you had purchased 1000 shares in the company at the turn of the century for £3,820, your holdings would be worth £32,000 today – This is without accounting for the £13,330 in dividend you received along the way. This is a compounded annual return of 14.7%. Amazing! One of the reason the company has done so well is because the underlying economic engine of the business is a great one. I have mentioned many times before that the economics of the tobacco industry are simply wonderful. But apart from Imperial Brands being in a fantastic industry economically, investors […]


The Death Of Brands – What Investors Need To Know

One of the common investment mantras is to buy companies with strong brands. The reason being a strong brand name will insulate a product from competitors causing the company that owns the brand to charge higher prices and earn above average returns. Whilst I am a fan of brands as an economic moat (Competitive advantage), I am unsure many people know what a strong brand actually means. Furthermore investors today are pacing too high a value on brands without understanding the consumer landscape has changed. History Of Brands Going back in time – say the 1800s – it is fair to say life was local. You didn’t experience a world […]


Share Price Charts Can Be Misleading – GSK And The Power Of Dividends

Most people look at the GSK stock price over the last 10 years and think it’s been dead money. The share chart will show that GSK shares were trading hands for £13.40 in 2007 and are trading for £14.80 in 2017. A lot of people have become disheartened by this abysmal share price performance. But it is important to note that great companies do go through extended periods of share price stagnation. And just because a company’s share price has stagnated does not mean wealth is not being created. GlaxoSmithKline is a classical example of this phenomenon. The persistent negative news-flow the company has faced over the past 10 years […]


Investors Need To Be Patient To Outperform Markets

One of the investment mantras we constantly hear about is the need for us as investors to be patient and think long-term. Whilst many of us know this principle, few really follow it in real life – it is akin to the statement of eating well and exercising more. But in this post today I will explain why patience is essential to earning above average returns. I will try to approach it based on logic and not because the gurus of investing have been preaching it. In order to understand the importance of being patience, let’s take a series of logical steps: Research by way of the Efficient Market Hypothesis […]


Why Stocks Are The Best Asset Class To Own

There has long been a debate about which asset class is the best to own. The discussion around property vs equities is particularly interesting. But in my opinion, there should be no discussion for long term investors as equities (stocks) are the best hands down. Looking at historic returns, equities have historically outperformed all other asset classes returning 9% per annum whereas property only returned 5.7% per annum. So why do equities outperform all other asset classes? The main reason why equities produce higher returns is due to equities having the unique ability to compound in value in a way that investments in other asset classes cannot. The explanation for […]


Investors Need To Understand Accounting – Warren Buffets 1982 Shareholder Letter

It seems that most investors today are oblivious as to the language of accounting. They would rather look at headline figures presented in financial media than actually dig through an annual report. Even famed investor Terry Smith once mentioned that analyst – the people that are paid to scrutinise a companies performance – don’t usually read a full set of accounts. But if you want to be an investor in individual stocks, it imperative that you learn the language of accounting. The accounts give you the clearest picture of a business and where it is headed. The accounts can show you weather a companies earnings are real or if they […]


Paying Up For Quality Growth Stocks – What Makes A Great Business

Great businesses produce great returns. As Warren Buffet said “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Rather than heading the great porches advice, most investors underestimate business quality which results in unduly low market valuations for the very best companies. As an individual investor, understanding quality and its true value can lead you to craft an investment strategy that exploits market inefficiencies. What Makes an Extraordinary Business So what makes a business extraordinary that deserves a premium rating? A truly great business can come in many guises but by and large there is a need for an […]


Why stocks fall in August and September and Rise in December

Most people who have been invested in the market for a number of years realise that on average stocks tend to have a negative return during the months of August and September. Looking at data for the S&P500, we can see this phenomenon playing out. In September 2016, the S&P500s return was -0.12%, August 2016 – 0.12%, September 2015 -2.64%, August 2015 -6.26%, September 2014 -1.55%, August 2013 -3.13%. Considering we have been in a bull market over this period, it is peculiar that the average return over August and September for this period is negative. The reason why the US stock markets – and this other markets which are […]


How Not To Check Your Stocks Every Week – Key To Being Patient As An Investor 2

After purchasing my first property earlier this year, I registered with popular real estate site Zoopla in order to keep a track on the value of my property. Initially, this seemed like great idea as I could track my property value and net worth in real time. The first couple of weeks went great. My house was up £300 in the first week and £1000 in the next. I remember thinking at the time that I had certainly got a great deal. But the email I received on the third week ruined my mood. It showed that the value of the property was down £2000. I felt a chill in […]