Professor Glen Arnold

Jeremy Grantham, a Brit from Doncaster (and Sheffield Uni) who made it very big in America through his deep understanding of markets (co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo (GMO) in Boston), published a piece a few days ago with the title “Let the wild rumpus begin” which gives you a […]

In yesterday’s newsletter I outlined James Montier’s objections to the practical use of the simplistic textbook version of discounted cash flow analysis (in his book Value Investing).  Today I’ll describe his suggested alternatives. Reverse-engineered discounted cash flow Take the current share price and use the DCF formula to work out what is currently being implied by […]

I’ve been re-reading an important book on investing, Value Investing by James Montier, which I highly recommend if you want to separate in your mind the nonsense spouted by “expert investors” from the truly rational. Today I want to look at what James wrote on discounted cash flow, a method we are all supposed to follow, i.e. estimate cash […]

Bruce Greenwald,  a professor focused on value investing at Columbia University’s Graduate School of Business reminds us[1] that every time you buy an asset, such as a share, thinking that it will produce relatively high returns in the future, another investor is selling that asset thinking that it will produce relatively low returns in the future. […]

Philip Fisher, mentor to many growth-oriented investors, concentrated on technology companies with excellent long term potential because they had developed teams of people who could continuously innovate and thus be one step ahead of competitors. When buying he asked questions like, .. . Are the people running a firm outstanding? Does it hold a strong […]

The investor’s worst enemy is likely to himself – his feelings and compulsions, his decision-making flaws. A sound investment strategy can be scuppered because when the crunch-time comes excitement, fear, impatience, greed and other emotions get in the way. Being temperamentally well-suited for investment is far more important than IQ or knowledge of accounting, economics, […]

Many investors have compounded their losses by holding a share until they could ‘at least come out even’.  They may not like the company as an investment anymore but they are loath to give up and admit defeat and crystalize a loss. Not only is there a danger that the share will keep going down […]

Playing the in and out game: The great investors say they cannot predict short term price movements. Imagining that you can look at one of the shares in your portfolio and say that over the next six months I think it will go down and therefore I will sell it now and buy it back again […]

Rejecting companies that have made mistakes:     Companies that are striving on a frontier, particularly a technological frontier, will experiment with projects; and many of these will fail. Technological pioneers must be permitted to endeavour, to go for the big breakthrough. Look for a good average success to average failure ratio. If the firm is run by […]

The commonplace concern is that you have too many eggs in one basket. But Philip Fisher, the intellectual leader of the growth investing school, was more concerned with the other extreme.  This is the disadvantage of having eggs in so many baskets that a lot of the eggs do not end up in really attractive […]