Sunday 18 May 2014

Best Books On Investing - My Top 10

1. The Intelligent Investor by Benjamin Graham - described by Warren Buffet as ''by far the best book on investing ever written''. It centres on Graham's philosophy of value investing ''which shields investors from substantial error, and teaches them to develop long term strategies.'' First published in 1949 but as valid today as it was then.


2. The Zulu Principle by Jim Slater - This is a great book on investment for growth. Its title is based on the premise that anyone can become an expert on a subject if they narrow their field enough (his wife is an authority on Zulus). Slater's methodology revolves around spotting small companies with good growth potential that are priced attractively.  

The Little Book That Still Beats the Market Your Safe Haven i | Greenblatt, Joel

 3. The Little Book That Still Beats The Market by Joel Greenblatt - Like 'The Intelligent Investor', this book centres on value investing and even uses some of Graham's terminology (Mr Market etc). Mr Greenblatt has effectively tweaked the Graham methodology to create his own 'magic formula' for investing. A good little book that won't take you long to read.

Common Stocks and Uncommon Profits and Other Writings 40 by Philip A. Fisher... 

4.  Common Stocks And Uncommon Profits by Philip A. Fisher -Fisher was a pioneer growth investor who specialised in innovative companies driven by research and development, his 15 point guide to assessing potential growth companies is still enormously relevant.

One Up On Wall Street by Peter Lynch (Paperback) : How To Use What You Already

5. One Up On Wall Street by Peter Lynch & John Rothchild -  Peter Lynch was one of America's best performing fund managers. He managed the Fidelity Magellan fund from 1977 to 1990 averaging returns of 29% per annum. This book delves into his stock picking methodology and highlights areas where amateur stock pickers can garner advantage over their professional contemporaries.  


6. The Great Investors by Glen Arnold - This book takes a look at nine of the world's greatest investors, some of whom have books of their own in this list. The people covered are Benjamin Graham, Anthony Bolton, John Templeton, Charles Munger, Warren Buffett, George Soros, Peter Lynch, Philip Fisher and John Neff. All fantastic money managers and all and ideal people to study. Soros particularly stands out from the rest of this group, as he is the only one you'll find in this list who is more of a trader than a long term investor. His Quantum fund has been one of the few truly successful hedge funds, delivering an annual rate of return of nearly 35% over the first 26 years of the fund.

7. Stock Picking For Profit by Simon Thompson - Simon writes a regular column for the Investors Chronicle. He specialises in analysing small businesses and has proved an adept stock picker. Many of the concepts/methods he utilises have been mentioned in other books on this list, but this book is probably one of the best for providing real life case studies, demonstrating exactly what you should be looking for when analysing a potential investment.


8. Extraordinary Popular Delusions And The Madness Of Crowds by Charles Mackay - Whilst not an investment title per-se, this book documents the limitations of human sensibility, and covers many interesting topics. Of note to investors should be the Dutch 'Tulip Mania', and also the South Sea Bubble. Yet there are many other interesting subjects mentioned, including the incidence of witch mania, alchemy, and the crusades.     

The Snowball - Warren Buffett and the Business of Life bookcover.jpg

9. The Snowball- Warren Buffett And The Business Of Life by Alice Schroeder - This is the biography of probably the world's best known investor, and while it doesn't dwell too much on his investing methodology, it does give fantastic insight into his psyche and habits. The book shows how his success owes as much to hard work, determination and self-discipline as it does to his method of investing. 


 10. Game Over by Stephen Leeb - WARNING, this book has quite a negative outlook for the future, so if you are prone to depression you may want to avoid it. Nevertheless it is extremely interesting, and offers a glimpse at what pitfalls a rising global population could face as our natural resources are depleted. Stephen has made a few good investment calls in the past, being one of the first to jump on the gold bandwagon. Although I don't always agree with his Malthusian view of things, his book is well worth a read.

Wednesday 7 May 2014

Ethical Investments

For the socially responsible investor, who wishes to save with a conscience, there are a plethora of 'ethical' funds available. These vary dramatically from fund to fund, and research is recommended, as certain funds may suit an individual’s ethical standards better than others.

It is worth noting that some stats have shown ethical funds to under-perform the market; this could be due to the fact that they tend to screen out sectors like tobacco, oil exploration, defence/arms & pharmaceuticals, which have strong revenue streams and often pay substantial dividends.

This is not to say that ethical investing should be avoided, as although returns may be sub par, it can still offer much better long term investment prospects than holding your savings in cash.

I have sifted through quite a few ethical funds, and below are some of the better performing examples that I came across.

F&C Stewardship Growth Fund - a long standing fund that aims to 'provide capital growth and income by investing in an ethically screened spread of UK equities.' The fund has gained 91.3% over the last 5 years which isn't too bad, but still 4.9% less than their benchmark (UK All Companies 96.2%).
A closer look at the fund offers some interesting insights. Amongst it's top 10 holdings are GlaxoSmithKline, who in the line of their business conduct testing on animals. Glaxo do try and 'prevent or minimise pain and distress before, during, and after experimental procedures.' but this still might not conform to the ideals that an ethical investor might aspire to.
Another holding in the fund is BG Group, the oil & gas exploration spin off of British Gas. Again some ethically minded investors may not be too keen on the idea of funding hydrocarbon extraction.
HSBC is the fund's largest holding, but as bankers seem to be an object of scorn for many, this could prove another bone of contention. 

Another Ethical equity fund which has performed a bit better over the past 5 years is the Standard Life Investments UK Ethical Fund.  It has risen a commendable 131.7%, soundly beating the UK All Companies benchmark (96.2%). There are no pharmaceutical companies to be seen in the top ten holdings and its largest holding is DS Smith who supply recycled packaging for consumer goods, a business which must surely tick a few boxes for most ethical investors! Another top ten holding is Asos, the on-line clothes retailer. There are however two banks present (Barclays & Standard Chartered), and BG Group also makes an appearance in this fund.

For investors with a lower attitude to risk the Royal London Ethical Bond Fund has performed admirably over the past five years, rising 72.3%, substantially more than the IMA Sterling Corporate Bond benchmark which has returned 58.1% over the same period. The fund's 5 biggest sector weightings are: structured products (21.3%), banks (15.8%), utility companies (13.8% - including some renewables e.g. First Hydro), social housing (9.1%) and insurance (8.9%).

As you can see, all the above funds have performed reasonably well, but ethical investment is not straight forward and each fund must be assessed on its own merits. If these are not to your taste there are many other options available (see trustnet table) that positively or negatively screen for many different ethical categories. For example the Virgin Money Climate Change fund aims to ''invest in businesses that are making the right decisions for the environment.'' ''Up to 25% of the fund is invested in what we call 'solution adopters' and 'solution providers'. Solution adopters are companies leading by example in their fields, actively seeking out new ways to lower their environmental footprint. Solution providers are companies developing and manufacturing solutions to environmental problems, including alternative energy sources.'' Unfortunately the fund hasn't performed particularly well, rising only 69.2% over a five year period. 

To sum up there are enough equity and bond funds out there to suit most ethical preferences and combinations of such could be used to match most risk profiles, as long as one isn't too fussy about returns.  

Tuesday 6 May 2014

Portfolio Update May 2014 - M&A Activity Driving Gains

After a lacklustre Q1 there has been a recent surge in the market, which seemingly has been led by a few of my holdings that have benefited from positive M&A activity.

AstraZeneca shares have risen strongly (up around 24% in 2/3 weeks) on the back of takeover bids from the US company Pfizer, who are probably looking to take advantage of the UK's generous tax rates by headquartering their business on British soil. I may look at offloading some of these holdings if the share price is pushed much higher.

Also GlaxoSmithKline have hit the headlines because of a proposed deal with Swiss firm Novartis, in which they would swap assets with a view to streamlining both businesses. This has also been received favourably by the market with Glaxo shares rising around 7% in the last few weeks.

Lloyds Banking group are doing okay too, having risen around 10% over the same 2-3 week period on the back of news of offloading TSB branches.

As these 3 companies comprise a substantial part of my portfolio, things are boding well for a Q2 out-performance.

There has also been some positive news flow from Terrace Hill Group who are planning a reverse takeover of Urban&Civic holdings. Terrace hill shares are up almost 20% since the deal was announced.