Christmas reading: books and our investment philosophies

Since moving to London in 2014, I’ll admit I’ve made the most of everything there is to do here - theatres, cinemas, landmarks, pubs, clubs, museums… I’ve enjoyed them all.

That all came to an abrupt end in March, but lockdown has given me the opportunity to catch up on some reading.

And, with little else to do other than work, what has been fascinating is that I’ve noticed how many everyday topics can relate back to investing.

Here’s a short list of some books I’d recommend this Christmas and how their subject matter is used by fund managers.

1. Soccernomics, by Simon Kuper and Stefan

Lesson: A good product doesn’t mean a good business

Football is reputed to be the world's favourite game. It’s followed in over 200 countries by hundreds of millions of people, each pouring their hearts and souls into supporting their chosen team every week.

But why does England lose whilst German and Brazil win? Why do so many clubs buy the wrong players? International bestseller Soccernomics has been written by an economist and a sports writer who answer all these questions and more. Did you know, for example, that Manchester United (the most valuable football club in the world), has a market cap smaller than Fevertree (the tonic water maker)? With a huge number of competitors, limited competitive advantage and not real control of its own destiny, is it a good business?

Fund: Montanaro UK Income

Charles Montanaro starts with a simple philosophy: invest in companies you can understand, buy things which are growing, back quality management, engage with your companies and don't over trade. The first part of the process is looking for good companies and the second is deciding whether these companies are good investments.

Fund: Invesco Asian

Manager William Lam has a very different approach and philosophy believing that the behavioural error of mixing up good businesses with good investments can often lead to trouble. He therefore has a very pragmatic approach and flexible strategy designed to separate these two elements.

2. Peak – How all of us can achieve extraordinary things, by Anders Ericsson and Robert Pool

Lesson: There’s always room for improvement

Do you want to stand out at work, improve your athletic or musical performance, or help your child achieve academic goals?

Anders Ericsson has made a career studying chess champions, violin virtuosos, star athletes, and memory mavens and this is so much more than just a theoretical self-help book. His research focuses on the real world, and he explains in detail, with examples, how all of us can apply the principles of great performance in our work or in any other part of our lives.

Nobody is born with a limited number of skills, but by focusing on why something goes wrong, we can all learn from our mistakes and improve - but we need to be honest, highly critical and not afraid to address criticism.

Fund: Blackrock European Dynamic

Despite already being one of the best funds in the sector, the managers are now using big data to analyse how effective they are in trading. From their stock purchasing approach, to their biometrics in the decision making process, they are continually looking for improvement.

Fund: Brown Advisory Global Leaders

The managers of this fund use a third party consultant to analyse their decision-making for behavioural errors, striving to cut out any mistakes. Co-manager Mick Dillon says: “As keen sportsmen we believe that is possible, with the aid of effective coaching and feedback, to continually improve as investors. Investment managers should have the same mindset as topflight tennis players and concert pianists – the belief that they can always get better.”

3. Everything is f*cked, by Mark Manson

Lesson: Don’t sweat the small stuff

Given the title, perhaps not one to open in front of the kids, but this counterintuitive guide to hope looks at contemporary society's relationships with religion, politics, money, entertainment, and the internet and challenges people to be honest with themselves and connect with the world in ways they had not considered before.

It seems a perfect read to end the year which has been dubbed ‘The Great Reflection’ and the author points out that most things you read about on a daily basis are far too small and insignificant to make a difference. He also says that the things that are ultimately the most impactful move too slowly for you to notice.

Fund: Jupiter Strategic Bond

This fund’s process starts with the manager forming a view on the macroeconomic environment before analysing countries and sectors to find the most compelling opportunities. Ariel Bezalel said: “Human emotions are very much involved when managing people’s money. That’s where you’ve got to try and step away from that, ignore a lot of the day to day noise and stick to your investing principles.”

Fund: VT Downing Unique Opportunities

Manager Rosemary Banyard’s approach to analysing a stock is to act as if she is buying the whole company - therefore she will look for long-term success rather than short-term gains. She says: “Ignore the daily stock market noise, just focus on finding some excellent businesses at a fair price and let them get on with it.”

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Ryan’s views are his own and do not constitute financial advice. References to individual companies are for illustrative purposes only and are not a recommendation to buy or sell.

Published on 30/11/2020