Putting lessons into practice
In the mid-1990s, I had been working in investment analysis for over 15 years. But I did not have the anchor line of a robust investment philosophy. How do you go about finding an objective way of identifying investments that can predictably build long-term wealth?
The starting point is to identify particular types of company as investment candidates, i.e. those with the most predictable business models, then to value them.
If a business model is not predictable to a high degree of certainty, how can you value it?
And if you can't value it, how do you know if the stock market price is offering you an investment proposition or not?
I alighted on the teachings of Warren Buffett and Charlie Munger and now set about learning with the zeal of a convert.
Buffettology, the book written by Mary Buffett and David Clark, helped to unlock the mystery. It is an accessible and very simple exposition of Buffett's methodology.
It showed me the overriding importance of concentrating on the economics of a business and discarding those companies that do not stack up against a set of predetermined criteria. This was a massive step-change in my thinking.
In a short space of time, I changed from being a securities (or investment) analyst to a business analyst practicing Business Perspective Investing.
The methodology that I use today has been synthesised from a lifetime of investment experiences.
Keith Ashworth-Lord is chief investment officer for Sanford DeLand Asset Management
