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Book Review – Invest In The Best

The book Invest In the Best, written by Keith Ashworth-Lord, has recently been published. I am familiar with Keith’s work (he currently runs the Sanford DeLand UK Buffettology Fund which has been performing very well), because he presented at a ShareSoc Masterclass event. I also remember reading the Analyst publication many years ago to which he was a major contributor and which very much influenced my own investment style.

The subtitle of this book is “Applying the principles of Warren Buffett for long-term investing success” and Keith is very much a disciple of that master investor – and there is surely not much wrong with that approach. In other words, it’s about some sound financial analysis combined with “business perspective” analysis.

To quote from the introduction: “To be a successful investor requires very few things. Foremost among them are discipline and patience. For me discipline comes from investing only from the perspective of a businessman”. This book attempts to teach you, and does it well, on how to pick quality investments that you can “own forever” (to reiterate Warren Buffett’s views).

So what does the book cover? It explains what business perspective investing is about. Namely identifying companies that meet certain characteristics, and hence will prove to be consistent performers. Some of those characteristics, without listing them all, are “an easily comprehensible business model”, “transparent financial statements”, “an enduring franchise with pricing power”, “high returns on capital employed” and a “high conversion of earnings into cash”.

So he does have certain prejudices (like Buffett) and says “you are unlikely to see me going near oil exploration companies, miners, banks, or blue-sky pharmaceutical and biotechnology companies”. That equates to my own views, learned from experience.

He emphasises that investing in shares is like buying part of a business. To quote: “Ownership confers a part interest in a real business. Shares should not be confused with gaming chips”. I do wish all investors would take that to heart, particularly the inexperienced ones.

The book has chapters on why “Growth is not always what it seems”, on why “Profitability of capital drives shareholder value” (and covers the various ways of looking at that), on “Economic Profit” and on why “Cash Is King”. There is also discussion of uncertainty, financial ratio analysis and on valuation techniques (because the focus is on identifying businesses that are worth intrinsically more than their current stock market price as in the Buffett/Graham approach).

The financial analysis approach may appear somewhat complex and time consuming however to the amateur investor, particularly if you have become reliant on simple rules of thumb such as P/E or PEG ratios. But Keith does highlight all the key factors that investors need to look at.

The chapter on Business Perspective Investing, and the final one on Portfolio Management, are particularly good and also easily digestible.

In summary this book is a worthy contribution to the education of any investor, whether experienced or not. Therefore it has been added to the ShareSoc recommended reading list.

Roger Lawson

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