[ BOMBED-OUT STOCKS ]
“By buying into situations where there’s a risk it may go
under, you’re saying: ‘This could be a 10 bagger, but I’m
prepared to accept it may go bust to get my hands on that.’ I
don’t think you have to do that”
from T. Rowe Price came out with:
‘Value matters, but only at either
end of the scale – if it is too cheap,
that’s an opportunity, and if it’s too
dear, that’s also an opportunity. The
rest of the middle is where we are
working most of the time.’”
Holding the baby
So the consensus seems to be that
unless you know what you are
doing and have an informational
edge when it comes to both buying
in and selling out, you can often
save yourself a lot of trouble by
avoiding companies whose share
price has collapsed. But what about
those long-term buy-and-hold
managers who believe they have
identified a compelling growth
business, only to see it crash and
burn after they bought in? Surely it
makes sense to wait for a rebound?
Not according to Keith Ashworth-
Lord, who heads up CFP SDL UK
Buffettology. The manager dumped
Revolution Bars and Restaurant
Group this year, two of his hardesthit
stocks. He began to exit the
former position before the pandemic
struck, selling the final tranche at the
bottom of the market, while the latter
was “the fund’s biggest loss ever”.
However, he has no regrets.
“One of my shibboleths is to try
and protect capital from permanent
loss,” Ashworth-Lord explains. “By
buying into situations where there’s
a risk it may go under, you’re saying:
‘This could be a 10 bagger, but I’m
prepared to accept it may go bust to
get my hands on that.’
“I don’t think you have to do that.
You can find quality businesses
like Games Workshop, Liontrust
and AB Dynamics where we’ve had
10 bagger-plus performance with
absolutely no risk of a big fat zero.
“There are people with different
methodologies to mine. They perhaps
get excited about a gamble. But for
me, if there is a risk of a company
going under, I’ll get it out.”
Ashworth-Lord’s aversion to this
risk doesn’t seem to have done him
any harm. CFP SDL UK Buffettology
is the second-best performer in the IA
UK All Companies sector over three
years. It was beaten only by CFP SDL
Free Spirit, a fund he co-manages.
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