Trustnet Magazine 63 June 2020 | Page 13

[ 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. trustnet.com