COVER STORY
investing : if you are going to catch the falling knife , good governance really matters .”
The house always wins Eric Burns , chief analyst at Sanford DeLand , says that what constitutes a “ bargepole stock ” depends on where you sit on the risk spectrum . For example , his group doesn ’ t invest in oil & gas or banks , as although they have generated great returns over the last few months , it is impossible to value a company whose fate is driven by the price of a commodity over which you have zero control . Instead , the managers at Sanford
Burden of gilts
The asset that Featherstone ’ s chief executive James Barton is refusing to go anywhere near is not one that is regarded as excessively risky ; in fact , in absolute terms , it is just about the safest there is : the UK government bond .
“ While 10-year gilts are undoubtedly cheaper than they were , at a yield of 1.7 %, they would give you a negative real yield even if you thought the Bank of England ’ s 2 % inflation target could be achieved ,” he warns .
“ Inflation and rising interest rates have rendered the asset class obsolete , yet so many wealth managers are blindly investing clients ’ money into them as they follow their paint-by-numbers instructions like lemmings near a cliff edge .”
DeLand focus on companies with proven business models that are growing and where profits are being translated into cash returns . “ A steady 10 to 15 % compounder is far better than a go-go stock that may struggle to sustain its meteoric growth ,” Burns says .
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