A Cheap £50 Note
Even though we are fast approaching a cashless society, paying £20 for a £50 note still resonates. This is just as well as it is the tag line of Deep Value Investing which resonates most.
It also makes it quite obvious how with relatively little fanfare, this book is now on its second edition. What is perhaps just as notable is that this review is being carried out by a die hard technical analyst for whom in theory financial ratios and balance sheets should be an anathema. What I can also say, is that if this book had appeared some 30 years ago, I might not have wandered down the charting path with such gusto. In fact, author Jeroen Bos is a fund manager who has been walking the streets of the City of London for some 30 years, and is still plying his trade today.
The Age Of The Algo
But the question may very well be, that in an age of algorithms and MiFID II, are methods which echo the ways of Benjamin Graham or his protoge Warren Buffett still applicable? We are also thinking of whether in the recent past where “rock star” fund managers have bitten dust, along with companies like Carillion, can the Deep Value approach provide a degree of immunity?
It would appear that according to Bos, and with the case histories in his book, the answer is in the affirmative. Indeed, perhaps the only real issue left to solve for those in the market currently is whether after over a decade of bull market conditions the low hanging fruit of opportunity may have already been harvested. But according to Bos, it is almost uncanny how there are almost always a contingent of unloved companies in bombed out sectors who provide those who are able to ignore the cackle of the crowd and focus on balance sheets, assets and liabillities. Rather gratifyingly you do not need to be a nuclear physicist or perhaps more appropriately, an expert in algebra to apply what Mr Bos does in order to glean the value situations. In this he is from the perspective of someone riding high with a C grade Maths O Level, something of a godsend.
Indeed, the message is clear from the balance sheets we see on each stock example, cash really is king, and for those interested in the world of M&A. If you are trying to second guess what the next bid target may be, it is better not to go for bulletin board rumour, and instead read between the lines of a company’s accounts. Bos tells us where to look in Deep Value Investing, and for this his readers will be thankful, and in many case better off.
Reading Between The Lines
The message from this book is that you can keep investing simple, and may be most importantly, you do not have to be a City insider, or just plain lucky. Ironically, for the more senior investors what can be regarded as the most helpful aspect of Deep Value Investing is the opportunity to “look over his shoulder” as he reads the RNSs of the companies is about to invest in, or has invested in. Reading between the lines is clearly not just related to accounting, but also with regard to newsflow.