A great book on investing deserves a great foreword by a great person. In the case of Investing for Growth, it is none other than the former editor of the Financial Times, Lionel Barber – currently doing the rounds with his diaries when he was editor. Rather cutely, Mr Barber has an anecdote of Terry Smith. A year after he set up Fundsmith, Smith wrote to Barber asking whether he could write an obituary regarding “Smokin’” Joe Frazier, one of the best boxers in history. This struck me for a couple of reasons. The first is that I had forgotten Smokin’ Joe had died, and the second, it is clear my media contacts still fall short of the mark. Perhaps more seriously, the message is that if you are going to set up a winning fund management company, having the ear of the editor of the Financial Times gets you off to a good start.
Whatever the facts, statistics, or even Neil Woodford might say, the number one fund of the past decade in terms of impact in the UK, and general schradenfreude, especially after the fall of Mr Woodford, has been Fundsmith. What is interesting after reading the book, and very consoling is the way that unlike many other “how I became successful” books in the financial area, one is not blinded by financial jargon or ratios. Quite the opposite. We are taught to be wary of words and phrases such as “reaching out”, “key” and “pension pot”, and taken through the minefield of value investing, where if one is not careful, there are companies which become value traps.
If one were to be facile then it could be said that Investing for Growth is a lesson in how to successfully invest in momentum stocks. These of course include the FAANGS area – a rollercoaster asset class, but can by definition mean one is casting a wide net.
But while the book ticks some of the boxes you would expect in any “greatest hits” of investment, it is the aspects of it which are different that make it worth a read. Most investment books are either slick, show off / marketing affairs, or earnest and even pious.
Investing for Growth veers away from both extremes. If anything, the feeling that one is left with is the humour and irreverence of Terry Smith, something you do not associate with City Grandees. For instance, what sticks in the mind is Smith’s harpooning of “Comic” Eddie Izzard, who has converted himself into one of the greatest counter indicators of our time, in politics, and if he tries, in any other field he steps into. Smith is no nonsense, and clearly does not suffer fools gladly – something which is a characteristic of the best fund managers I have managed to brush shoulders with over the years.
Apart from taking pot shots at celebrities of present and past, Smith offers two significant benefits in his book. The first is using the “lessons” approach – where he covers the rules that work, and the rules that do not. Companies with the zeitgeist hyperbole, and those on whatever the present bandwagon is, are obviously ones to avoid.
Perhaps the sad part of it is how few of us manage to notice this unless it is pointed out to us. There is also the advantage that the book is a compilation of articles and annual letters to shareholders over Fundsmith’s first ten years, so there is no grandstanding in terms of trying to appear clever now post COVID-19, or in the wake of Brexit, or QE. Topics such as market timing, retail traders, and ETFs were written in the wake of them being newsworthy or relevant, and are all the better for being covered as such.
But the real takeaway from Investing for Growth is “no nonsense”, something here which seems related to the homespun wisdom of Warren Buffett, but with Terry Smith you are spoiled with detail and have much more of a template for all times. Indeed, by the end of the book, for someone who did not look at Fundsmith or read Terry Smith’s articles previously, there is a considerable amount of regret for missing out something highly significant to the investment world and beyond, hidden in plain sight. The message here is to buy the best in the market, without fear or favour. In Investing for Growth, we are shown how to identify the characteristics of the best and worst companies, and given Smith’s ten golden rules for investment. Coming from a master, this is a very good offering indeed based on a decade of excellence.
Investing for Growth is published by Harriman House (www.harriman-house.com) and available on October 27
Hardback £24.99 eBook £18.99