Keith Ashworth-Lord is regarded as one of the foremost authorities on the investment philosophy of Warren Buffett and Charlie Munger and a keen student of the teachings of Benjamin Graham and Philip Fisher.
And in his new book, Invest in the Best Keith Ashworth-Lord details how you can adapt your investment strategy achieve Buffett-like results.
Invest in the Best concentrates on the investment style of Business Perspective Investing, as practiced by Benjamin Graham and Warren Buffett. It takes the reader through the realisation that the thought process involved when buying shares in a company is no different to buying the company in its entirety.
Ahead of Invest in the Best’s release, Keith Ashworth-Lord was kind enough to answer some questions for ValueWalk about the book and value investing in general, as part of ValueWalk’s Value Fund Interview Series.
Interview with Keith Ashworth-Lord author of Invest in the Best [Pt 1.]
Rupert Hargreaves: Could you give our readers a brief summary of your book, Invest in the Best?
Keith Ashworth-Lord: The book focuses on the investment style of Business Perspective Investing, as practiced by Benjamin Graham and Warren Buffett. It takes the reader through the realisation that the thought process involved when buying shares in a company is no different to buying the company in its entirety. Beginning with how to assess the quality of a business, it explains and illustrates with examples what to look for in company accounts, how to determine the value drivers of a business, the strength of its franchise and how to interpret key financial ratios and performance indicators. It discusses the ideal characteristics of a business worthy of investment so that the reader will develop a mental checklist of what to look out for. The book then sets out a number of valuation methods to determine the likely economic worth of a company. It is against this estimate that a judgement can be made as to whether the share price offers good value. The book concludes with thoughts on portfolio construction, in particular Focus Investing, where a concentrated approach is taken, and legitimate reasons for deciding to sell a holding. Throughout, the emphasis is on the methodology used to manage the Sanford DeLand UK Buffettology Fund.
RH: What was the inspiration behind the book?
KAL: I had it in mind to write just such a book for many years and had sketches of the chapters already set out. I have several investor friends in the US and for Americans, writing a book is a rite of passage. When Harriman House approached me in 2015 to write a book, it took me all of a nanosecond to agree.
RH: What do you hope readers will take away from the book?
KAL: This book has been written with the aim of guiding the reader through the most important tenets of my investment philosophy. It illustrates the manner in which I set about identifying and selecting companies that I want to own. At the end, the reader should have a good grasp of the methodology I have synthesised over many years and that, for me, has proven spectacularly successful. It is not a beginner’s guide to investment. It is intended for readers who already have some understanding of the basics, in particular some knowledge of the language of business, accounting. On the one hand, it will be especially helpful to those who have started or managed a business or those who are looking to expand one by reinvestment or acquisition. I am constantly surprised by the number of experienced managers who fail to appreciate the factors that drive value creation. On the other hand, it will aid the conscientious investor who is looking to put together a portfolio of outstanding businesses by showing them the characteristics that crop up repeatedly in the best of them. Again, I am constantly surprised by the number of investors who fail to have an anchor line guiding their investment process.
RH: What experiences have shaped you as an investor?
KAL: The experiences of a lifetime – some favourable, some unfavourable – exert a profound and lasting influence on what you think about investment. If you began investing near the top of the dotcom boom or shortly before the crash of 1987, you will tend to think that another disaster is always just around the corner. You have been conditioned to be a natural pessimist. Conversely, if you got rich trading technology stocks in the dotcom boom and managed to avoid the bust, you are more likely to be a natural optimist. The same goes for people like me who got involved in investing and stuck it out through the long secular bull market of 1982-2000.
I bought my first shares at the age of 21 in one of the partial privatisation offerings of BP. At the time I was reading for a Bachelor’s degree in Astrophysics, but with that first investment, I was hooked. It was not, therefore, surprising that a few years later, after a false career start, I emerged with a Master’s degree in Management from Imperial College, London. I then chose to make my way in the world of financial services, having become more interested in coupling finance and economics to my mathematical knowledge, rather than physics.
I started out as a trainee investment analyst covering the engineering sector. As a trainee in the 1980s, you were left to get on with it. Learning on the job was preferred to a structured training scheme. From there I climbed the ladder to Head of Research before broadening out into other industries and trying my hand at corporate finance. It took a little while to realise it but I did not have a robust investment philosophy. I knew I had to get more professional and so I set about it by reading the investment ideas of others. I was particularly struck by the success of the disciples of Benjamin Graham; the so-called ‘Superinvestors-of-Graham-and-Doddsville’. These guys were all battering the S&P year in, year out, yet they had constructed very different portfolios. Foremost among them was Warren Buffett. Studying these guys in the years that followed, cast my investment methodology.