Why I started

It was through my interest in statistics and gambling games that I became interested in the greatest "Casino"of them all, the stock market. Though in opposition to my starting point I prefer not to deal in statistical or technical analysis of the market or companies present in the market. Also you learn that necessarily the market is not a Casino.

When I started

I have been an active private investor since 1990 and my first interest in investing really kicked off in 1985, trading on a paper only basis prior to entering the market. I felt I needed to fully qualify my experience before getting involved. I bought a variety of books, attended lectures and subscribed to various investment magazines before taking the plunge.

I went through the classic stages of understanding. At first I couldn't understand a thing in the investment journals. Then I could understand them, then I would understand what they were likely to say, then I would be critical of them and finally I reached the stage where I had my own work published in them.

I actually got involved in private investing long before it was trendy and watched with interest as the market grew significantly. Certainly the Internet has improved the quality of information and the ease at which private investors can get such information and gain utility from it. Though I notice that it often doesn't help their decision making!!! That said I couldn't imagine ten years ago doing half the things that I currently do.

It was down to my interest in this that I became the first ever poster to a commercial Internet investment bulletin board in the UK in October 1996. I posted an analysis of my buy recommendation on Nortern Ireland Electricity (Now called Viridin). Thank goodness it shot up from there, else I wouldn't promote this minor claim to fame. I am still heavily involved in this scene and you can see me posting to a variety of financial forums but less than I used to.

Investment philosophy

My stance on investment is very much longer term and value oriented which leads me to research companies very in-depth. This is excellent, as it provides me with constant opportunity to witness and judge companies from a strategic, competitive and financial basis. This approach has proved very beneficial in making business decisions outside of my investments. Making judgments on existing businesses and their generic strategy allows you to respond in kind on things that are happening a little closer to home.

I also tend to be a contrarian, I believe that if you follow the herd you will tend to get the same return as them, I am not interested in this at all, I have a tendancy to buy when other sell and sell when others buy.

My major acid test in investing in a company is to ask the simple question "If I had enough money would I buy the company outright?". If the answer to this question is yes then I will invest in them. If the answer is no then I will be unable to proceed. Indeed this leads to my next stage of development, my ultimate ambition is indeed to buy companies outright rather than invest in a minority stake of the equity of such companies, that is my ambition.

I settled on my  approach after extensive research on all other methods. Picking companies that are undervalued and waiting for the market to attain a sensible valuation is a painstaking but rewarding business which tends to lead to above average returns in comparison to the various other methods I have looked at. It's also almost infinately scalable. More imporatantly the returns from this investing style can be proved where as other such methods are difficult to justify. This approach also allows me to invest with the minimum of fuss, cost and disruption to my existing lifestyle.

The only issue with this approach is that is does not tend to be generally popular and most of the investment head line grabbers have a tendency to be from the opposite side of the fence. "Boring investor who never does much exciting, makes good sum of money" is not the sort of headline that sells newspapers. Therefore, buying stakes in companies that are unloved by other shorter term investors for a shade of out performances in the long term, is not something that most people readily apply. It is much more exciting to try and "Out speculate" other speculators.

Berkshire Hathaway shareholder

Perhaps then it is no surprise to readers that I am a Berkshire Hathaway shareholder. I look forward with great excitement the annual general meeting in Omaha, Nebraska. It has become a regular fixture on my calendar and I really enjoy being part of this meeting. The questions are often the same or similar and the format is generally unchanged but it's the whole experiance that makes it fun. During the Q&A sessions you often get to peak inside the mind of Buffett and Munger and each time it often throws up interesting nuggets of information. Each year I return to meet with former friends made at the meeting and to possibly meet new ones. It's a great focal point for the year. It's a pleasure to be a shareholder of this company and its very rewarding when both key figures are happy to take time out to have an audience with their shareholders. Not only that but if you lucky, like me, you may actually be able to have a one to one sesssion as well. It makes me smile and gives me immense pleasure to say that I have met and talked to Buffett on more than one occasion. Even if you only get the chance to go once you should. To fail to do so may leave you missing the chance to be a part of investing folklore.

Aside from my 'boring' side, I do use a variety of derivatives for taking short term positions if the opportunity strikes. My other "Hat" is that of an arbitrageur. Often though my positions are arbitrage in nature but not by definition. I will take a postion with a positive expectancy but with an open risk if I can clearly define the opportunity. In general, a gift horse only has to look me in the mouth briefly before I've jumped on it and ridden off into the sun set. I 'm happy to use positions in a variety of instruments to achieve my objectives. Arbitrage can be a useful weapon in your armory if used correctly, in isolation or as a hedging tool.

I use a unit accounting system to value my investments net of any cash movements in or out of my investment funds. I first issued units at 10p in 1990 and since then they have grown as show on the following graph.

The interesting thing about being around for a while is how many people you see adopting different approaches and how many people come and go. Birds of a feather, really do, flock together as I now have a close group of fellow investors and speculators with whom I share and discuss information. Probably the only qualifying criteria that these people have is that I have known them for a long time and they have been successful over that period. Poor investors and speculators tend to partake in a self selection system as per Darwinism and, as such, only last for as long as the market allows them too. Like the gambler at a casino who is having a good run the law of large numbers or the prospect of ruin determines that eventually their good luck requires pay back.

Summary & further reading

I have spent over 15 years investing in the markets proper, Five years paper trading, expended a fortune on books, papers, research, attending lectures and networking with guru's. It has taken a lot of time, money and effort but you can hear my experiances and recommendations in a variety of manners. I produced an audio visual CD in association with sharescope, I write for Shares magazine and I am also contracted by training companies from time to time where I present my experiances of value investing. So don't just take my work for it, read the book, see the film, listen to the lecture!! I wish you the best of luck with your investing career.