Table of Contents

Investing Against the Tide Book Summary and Review | By Anthony Bolton

One of the most well-known and successful investment fund managers in the UK is Anthony Bolton. He was the fund manager for the Fidelity Special Situations fund from December 1979 until December 2007. Over the course of this 28-year period, a £1,000 investment became £147,000 thanks to the fund’s annualized return of 19.5%, which was far greater than the stock market’s overall growth of 13.5%.

Bolton earned business and engineering degrees from Stowe School and Cambridge University. At the age of 29, Fidelity chose him to be one of their first investment managers in London after he pursued a career in the region. He presently serves as the manager of Fidelity China Special Situations PLC and the President of Investments for Fidelity International Limited.

*Investing Against the Tide Book Summary*

Sometimes it just seems like the stock market is out of control. It is imperative to remember Anthony Bolton’s counsel in such situations, one of the greatest investors in British history. Bolton asserts that bull markets cover up fissures while negative markets make them obvious. Remember this since there are always fissures of some kind.

It looks like a happy face. When you look at it one way, it smiles back at you, but when you look at it the other way, it looks old and dejected.

We’ll study how to thrive in choppy stock market circumstances in this lesson. The top five lessons from Anthony Bolton’s book Investing Against the Tide are listed below.

Conviction is founded on a variety of unique facts and elements.

At the time, Anthony Bolton was one of the fund managers at Fidelity, where Peter Lynch and other well-known investors worked. He worked there for the entirety of his 28-year career and gained a tonne of knowledge about how to be successful when investing in small and mid-sized enterprises.

Bolton came to the conclusion that the investing landscape had significantly changed since he began working as an investment manager. The major objective was to find knowledge that others didn’t have or hadn’t noticed. The ability to evaluate information more skillfully than anybody else is the key to outperforming the rest of the financial world today, on the other hand, because it is so publicly available.

If you follow a rigorous procedure for evaluating a wide range of discrete facts and elements before making your investment selections, you will feel more secure when you invest against the trend and be less likely to commit costly mistakes. Anthony approaches investing from the ground up. Before buying a stock, he assesses it in six important categories, and he only does so if he is persuaded after weighing all six of these factors.

1) A reliable brand

This is one of the best questions to ask to secure a successful business franchise:

How likely is it that the business will still be around in ten years and have a higher value?

2) EXCELLENT MANAGEMENT

More important than what the management is accomplishing is how they are compensated.

Strong performance incentives will typically lead to strong performance.

3) About Low Valuation

4) STRONG FINANCES

5) TARGET FOR TAKEOVER

The likelihood of takeover targets being small and medium-sized organisations is higher. Therefore, if your company is acquired by a competitor, you’ll typically profit greatly as a shareholder.

6) SUITABLE TECHNIQUES

Bolt came to the conclusion that his advantage stems from fusing pricing information with fundamental insight.

He is looking for a company with a captivating story whose pricing has not yet caught up to its attractiveness. As a result, he frequently avoids equities that have had significant rise. Say I grew by 200% in three years, for example.

One source of information is newspapers. a few from annual reports, perhaps a handful from other analysts, manager interviews, etc. The task of organizing the information falls to you as the investor because it is by its very nature unorganized. You may rate each of these six qualities on a scale of zero to five, with five being the highest possible score, in order to use it, for example, to help you make investment decisions.

Effective completion of this work requires time. The next section of our discussion will focus on selecting companies that are worthwhile of further investigation.

A Reasonable Cost

Mean reversion is a very powerful phenomena in the world of investment.

Nearly everything goes back to normal. A prosperous business becomes a typical one.

A brilliant manager turns into a terrible manager, and most importantly, a high valuation becomes a low valuation. As a result, Anthony Bolton looks for inexpensive stocks. In contrast to prior prices and competitors, it is inexpensive. His four primary criteria for this are Price to Earnings, Price to Book, Price to Sales, and EV/EBITDA (Enterprise Value/Earnings before interest, taxes, depreciation, and amortisation).

Although Bolton prefers to examine these over periods of 20 years, 10 years will serve for the purposes of this study. We’ll look at GAP, Toyota, and Apple.

Regardless of the key ratio we look at, we can see that Apple is trading at its highest price ever, while Toyota and GAP are going through the exact opposite.

These prices haven’t been this low in ten years. Furthermore, every significant ratio shows that Apple is more costly than the S&P 500. The best place to look for prudent investments is here, even though GAP and Toyota are less expensive. However, keep in mind that pricing is just one of the many aspects you need to consider when buying a stock.

Skeletons are included in the balance sheets.

Never invest in a company, according to Peter Lynch, until you completely understand its finances.

The biggest stock losses happen at companies with precarious financial standing. Imagine you found a company that is severely undervalued according to the valuation criteria we established in lesson 2

As a result, it is likely that business isn’t doing so well right now. It might even be negative. We must make sure that the company’s financials are sound since we would like mean reversion to start before it goes out of business. Look at the financial sheet and steer clear of businesses with big debts. When appropriate, you should compare the debt to the company’s profits or equity.

Include elements like a need for future payments, pension fund liabilities, and redeemable preferred shares.

DUE NOW PAYABLE CREDIT

Determine whether the company has the short-term capital it needs to survive by understanding the debt profile.

Low Interest Debt

If the corporation has any outstanding bonds, take a look at the markets where they are traded.

If the yield on them is very high, it means that bondholders have little confidence in the company’s future prospects or financial stability, and you should share their concern.

While staying away from businesses with fragile balance sheets will mean you miss out on some winners, it will also mean you stay away from a lot more losers.

When you’re struggling, create a to-do list.

Even the most successful investors occasionally experience downturns. Examine your portfolio to see whether it has the flu by using this short checklist.

An ideal level of conviction is thought to be around 50%. You must persevere, but you must also be flexible.

Don’t put yourself in a tight spot.

The renowned activist investor Bill Ackman lost a lot of money by shorting the stock of a company called Herbalife. His worst mistake was probably admitting he thought the company was a fake on live television, which left him in a precarious situation. He acknowledged defeat way too late since his ego was on the line.

Refrain from changing drastically just because you’ve had a few bad years.

Pay attention to Asymmetric Payoffs

Asymmetric payout refers to a situation when there is a big benefit but a modest disadvantage. Peter Lynch is credited with coining the term “tenbaggers,” which describes stocks that experience a 10-fold increase in value. Consider the potential that you could completely fail with just one of these stocks and select nine prosperous businesses that collapse.

Given how significant this asymmetry is, I believe it’s intriguing to consider this question when picking a stock: “Would it be plausible for this corporation to be worth 10 times as much in 10 years?”

For the vast majority of organizations that are already quite large today, I think the likelihood of this happening is pretty low.

I have no idea how Apple’s worth could go from $1.13 trillion to $11.3 trillion, for instance. Although not unlikely, we should consider that ExxonMobil had a market cap of $316 billion ten years previously and Microsoft had a market cap of $560 billion in 2000.

My claim is that a small company is more likely to have asymmetric payoffs than a large one. An example of a stock with an asymmetric payoff would be a smaller oil company with a favorable valuation and great cashflow that aggressively invested capital on new exploration efforts.

Particularly since that oil prices are at their lowest point since 2004, such a firm would have very little risk and tremendous potential returns. oil price stability mixed with. If a significant oil well were found, the PE multiple would rise, and the company might quickly become a tenbagger.

A smaller pharmaceutical company with comparable characteristics could serve as another illustration. It need to be fairly priced and produce a sizable amount of cash flow, most of which is used to fund fresh research to find the next big thing. Such R&D should also be conducted in a decentralized organization with an eye towards many different possible outcomes.

Another strategy to invest against the grain is to select the least glamorous stocks you can discover. This strategy was made popular by Peter Lynch in his book One Up on Wall Street.

Investing Against The Tide Book Review

“Investing Against the Tide” is a book written by Aswath Damodaran, a professor of finance at New York University’s Stern School of Business. The book provides a practical guide for individuals and professionals looking to invest against market trends and common beliefs. It covers topics such as value investing, behavioral finance, and risk management. It aims to help readers make informed investment decisions by understanding and managing the psychological biases that can impact decision-making.

If you really like this “Investing Against the Tide Book Summary“ by Growthex then you can also check out some more amazing posts which is freely available on this platform :

To Watch great book summary explanation videos in Hindi language then visit : THIS YOUTUBE CHANNEL

Get the most out of every book you read. Growthex.org provides free, high quality summaries of books to help you make the most of your reading time.

Unlocking the power of knowledge, one book at a time. Growthex.org – the home for free, high-quality book summaries. Learn something new today.