Investment: Stock-picking
Remember the wisdom of Keynes and Mark Twain
9 June 2007
John Maynard Keynes said that picking shares was like a beauty contest where ‘it’s important to choose not who you think is the prettiest girl, but who the judges will think is the prettiest girl’. One of the key lessons I’ve learnt over the last 30 years or so of being an investment manager is that, although perception and reality are both factors in choosing investments, perception is probably the more important. When everyone thinks the shares of a company are unattractive, this can often create a great investment opportunity — but investments can be riskier when everyone has fallen for their ‘beauty’. This is at the heart of my contrarian approach: buying the stocks I think are misvalued and paying little attention to the stock market index weightings which guide the majority of investors.
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