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Investment special: Confessions of a stock picker

I always seek the best advice – then do the opposite

4 May 2013

9:00 AM

4 May 2013

9:00 AM

My name’s Freddy and I’m an online gambling addict. The problem started a few years ago when I opened an account on Betfair.com. At first it was small bets on football games, maybe the odd greyhound. A fiver here, a tenner there. Click, click, click. It was fun. Pretty soon, however, the hobby had developed into a minor obsession. I moved on to the harder stuff: cricket, tennis, even X Factor results. I had some wins but more losses: £20; £30; oops, there goes a hundred. Click, click, click. Then I downloaded the Betfair app onto my phone. Tap, tap, tap. I realised things had gone too far when I had almost all my savings on Andy Murray to win a quarter-final somewhere. He did, happily. But I got short odds — and it was Andy Murray, for goodness sake. I talked to my wife, vowed to stop, and I pretty much have.

But now I’ve got a new fix and a new app. It’s called a Hargreaves Lansdown Vantage Fund and Share Account. I’ve become that least respected creature in the financial universe: the amateur stock-picker. -Actually, amateur isn’t quite right — I’m more a know-nothing picker. I like the Hargeaves Lansdown ‘platform’ because it presents you with lots of technical-looking data, which you can pretend to understand but don’t have to. The buying and selling is done by hitting a big green button labelled ‘Deal Now’.

I only buy and sell obvious shares, in companies that advertise on television, and usually because of some vague hunch. I sometimes invest after the most cursory glance at the business pages. In a Michael Lewis book, I’d probably be called a ‘lamb’ or a ‘mark’ or some other derisive term that traders use for the idiots who dare to play their game.

My basic approach is contrarian. That’s not based on any sophisticated understanding of behavioural economics, long tails, or what makes a bubble pop or not. I just have a slightly conceited faith in my instincts, an overriding feeling that prevailing wisdoms are foolish, and a gambler’s sense that it’s all luck anyway.


The conceitedness comes from a fortuitous first break on Lloyds Banking Group in the summer of 2011. There had been another great panic on the stock exchange. The eurozone crisis was heating up. Confidence in the bailed-out British banking sector was at an all-time low. Ordinary Lloyds shares had fallen to about 28p.You didn’t have to be Warren Buffett to see an opportunity. My thought was that if Lloyds — 40-odd per cent owned by the government — went bankrupt, there was not much point owning anything denominated in pounds sterling at all. So what the hell?

I consulted some people who knew their stuff, including The Spectator’s business editor, no less. The great Martin Vander Weyer raised his eyebrows and shook his head in a manner that suggested I would have to be mad to contemplate such a move. I pulled together every spare penny I could find and lumped it on Lloyds.

It worked. Thanks to the unstoppable generosity of the Treasury and the taxpayer, Lloyds moved from near extinction to relative safety. I sold out at 40p. If I had hung on until today, I could have got as much as 55p. I console myself that the mature investor takes a profit when he can.

Since then, a few other wagers have come good. At the start of last year, I rang up a friend who works in the City and asked what he thought of investing in the US stock market. Oh no, he said, America’s much too precarious — you’d be better off in emerging markets. Straight to Hargreaves Lansdown, then, to invest in Aberdeen’s North America fund. It rose in value, but slowly. After a few months I got bored and went instead for Johnson & Johnson shares, which I thought a safe choice because they pay nice dividends. That went up by more than 20 per cent. I sold two weeks ago and last week put the money into Apple — simply because everybody who knows about technology is saying the Apple brand has gone sour, and the share price has fallen by nearly 30 per cent in the past six months.

Quite a few punts haven’t worked out, however. And even I have noticed that my successes in the last year coincided with a huge rally in the stock market. I realise that the two phenomena might be connected. In recent weeks, the market seems to be getting nervous again, and all the arrows in my Hargreaves Lansdown account now point downwards in red. But here again my demented gambler streak comes in. If I’m up, I’m happy to be conservative and quit while ahead. When an investment goes wrong, though, I typically refuse to sell until it goes right again. In fact, I often chase losses — doubling down on bad bets in an attempt to make myself feel better. It’s a sickness, you know.

The other day over lunch, another friend, Sam, tried to help. Sam is an independent financial adviser at Xentum Wealth Management. He knows that I have a young family and a journalist’s salary, and shouldn’t be mucking about with my capital. ‘Over a three-year period,’ he told me, ‘75 per cent of fund managers can’t beat the index.’ He was trying to say that since even experts can’t outperform the market, I had no chance. What I took from our conversation, however, was that the experts are idiots and I can do better. Sam told me that in these uncertain times, the soundest investment is a highly diversified global fund. ‘It’s boring and you have to be patient,’ he said. ‘But it’s for the best.’ I nodded obediently, thanked him as we said goodbye, then went straight back to my computer and piled into Aviva shares.

So there you have it. My strategy is to combine stupidity, arrogance and hubris. I’ll probably lose in the end. But for now I’m still up — and enjoying myself in the age of crisis capitalism. If it all goes wrong, I can always go back to Betfair.com.


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