investing etc. 0011
Spring!, stage fright, keep it simple, stupid!, automation, simplification, Kessler syndrome, storytelling, photo-realistic writing, Bunzl and 4Imprint...
Welcome to investing etc. 0011. Spring is here, just in time for Summer!
Stage fright
Next month, I am giving a talk to a group of investors.
I do not enjoy preparing for events like this.
This time, I’ve asked the chairman to structure it as a Q&A, where he asks the questions for a while and then invites questions from the floor.
The issue, you see, is that I like writing, not performing.
An article is a self contained thing. You can shape it until it is coherent. Talking, on the other hand, is unstructured and chaotic.
Anything can happen! I do not want to make myself look like a fool by forgetting things, getting them wrong or not knowing them in the first place.
On the other hand, I do not want to recite something pre-prepared like a parrot.
Hopefully the Q&A format is a natural way to introduce structure and make it partly somebody else’s responsibility.
Having settled that, I must decide what to talk about.
Better than X: Neighbours put aphorisms in their window. I must have been channelling this one, when I agreed to do another talk.
It’s not (just) what you do, it’s the way that you do it
My first instinct is to expand on an article I wrote last December: “What I think about when I think about investing.”
That article introduced my guiding principle, which is to: “Invest in people I trust to make money through thick and thin, for everyone”.
The challenge of finding and evaluating these businesses is enormous, when you consider how many companies there are, the fact that we can only know a tiny fraction of what there is to know about them, and they exist in a chaotic system we call the economy.
It would not be possible without an additional principle. Not one that determines what to do, but how to cope with the overwhelming amount of information we are exposed to in doing it.
Without realising it, I think I have been following a very well known principle: keep it simple, stupid!
Rule #1: KISS
For me, most investments start with the generation of ideas in SharePad, where earlier this week I found five more candidates.
A filtering system whittles over a thousand shares listed in the UK down to perhaps a 100 or so that merit further attention.
This simplification stems from my belief that the companies most likely to prosper will have demonstrated they already know how. We can establish that by examining a handful of financial statistics over time.
We also need to be confident these companies will continue to perform well, though. This requires an understanding of how they make money, what could stop them making more, and how they will meet these challenges.
So I also score these “future factors”. To simplify the task, I reduce the amount of information required to determine the company's direction to a minimum.
Generally, I ignore most of the usual sources of information: corporate presentations, and broker research for example. Instead, I rely heavily on one document, the annual report.
In fact, I rely most heavily on bits of the annual report: the principal risks and uncertainties section, the chief financial officer’s report, and the segmental report.
Since investing etc. 0010, I have scored Bunzl and 4Imprint, which means mostly I have scored these bits of their annual reports.
The scores enable another simplification. A rules based trading system. You can see it in action in the latest Share Sleuth update, when I added Macfarlane to the portfolio.
Talking about Macfarlane...
Going Orbital
You may remember the company from investing etc 0010. It is the protective packaging supplier that packages up satellites for Astroscale, the company that is going to clean up space debris.
It hadn’t occurred to me that an orbital litter-picker could be an instrument of war, but it could be if, instead of hurling space junk out of orbit, these satellites targeted functioning space hardware.
Neither did I realise that there are numerous anti-satellite weapons (ASATs) ranging from earth based missiles to chemicals that blind satellite sensors. In 2021, a Russian missile destroyed a satellite in what was widely interpreted as a military test.
The satellite broke into over 1,500 pieces of metal travelling in the same orbit as the International Space Station (ISS). Seven astronauts including two Russians hid in their docked spaceship capsules until they got the all clear.
The event echoed the film “Gravity” and raised the spectre of the Kessler Syndrome.
Named after its creator, a NASA scientist, the Kessler Syndrome envisages a cascade of collisions creating ever more space junk that eventually makes operating in space impossible.
Tim Marshall, the author of The Future of Geography, a book about astropolitics (the extra-terrestrial version of geopolitics), says we urgently need to prevent space from cluttering up. But how?
Getting agreement between, principally, the USA, Russia, and China seems a long-shot when space is the new military high ground, and the issue is mired in earthly national security.
The Future of Geography is full of amazing stories, and unlike the science fiction magazine of the same name, they’re true.
I am reading it alongside Orbital by Samantha Harvey, a work of fiction describing life on the ISS that is hardly a story at all. It is more like the literary equivalent of a painting that is so realistic you wonder whether it is in fact a photograph.
They make a great double-bill, even if the work of fact is like a thriller, and the work of fiction is like nothing I have ever read before!
Thank you
Thanks for reading. If you are enjoying investing etc. please subscribe, share, comment, like or email me, richard@beddard.net, it’s all the encouragement I need!