Investment Philosophy Investments
  Value investing through thick & thin  



Q1 : How did you become an investor? 
Ans: I first became interested in equities aged 11, when my father used to discuss specific opportunities that were reported in the financial press. One lasting memory occurred when a stock performed particularly well, and as a result we were able to buy our first music system.

However it was only after joining Unilever plc in 1990, that I had sufficient funds to begin investing seriously. In 2003, after 13 years of working in finance for large corporates, I finally took the plunge and decided to setup my own company PMH Capital in order to concentrate full time on investing and equity research.

Q2 : How would you describe your investment strategy? What lessons have you learnt along the way?
Ans: In a nutshell the strategy is to figure out what something is worth, and then pay a lot less for it. Hence:
· Buy where there is at least 30% below its fair value, which builds in a healthy margin of safety
· Sell at fair value and recycle the proceeds into other deep value plays
· Fight the right battles where one has expertise, and invest more in those stocks where greatest conviction
· Be patient, control emotions & be selectively contrarian
· Monitor performance using absolute returns, and pH Score
"pH Score" is defined as “ratio of winners/losers” multiplied by the “average £ gained per trade / average £ lost per trade”.

The pH score basically assesses whether one is 1) selecting the right stocks, and 2) successfully investing more in those stocks which have the best risk/reward profile.

Q3 : What would you say differentiates you from other investors?   And how do you come across a winning idea?  
Ans: My philosophy is based on common sense and sound financial principles. What differentiates successful investors from the herd is purely results. I define investment success as “long term capital growth both in terms of positive absolute returns, and outperformance verses the benchmark indices for a chosen level of risk”. I look to achieve positive 'Alpha' rather then 'leveraged Beta'.

I’m a “GARP” investor and find that combining growth with value is more attractive than simply choosing value, since for the latter there is generally a maximum ceiling on the share price.

Importantly now that my family’s standard of living hinges on PMH Capital’s success, I have a very strong incentive to choose investments carefully. Indeed I spend a great deal of time investigating markets, trends and companies, and particularly focus on those which are off the beaten track for most research houses. Indeed an excellent indicator of a possible winning idea, is how difficult it is to obtain background information on an industry. The more arduous the research, the potentially larger the price-value gap and the more lucrative the possible returns.

Q4 : What are the best investments you’ve recently made?
Ans: Over the past 3 years I’ve invested and exited stakes in healthcare, machine-to-machine communications, defense, commodities an IT, which have generated substantial returns. See examples of investments.

And your worst?
Back in early 2003 I bought Trafficmaster plc shares at an average price of 14p, and then disposed of the entire stake at 25p following negative press comments from the CEO. Although no one should be too disappointed at realising a profit, I exited far too early, only to see the shares race up to over 100p, nine months later!

Q5 : What do you think are the keys to investment success, and the most common mistakes that private investors make?
Ans: Although a cliché, the key to investment success is detailed research, monitoring ongoing performance and selling if either the shares become unrealistically over-valued or your logic behind the original purchase proves incorrect. 

In my view most mistakes made by private investors occur due to a lack of thorough research and/or a poor understanding of valuation. Consequently many private individuals either don’t invest in equities or pay expensive fees to fund managers to manage their portfolios.

Date last updated : January 2011