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Peter Lynch’s performance when he ran Fidelity’s Magellan Fund was astounding. He achieved an annual rate of return of 29.2%, turning $1,000 into $28,000 in 13 years.
Philip Fisher, the leading thinker in growth-at-a-reasonable-price school of thought, ran portfolios in California. He is one of Warren Buffett’s heroes – Warren learned a lot about qualitative analysis from him. His performance, while known to be very good, is not public information.
Lynch and Fisher paid particular attention to the way a company was run, looking at many different aspects. I’ll discuss three things you might want to keep an eye out for:
All corporate thinking and planning must be attuned to challenge what is now being done – to challenge it not occasionally but again and again
Philip Fisher
I’ve met managers who seem stuck in the past; they are losing shareholders money but want to keep running the company in the same way it was run in the old days. Northamber is a case in point. I invested in this one in 2013. It had net current assets over double market capitalisation. And then, even better, the value of the assets rose as a result of obtaining planning permissions.
But the operating business was loss-making because it was wholesaling electrical components and finished products, e.g. computer peripherals – a commoditised industry if ever there was one with hundreds of internet competitors.
I offered my observation at AGMs that that the wholesale business has year-after-year lowered shareholder value held in the company and, if they carried on with it, about £0.5m – £1m will be lost each year from that point forward. I suggested closing down loss-making activities. I was dismissed as an “asset-stripper”.
In the three years since then the company has lost money every year. It still do……………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
