One thing that really holds a lot of investors back is the (entirely natural) desire to sell on bad news and buy on good news.
Unfortunately this habit is probably one of the biggest reasons why most private investors underperform the market by anywhere between 3% and 6% a year. Focusing instead on the ability of companies to generate long-term profits and dividends is, in my opinion, a far better way to match and even beat the market, without having to take on extra risks.
That's why I have been somewhat surprised by Neil Woodford's actions in the last year.
He's an investor with a fantastic track record and we're very much in the same camp of looking for quality companies at attractive prices, but that doesn't mean he's infallible. In the past year he has effectively sold one supermarket and replaced it with another, selling one on bad news (Tesco) and buying the other when things are going well (Morrissons).
In this week's article I pick apart his decision by side-stepping the usual speculation about which company has the better strategy, and instead focus on comparing the factors that most investors miss - namely the long-term track record and valuation of each company.
Was Neil Woodford right to pick Morrissons over Tesco?
Neil Woodford's latest purchase of Morrisons makes him the company's largest shareholder. This move is in stark contrast to Woodford's exit from Tesco just over a year ago. We know that Warren Buffett prefers Tesco, so which supermarket is the better investment... read the full article here >>
I realise that this kind of highly quantitative approach is different to that of most investors, but as you're probably aware, being different is a pre-requisite for outperformance.
As always, if you have any questions you can reply to this email and I will do my utmost to provide a decent reply.
Have a good weekend,
John Kingham
Editor, UK Value Investor
Email: john@ukvalueinvestor.com
PS. My goal with UK Value Investor is to help independent investors get more income and capital gains from their portfolios. If you'd like to quickly and easily find high yield, high growth and high quality FTSE 350 stocks, and also find out exactly what's being bought and sold for the Model Portfolio, just click here to start your 6 month free trial.
Note: UK Value Investor provides information for investors who can make their own decisions. It does not provide financial advice. You should seek a professional adviser if you think you need one. Please remember that the value of investments and their income can fall as well as rise.
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