Anthony Bolton: Remembering the Wisdom of Keynes and Twain

Anthony Bolton writes about stock picking in this column in The Spectator. In it, he recalls John Maynard Keynes stating that picking stock is like a beauty contest where "it’s important to choose not who you think is the prettiest girl, but who the judges will think is the prettiest girl." And he also recalls Mark Twain famously saying, "History never repeats itself but it sometimes rhymes."

Bolton himself writes that those eight words "should be burned into every fund manager’s desk."

This is a wonderful column, written by one of Britain's top fund managers over the past three decades. (I called Bolton to the attention of Controlled Greed.com readers last year.)

Bolton writes about "three moments of drama" during his career: the 1987 "Black Monday" stock crash; the tech bubble of 1999-2000; and the terrorist attacks of September 11, 2001. Regarding the last:

Following this horrific incident, the worst-hit shares in global markets were insurance, hotel and travel companies. I later increased my fund’s holdings in these industries and made good returns as the shares recovered. Being in the investment business sometimes involves being hard-nosed — especially as a contrarian, which means investing against the crowd. If an investment feels ‘comfortable’, then you’re probably too late.

I held some property and casualty insurance firms at the time -- still do -- and they got hit hard. But I held on and they came back strong.

That's the good. The bad?

I remember reading an interview with either Mason Hawkins or Staley Cates and they were pounding the table for hotel stocks. I think Marriott and Hilton. They probably made a bundle and I foolishly didn't buy even though I knew better. Why didn't I buy? I don't know.

Just like I don't know why I didn't buy Disney when it was going for $13 or thereabouts several years back. And just like I don't know why I didn't buy Jardine Matheson when its ADRs were trading for a buck each back during the Asian crisis.

Stock picking is a lot of things. But among the most important is human behavior. And nothing is more human than failing to pull the trigger -- when you know you should.

Comments

[George]

After September 11th, I bought shares in HPT several months later. Those HPT shares are what turned me on the "fat pitch" investing. The only other real fat pitch that has come after that incident was hurricanes Katrina and Rita. I should have bought every piece of prime real estate I could have got my hands on. Instead, all I could think about was the damaged infrastructure and the potential that this was just the beginning of the destruction in the Gulf of Mexico as a result of climate change. That might still prove to be true, but I already would have been wealthy while I waited to find out.

[John]

George: When you say you should have bought prime real estate on the Gulf Coast, do you mean the physical property or stocks with real estate assets there? Just curious.