Montier: Ten Tenets Of My Investment Creed

James Montier, the world' s top ranked strategist at Societe Generale writes about his 10 tenets of investment creed:

Many times over the years I have been asked how I would approach investing. This ... attempts to codify my beliefs (and provide some evidence for them). However, before embarking upon a journey into my investment creed, it is worthwhile asking a question that doesn’t get asked often enough – What is the aim of investing? The answer to this question drives everything that follows. I feel that Sir John Templeton put it best when he said “For all long-term investors, there is only one objective – maximum total returns after taxes”. Nothing else matters. The question becomes, how should we invest to deliver this objective?

Tenet I – Value, value, value. Value investing is the only safety first approach I have come across. By putting the margin of safety at the heart of the process, the value approach minimises the risk of overpaying for the hope of growth.

Tenet II – Be contrarian. Sir John Templeton observed that “It is impossible to produce superior performance unless you do something different from the majority”.

Tenet III – Be patient. Patience is integral to a value approach on many levels, from waiting for the fat pitch, to dealing with the value managers’ curse of being too early.

Tenet IV – Be unconstrained. While pigeon-holing and labelling are fashionable, I am far from convinced that they aid investment. Surely I should be free to exploit value
opportunities wherever they may occur.

Tenet V – Don’t forecast. We have to find a better way of investing than relying upon our seriously flawed ability to soothsay.

Tenet VI – Cycles matter. As Howard Marks puts it, we can’t predict but we can prepare. An awareness of the economic, credit and sentiment cycles can help with investment.

Tenet VII – History matters. The four most dangerous words in investing are “This time is different.” A knowledge of history and context can help avoid repeating the blunders of the past.

Tenet VIII – Be sceptical. One of my heroes said “Blind faith in anything will get you killed”. Learning to question what you are told and developing critical thinking skills are vital to long-term success and survival.

Tenet IX – Be top-down and bottom-up. One of the key lessons from the last year is that both top-down and bottom-up viewpoints matter. Neither has a monopoly on insight.

Tenet X – Treat your clients as you would treat yourself. Surely the ultimate test of any investment is: would I be willing to invest with my own money?

Don't forget to use your own brains too ...