#13 – The Contrarian

Richard Oldfield is a true value investor. Author of the delightful commonsense investing book, Simple but not easy, in this interview he recites several wonderful anecdotes from his long experience as a value investor. We even get a song (and Steve recites one of Richard’s investment poems). Richard has an innate belief in the cyclical nature of markets and the madness of crowds. He is a classic contrarian investor and he came out with numerous gems about how to think in this way. Richard is a truly independent thinker. He doesn’t believe in index funds, likening them to hanging on to the coat-tails of a lunatic. He believes, as do I, that anyone with some common sense, experience and ability to manage their emotions can outperform the market.

SUMMARY

Richard Oldfield is a true English gentleman, with a self deprecating manner, a sharp wit and a deep understanding of investment.

In this interview, we discuss Richard’s brilliant yet under-appreciated book, Simple but not Easy. It’s chock full of anecdotes from his long experience as a value investor. Richard has an innate belief in the cyclical nature of markets and the madness of crowds. He is a classic contrarian investor and he came out with so many gems about how to think in this way.

He also frets about the mess central banks have got themselves into, but believes in the long term, equities will continue to deliver the 5-6% real that they always have. But he believes the time is now ripe for value and that the few true value investors left – those who have not given up the faith and veered off into quality investing – will have a field day.

GETTING INTO INVESTING

Richard's father was a stockbroker and did not encourage him to follow in his path, but he had a real interest and used to read the share prices in the newspaper from a young age. In the podcast he tells the story of his first investment, in Britannia Arrow. He made money as the stock was shunned through its association with the failed Slater Walker, even though the company was perfectly solid. Picture: Jim Walker. Source: The Guardian

On Index Funds

Richard has a rather jaundiced view of index funds. He describes participation as hanging on to the coat-tails of a lunatic, as the weighting is increased in what has already gone up. The practice of index revisions is to eliminate stocks which have gone down and increase participation in what has already gone up, which he describes as exactly the opposite of what you should be doing.

In his book, he describes the revisions to the FTSE 100 Index at the peak of the tech boom. Of course, the companies aded all had stratosperic valuations or were loss-making and the companies which were ejected from the index were old economy deep value stocks. The table shows the additions and deletions and the subsequent 3 month performance.

index changes

A Ditty

In Richard’s book, below, there is a wonderful ditty on the merits of Russia and China.
Was China finer?
It appeared,
We feared,
When the dollars were counted,
The odds had mounted
The convincing prospect
Of the growth we expect

Was Russia lusher?

It depended
We tended,
On how much imputing
To President Putin
Of a dubious motive
To increase his vote if,
As part of his prospectus,
He was seen by elector
To come out strong
When things done were wrong.
Too much faith in Khodorkhovsky. Could quite frankly be sort of costly.

simple

Simple, but not easy

Richard published the original book in 2007 and Harriman reissued an updated edition in 2021. He always enjoyed writing and having accumulated a lot of prejudices about investing over the years, wanted to give vent to his thoughts. He also thought that most of the investment books were not very approachable. The book is a common sense approach to investing and is aimed at those who want to maximise their long run returns.

Richard’s publisher (and mine), Harriman House, are offering the book at half price to podcast listeners this summer. Use the Code SBNE50.

ABOUT Richard Oldfield 

Richard founded Oldfield Partners LLP in 2004 and was chief executive until 2013, and chairman until 2022. He is now a partner, a non-executive director of the firm, and he contributes to the overall investment selection. Oldfield Partners is a value-style asset management firm with over $4bn in assets under management.

Richard was chief executive of Alta Advisers Ltd. from 1997 to March 2005. Before joining Alta in 1996 he was a director of Mercury Asset Management plc and head of the global team. He joined the S.G. Warburg & Co./Mercury group in 1977 on graduating from Oxford University. 

Richard was Chairman of the Oxford University Investment Committee and of Oxford University Endowment from the latter’s inception in 2007 until 2014 and is Chairman of Shepherd Neame, a director of Witan Investment Trust plc and a trustee of Royal Marsden Cancer Charity and Canterbury Cathedral Trust.

Richard holds a BA Hons in History from Oxford University. His book about investing, ‘Simple but not easy’, was published in 2007.

BOOK RECOMMENDATION

Richard recommended two books, one by Ben Graham and one by Peter Cundill. I chose Intelligent Investor as I think it’s the more approachable book. There’s Always Something to Do by Cundill is available on Kindle.

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Peter

HOW STEVE KNOWS THE GUESTS

I didn’t know Richard, but bumped into him at the London Value Investor Conference. I explained how much I enjoyed his book and asked him on the podcast. He was keen to promote the second edition and to my delight, he agreed. I really enjoyed talking to him. This is one reason why I started the podcast  – I get to meet people I would not otherwise, and I get to learn, which is my passion.