In a recent fascinating discussion I had with Will Low, one of Nikko Asset Management’s senior investment professionals from Edinburgh, we talked at length about the role the media plays when valuing and buying investments.
In this conversation, Will discussed the concept of ‘recency’ – how what we have heard and read lately about a market, a political landscape or an organisation can greatly affect how we view the value of a stock.
Will also outlined two types of investors, the hedgehog and the fox.
The hedgehog is an investor who has very strong views on the way the investing landscape is going. They are usually the investors who tap into more media commentary that anyone else and contribute further to the recency phenomenon by sharing and discussing their views with others.
The other investor is the fox: someone who is more pragmatic, will constantly assess decisions made for change, and whose view is generally lower profile, but more open to change depending on factors that could affect valuations. Will described himself as more of a fox, a style which is beneficial to professional investors as it allows their views to shift depending on new information and market trends.
With the recent volatility in the share market, it’s interesting to ponder the suggestion that recency may have us fearing the worst for valuations moving forward. However more foxlike behaviour may suggest that this volatility has other explanations and does not indicate a downward spiral across the board.
The world of investing is, and always will be, incredibly complex. Talking to global investors who manage billions of dollars every day is a fascinating insight into the pressures and intellectual rigor that goes into getting these decisions right – keeping in mind that nobody is right all of the time.
I value these Thought Leader conversations and hope they will help you have better conversations with your client about how investing works. Rather than media commentators, these successful, thoughtful and intentionally low-profile professional investors, provide a different view of opportunity in markets, and how to think without following the crowd.
We also discussed the ‘botox’ of the investment industry, and what to do to smooth out the wrinkles!
I hope you enjoy the conversation as much as I did filming it.
Until next time,
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