The Future Is Small by Gervais Williams. A book review by Zak Mir
Posted on Date Wednesday, November 12, 2014 at 11:15PM
?The Future is Bright, The Future is Orange?, was used first as an advertising slogan, some years back. But could it be that The Future Is Small turns out to be the winning mantra in terms of the future in the investment / companies area. This is the view of Gervais Williams, not only a first rate fund manager but an author again via his new book.
I should state that being such a positive person, and not a big reader these days (school put me off), I only tend to read books which I think I will like (?) and only review the ones I really do like.
The driver in this instance was an invite to the book launch of The Future Is Small, which is published by Harriman House ? also the publishers of some of the best contemporary books on finance. I obviously could not say no, especially as it sounded like it was going to be a glamourous affair, a concept which of course fits in with the lifestyle of the Editor of Spreadbet Magazine.
In fact, being surrounded by many of the great, the good and simply the richest and cleverest people in the City of London, I was overcome with the panic feeling of being the poorest person in the room. Alas, I do not yet have £1bn under management or earn £1bn a year?.!
But getting back to the subject of the book, it may be worth a precis of Mr Williams? speech to the glittering gathering. He acknowledged the notion we would all be thinking of - in the wake of such share price nosebleeds as Gulf Keystone (GKP) and London Mining (LOND) amongst many others - that the AIM market and single asset / single concept corporate hopes for the future may not always come up trumps for private investors and fund managers alike.
But to write off the idea of such speculation in favour of heading towards the ?blue chips? such as Unilever (ULVR) and Reckitt Benckiser (RB.) in the present environment means we are going to be facing the horrors of diminishing returns in the new world order. According to Williams this environment has been distorted by the vagaries of quantitative easing and SME?s being starved of cash by banks. Nevertheless, he thinks we are due a new golden age for AIM and for small companies.
This is even though many will be concerned about how we have apparently been on a slippery slope, dominated by the evils of deflation, low growth and perhaps even worse, ever lower barriers to entry, via the internet and a global market place. In such a world you can increasingly find that yesterday?s Tesco (TSCO) becomes today?s Tesco.
Indeed, we are reminded with Tesco?s demise that we are in the age of disruptive action. Arguably, it was first seen in the airlines sector from the 1990s onwards with the discounters easyJet (EZJ) and Ryanair (RYA) and continued with online retail heroes such as ASOS (ASC) and Ocado (OCDO). As we all know, and these examples underline, it is small companies who by definition are the kings of being disruptive, having the flexibility and the nimbleness to beat their ?betters.?
We also have the chance in the post financial crisis environment to rewrite the concept of both what risk and reward are, especially given the low growth scenario. In particular, the idea is to appreciate that with small caps there is usually very little dependence on general economic growth for success. The upside of this is that when you are able to disconnect from hoping to be carried along by a rising tide, your investment portfolio is actually free to make the greatest gains.
I would encourage you to read The Future is Small for many reasons - remembering that the FTSE 250 has tended to outperform the FTSE 100, that small caps are under researched and suffer the greatest valuation inefficiencies, and being aware of the small company effect. The latter effect simply states that the smaller the company, generally the better the performance.
The Future Is Small by Gervais Williams is published by Harriman House (£16.99)