Paul Mumford is a noted stock-picker with over 50 years’ experience in the markets – first as a stockbroker and then as a star fund manager for Cavendish. In this new book, The Stock Picker, Paul Mumford takes a deeply personal look back at his time investing: exploring not only the secrets of his successful approach to the markets and how to find great shares but reminiscing about the changes that have taken place in the investing world since the early 1960s.
In the interview below Paul talks a bit about the book as well as some of the more valuable lessons he’s learned over his career.
Interview with Paul Mumford Ahead Of The Release Of His New Book, “The Stock Picker”
1. Could you give our readers a brief summary of your book, “The Stock Picker.”
The book asks the question as to whether most stock pickers are morons? To look for an answer I discuss my the things that have influenced my life and how the stock picking approach has developed. It traces my career, First as a stockbroker and then a fund manager covering the various booms and busts plus the investment successes and, more interestingly, stocks that have gone wrong.
2. What was the inspiration behind the book?
I wanted to produce a book which would be of interest to my three daughters. The downside to this might be that they become convinced that daddy really is a moron.
3. What do you hope readers will take away from the book?
I hope that readers will learn a little about life in the sixties and some facts that they might have forgotten or did not know.
There are plenty of investing books out there, many of which carry a similar message. What do you believe makes “The Stock Picker” stand out from the crowd?
Only that, in say one hundred years’ time, readers will be able to have a first- hand account of how value investing developed. I would guess that there in nobody else who has had a parallel and lengthy career
The book contains some of the lessons learned from your 50-year career in the fund management industry, what would you say is the most important lesson you’ve learned over your career?
Buy when shares or the stock market is cheap and sell when high.
4. What has been the biggest change in the markets since you started investing and do you think this has been good or bad for investors?
Electronic trading makes the market more efficient and the internet allows investors access to information on company websites. This must be good for investors.
With so much experience, you must have seen it all. What would you say is the biggest mistake investors (both experienced and inexperienced) make when it comes to the stock market?
Fear and Greed. Hold your nerve in a bear market and do not get carried away in a bull market.
5. What experiences have shaped you personally as an investor?
Investing when I did not have enough capital to afford to lose and going through the 1973/4 crash when one of my clients was investing at a time when I thought they were mad as the outlook appeared dire,
The three funds you manage, the Cavendish Opportunities Fund, AIM Fund and Select Fund all invest in smaller companies which offer long-term growth. What skills and traits do you think have helped you stand out as a small cap investor over the years?
Actually, the Select Fund is a mid to large Cap Fund. Otherwise, there are a lot of under-researched smaller companies which fall under the radar of many Institutional investors.
6. What are the traits you look for in a potential small cap investment and is this something you look at in the book?
I look for value in my investments which often means going against the tide and investing in unfashionable areas. I try to emphasize in the book that it is important to have a spread of investments as, unexpectedly, things can go wrong. it is important to learn from mistakes and hence the reason for mentioning companies that have gone bust. There will always be unforeseen mishaps and I hope that the book shows that, despite these, a decent performance can be achieved.
Finally, what do you think about the current trend of investors fleeing active funds run by managers such as yourself, in favor of cheaper index replication passive funds?
By investing in a FTSE 100 Index tracker in December 1999 the investor would be nursing a loss. Find out why from my book. I rest my case.