Is one of your early new year’s resolutions to be a more successful investor? Your Christmas reading should include Super Investors: Lessons From The World’s Greatest Investors (Harriman House, £24.99), a new book that reveals the secret of such stock market legends as Warren Buffett.
The author, Matthew Partridge, an academic, also focuses on lesser-known figures such as Nick Train of Lindsell Train, the fund management group. Mr Train’s stock-picking successes include buying Burberry shares during the financial crisis, when the company’s share price was £3.60. It is now £17.67.
Partridge also distills the doctrines of past stock market gurus such as T Rowe Price, an American investor who believed in the virtues of “buy and hold” investing, with a focus on companies that could grow their earnings year in, year out.
Price looked, in particular, for stocks with strong earnings growth. His yardstick was that average earnings over five years should be 50 per cent higher than those of the previous five. He also looked for a high return on invested capital.
He argued that a decline in this figure might indicate either increased competitive pressure or signs that a company was making unproductive investments.