‘Balance sheets could unravel when next recession comes’

‘Balance sheets could unravel when next recession comes’

Jeroen Bos, ‘deep value’ manager for Church House, has revealed if he gets the go-ahead for a second book it will focus on goodwill on balance sheets.

In an interview with Financial Adviser’s Simoney Kyriakou, he said: “I have another book in mind if the first one (titled Deep Value Investing) sells enough copies.

“The first one was very much concentrating on Deep Value investing but the other one I have in mind could possibly be on treating goodwill in balance sheets.

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“It is amazing that companies can have balance sheets that look quite robust but if you actually look at the fixed assets it seems to contain a lot of intangibles and such like. These balance sheets can unravel very quickly when the next recession comes round the corner.”

When quizzed about why his approach to investing fails to attract many followers in the UK, he said: “Value investing has been fairly unpopular in Europe. It has been much more popular in the US where there is a much wider audience for it.

“In the UK and Europe we tend to be much more orientated on earnings and not as much on the value or the assets.

“Certain types of stocks lend themselves for better things. It is in the service sector that it tends to work best. They are very cyclical anyway and at the maximum distressed these companies tend to look highly unattractive on an earnings basis but they can be bought very cheaply just on the cash on the balance sheet.

“Looking at their (service companies) past history, which runs in cycles of four to five years, among those you can buy very good companies at low valuations.”