Book Review 

The signs were there by Tim Steer

The signs were there by Tim Steer

Tim Steer has written a helpful and enjoyably readable book.  

In it he presents a rogues’ gallery of struggling companies and usefully highlights early warnings whose identification could have saved investors’ heartache.

Anyone who invests directly into shares will benefit from studying it – and I absolutely include myself.  

He offers several heuristics I wish I had been alert to decades ago, for instance, his blunt advice to “just run” if you come across a company that engages in transactions with related parties.

Here are some reflections inspired by the book:

• It has been said the only difference between professional and amateur investors is the former make mistakes with other peoples’ money, not their own. But whichever, I do positively encourage you to be open to making at least a few (small) mistakes. The tales in the book are cautionary, but there is no substitute for making your own errors of judgement and doing in some of your own dough. That sting is worth a dozen ‘how-to’ manuals – if you learn from it.

• Be grateful for our 21st century annual report and accounts. People sniff about disclosure standards in some emerging markets, but we should not forget the Anglo-Saxon markets too used to be untrustworthy. Indeed, there is a case to argue the valuation of equity as an asset class has been gradually rising as systemic honesty and transparency have risen too.

• Mr Steer’s examples are hair-raising, but not endemic.

• Profitable growth is rare. Company management sometimes bend the rules (as opposed to break the law), not because they are wicked, but because they struggle to give investors what they demand. Most companies are mediocre. Never forget this. But I would also say: why would you ever invest in almost any of the businesses in this book, or their ilk? No one forces you to invest in mediocrity.

• The whole world needs a dose of John Maynard Keynes’ ‘animal spirits’. We need more inspired entrepreneurs and hard-working business builders.  

By all means – read books like this and learn to recognise some of the pitfalls.  

But do not lose the faith. New ideas and new businesses will create more well-being, employment and investor wealth. Keep investing.

Nick Train is a founder and portfolio manager at Lindsell Train

Published by Profile Books