hi everybody today we are in really good company because I'm here with Anthony Bolton and Anthony Bolton he is in a way in my mind the father of contrarian investing you know the best person I know to do the opposite of everybody else and my have you made a lot of money for Fidelity over the years doing that so warm welcome anony thank you Nikolai it's lovely to be here with you

you know the best person I know to do the opposite of everybody else and my have you made a lot of money for Fidelity over the years doing that so warm welcome anony thank you Nikolai it's lovely to be here with you

thank you Nikolai it's lovely to be here with you

why can one make so much money by doing the opposite of other people

I think because very few people are doing it by so it's almost by definition

and the trouble in the stock market if you do what everyone else is doing it will work for a while but the more people who get on the bandwagon eventually it bursts

and I think that's why it's it it's important I always my view of investing that popularity is risk and conversely unpopularity is opportunity

I'm not saying everything that's unpopular therefore is is an opportunity but I I just early on I wanted to look where other people weren't looking

and I always felt uncomfortable if I own something that everyone else owned

not many people feel that way and that that's the point that's why I think it works

but so when so so when you you when you think about being contrarian I mean what what what is it what does it entail

I think it it entails I think it's something in the personality that you feel comfortable about being different

I think most people are are they like the comfort of the crowd they they like to be reinforced they like the people around them to be telling them you know what you're doing is is good it's what I'm doing and what everyone's doing

so I think there's something in the makeup of a contrarian that that is really important

and it it's very difficult to put my fingers on it because often my colleagues Fidelity say you know how can I become a contrarian

and I think you need to start I'm not sure I don't think everyone can do it put it that way

so there has to be something inside you and what and what is that what is that

it's so difficult to put one's finger on it but it it's it's it's it's the ability to to back your own convictions to be unemotional and to be patient I think is is is part of it because often you're you're going to have to wait a bit

because often you're you're going to have to wait a bit

do you have any friends

I do have some friends like goodness

what I mean is it if you if you crave for uh people to like you uh you are probably not a good contrarian right

yes I don't know

I don't think likeness and dislikness comes into I mean that's more to do with people's characteristics

but it's you know what people say it's lonely being a cont which is slightly different

I doesn't doesn't mean that you don't have friends but you're you're sort of out on a limb

and you know how it is investment I often found the best opportunities were were the uncomfortable ones

by the time it was comfortable it was late and it would still might be all right for a while but you have to be prepared to be in uncomfortable situation

what does that what does uncomfortable mean

uncomfortable means that other people are you you're you're doing something that other people and several people people will probably tell you it's wrong

um I think funny funny enough I think one of your one of your recent people you were talking to said he gave a medical example of you know somebody who who made a big stride in cancer research and they said at the time the guy was terribly unpopular because he was going against conventional wisdom

so you have to be somebody who's happy I think to go against the conventional wisdom at times not all the time but time now

unemotional what are you unemotional I am un unemotional

I I think like are you on the Spectrum you think I don't think I'm extremely unemotional

but I am I can take success and failure pretty much the same that now

that's really important for investors don't let the successes get to your head because everyone has successes but conversely everyone will go through a bad phase and don't let the the bad time get get to you that's the bit that gets to most people

so um H how would I describe it

um I think if you get very worked up about Investments I think in general that is bad in this business

you know you have to stand you have to take yourself sort of somewhat out of the situation and look down from above impassionately

but do you spend all your life looking at your portfolio or meeting companies thinking about these things how can you be unemotional about what is your life

I think unemotional committed you know involved ex you know it as you know is the most fascinating business to be in to meet all these companies to be in touch with all the great Trends in the world

but it's it's at times don't underestimate the Market's ability to Discount

I think the mistakes so many people do they often talk about what's the Outlook you know is it is the Outlook bright is the Outlook poor

but the key thing is what Outlook is discounted in the stock market at the moment

it's not the Outlook it's it's how your view of the future Compares with what's discounted in the stock market

when you look at the stock market what are the type of things you look at how do you gauge the stock market's mood for instance what are the indicators

okay I was someone who would like to look at a whole amalgam of things

and I always say look what I looked at wasn't necessarily different from what most people perhaps how I mixed it together

um it's interesting when I look at a stock often the first thing I look at is the chart

I want to know you know the chart immediately tells

so the charge being the stock price right stock price

stock price

so so I'm putting a charge in front of you what are you what are the things you looking

so the F I'm you know it tells am I early or late

is this a stock that's done well for a long time you know which probably means I'm late doesn't always mean I'm late but probably

is it a stock that hasn't done well and th those were the ones I particularly like you know to screen for

because I'd look at them some of them were no good you know they're always going to be dogs Duds

but particularly if there was change if there was change in the management or the portfolio of businesses that they were in all the environment was changing for the better then I'd look

especially with UK companies i' look at the shareholder list

I found it's it's a very underrated thing to look at shareholder lists

and what I was looking for is are the funds that I rate already owners of this company

this is particularly so medium and smaller companies and that was very much the heart of my Approach

I mean as the funds got bigger I bought more big companies but I think my greatest love was in medium small companies

because you could if you did your work you knew that you knew more on those companies than most people did

what were the type of shareholders you would have you like

I mean I can't you know I'm I'm 10 years out of date from from doing it or even longer but there were there were certain funds that I rated

and it it was if I saw lots of them there then I knew I was late they had all discovered it before me

if I saw none of them there I mean that might be a great sign or it might be just it's a terrible business and no one's ever going to buy this

perhaps the best were maybe there was already one other fund that I rated and that sort of said well they they've already picked this up and then but it leaves lots of room for other people to come in later

did you look at buy and sell recommendations and so on or what did you do with those

yes I you know the the the two great things of the stock market the weighing and the voting

most people spend all their time on the weighing and I I would underestimate that and obviously our analysts spend all their time on the weighing

but the voting was the bit that I really was interested looking trying to measure sentiment in stock and that that's ownership and things like Insider dealing

I was that that was really important to me if The Insider trades confirmed or conflicted with my view

so that the CEOs were buying for instance

well yeah the CEO were buying

but I also use charts as a sort of confirming or not confirming sign

people find that difficult you know Anthony why why do you think charts are important

but if if the chart confirm my fundamental View and my my general view I might take a bigger position

and if the chart didn't if if the chart started to roll down it's something it was one of the factors I might cut back my position because it was always incremental to me

I never came in one day and bought a huge position in a company

I was normally building something up as my conviction increased and then the share price moved or something changed and then probably I was reducing it

so that that for me it wasn't black and white

and management you management meeting is quite management was really important

you know I at the height I was doing sort of companies a day

but it was REM meting just in one meeting I I find yeah people impress you

but it it it's seeing how the story develops and are they consistent in what they say

how do you decide the entry into a contrarian position

as I say the the whole amul of things that I looked at

and when I I thought it was interesting I would buy a position but I normally start um it was normally at half a percent so 50 bips type position in the company

and then as my conviction increased I might go up to 100 and then up to 200 and then I have a few positions where I perhaps got up to 400

it was interesting in the early days I thought of everything 400 that's like 4% of your portfolio of the portfolio in the early days I thought of everything

absolutely because obviously in the last 10 oh know last 20 years or so one thinks much more in terms of relative positions than absolute positions but that that's how I did it

and I normally had you know a thesis on it

one of the things I particularly like were asymmetric Returns

what does that what does that mean

so stocks where I thought the downside was limited but they might in certain circumstances have a lot of upsid

so the upside and downside wasn't the same

in in a lot of stocks it well they of might have a lot of upside but they also can have a lot of downside

so the downside was protected by maybe a very strong balance sheet or a business with very good cash flows or whatever it is

but they had something like like a drug Discovery or they were drilling for oil or something that if if they were lucky this could make a a huge difference to the valuation

what would be be what would be the most contrarian thing you can do just now you think in the market

China to buy China to buy China definitely

I mean look every other Market in the world not every but nearly every Market is near its high China's near its low

so China must be the contrarian position at the moment

and how would you fund that what would you what would you sell

America the whole America

everyone loves valuations are high all the money has been going into America

the other thing I think is very important in investment is often divide the journey from the arrival

markets move during the journey and normally when you get to the arrival that is the end of a trend

so I think in America you know the inauguration of trump is is is is the end of the journey up to that

with China everyone's been scared of the tariffs you know for for months and months I think the date the tariffs come could M main the Turning Point

well they came today right

yeah so maybe it's today

and the other thing look when I look at and I think some the idea that AI only rubs off on a small handful of of US Stocks it makes no sense to me

and I think some of the China

so what do you mean by that AI has driven The Magnificent Seven or six of the seven yeah you know to new new higher and higher levels

yeah you know to new new higher and higher levels

and I wouldn't I'm not belittling AI but the you know the stock market H loves these sort of situations it's so similar to the doom and the stock market loves it and drives up the stocks in anticipation

but the idea that only a handful of companies are going to have the you know control the I Ai and you've seen in the last few weeks some of that rub off to China

so I I think American Tech into Chinese Tech

now look I'm not belittling everything all the risk to do with China I mean the E economy has got problems the the the the poit the geopolitical situation is risky in China

but what are the domestic investors in China going to do we've had a threeyear bare Market

the authorities in China want the stock market higher um bond yields are record low

are they going to go back into prop I think not in a hurry

gold has done well they've gone into gold

there's really one other place they can go to which which is equities

so yeah my my my view today is that we're in the early stage of a b a new B market in China

um just going back to the US where do where do where does crypto fit into to this

not not much for someone like me I I just can't analyze crypto no

so but it it it to me it's one of the signs of excess

so if you're looking you know for a market that's high and has excess then crypto is an indication of that

so you you think it's maybe the end of a a bull market or some science

yeah

just how how how do you expected to unfold

I don't know nowadays the bare markets tend to be sharper and and happen quicker and they're over quicker

I don't think I can predict how it is but I'm just saying in in the way I look at markets and Cycles the the the US market is near the top of its phase

you know nothing goes up in a straight line in this business

and you know and the Very fact America's you've had 20% return whatever it is for two years running it just you know when things are high and the valuations are high I just think your odds as investor reduce of making money

okay so super stupid question why don't you just sell when it starts to go down

well you never quite know do you no

if it was clear and that's the trouble

and look you know I Nicolai I'm someone who said most of my time in investment I don't want to take Market bets

now I've given you some Market views because I'd you know I'd rather find something find your Competitive Edge find your competitive Advantage

for instance you know the the Thousand investors trying to second guess the FED where am I going to have a competitive advantage

that's why mainly I like to look at companies

so even with a market view I I wouldn't bet my whole portfolio on

so you don't spend a lot of time on macro

no no

and um is it different uh is it different being equitarian investor in a bull market versus a beer market what are the other different characteristics um is it different in a bull market versus a bare Market that's an interesting question I havn't really thought of it in that context

that's an interesting question I havn't really thought of it in that context

one things I found in the bull market the my number of Holdings went up I could find more interesting situations

and in the bare Market normally I prune back the number of Holdings I try to concentrate it

it's one of things I say when managers are doing poorly you know try go through every stock every you know the reasoning for owning every stock and and concentrate where where you're strongest

the the other thing I think is really important in investment is listen to the other View

and it perhaps it comes back to this sort of most people listen to the Views that confirm

you know Google's an amazing investment so everyone will listen to the Bulls about Google

if I had a big position in Google my I'd be spending most my time listening to the Bears of Google to see what's changing

and I think that's very important listen to the counterview listen to the shorts

if if you've got if you're long of something and you see the shorts out there try and find out why the shorts are short

do you find that short sellers short sellers are good

I don't think I have a sort of special view so many left of them after this Market I guess

but um I always give the famous case um of of a company I owned it was actually an all company and we had a position as a house

and one day the I had a meeting with hedge fund that was short of it and I was sitting there and after 10 minutes it just hit me like a flash that they were right and we were wrong

and so and that that's you know when you're dealing with gray not black or white it's gray how I think hearing the count view is really important

do you think the difficulty in being a Garian um investor is that you may lose your job

I mean now you're not you're not going to lose your job you're going to lose your job now by owning that's the whole point the big seven companies that's why that's why there's so few of them around

and I remember you know in the dotom bubble the great I can't remember was it uh PN d p yeah yeah yeah Andre somebody die yeah yeah he was sacked yeah I think Within two months of the of the peak of the bubble the internet bubble

and that's that's the trouble so many people you know are so short term

and no no no approach works every every year year in year right in my view

and you've got to find what works for you and stick to it

I'm I I I I am cautious about people who say they can you know I can be a growth investor and this environment and then a value investor and then something else I I don't think that's easy for an individual anyway

I don't think that's easy for an individual anyway

how long can you be wrong before you change your mind how you know how stubborn are you

well that's that's an interesting thing

I think it's to do you stubbornness versus conviction you mustn't let conviction

I was always one of my colleagues said you know they were on the edge of their seat with stalk

I think that's you have conviction but you you've got to be open to changing that I think that's terribly important

so stubbornness but but it's a difficult business because in my view you can get by with luck for three years

I think over three years it's skill it's not luck

but anyone's record less than three years might purely be luck or or the opposite might might be lack of luck if you see I mean

yeah

um now how do you know when you're wrong

I think it's the keeping the open mind I think keeping the open mind

look you know G getting it right 55% of the time is is is great so 45% of the time you're going to be wrong

so youve got to realize that this is a business where we're going to have a lot of times we're wrong and you've just got to learn from it and and and and move on

and one of the things I always say is the things that often differentiate the good Managers from the bad managers is not the successes it's it's not having the losers

I think if you can cut out your losers that can take you from you know an average or better than average in in up to the top cile

how do you deal with stress yourself

um I suppose may maybe that's why I was good contrarian it didn't get to me

yeah yeah obviously there were certain times it got to me

and you know after the the great market crash in 87 and stuff you you sort of yeah it does keep you at weight at night for a few nights thinking gosh you know has this all changed

but I think the whole point is I could I could cope with stress and which which meant I guess that I could switch off

and that's when you compose music

that's when I I I didn't have that much time for writing music when I was running money day to day but yes that was one of things family whatever it might be

and now you compose church music

and I compose a range of music but I've written two operas that's been the main thing that I've done the biggest things that I've done

wow that's that's impressive that's impressive

um now how do you avoid overconfidence how do you stay humble after such a long successful period

Well I think this is why you've got to analyze yourself in this business

and I think a a good degree of humility is really helpful

so I'm slightly if people are very arrogant and therefore to me that means not always but often they're not willing to analyze themselves and know their their failings Etc

I I think that's important so humil I think humility sort of helps

is that part of the corpor culture where you were

I we like to have a range you know of people

I I think it's very dangerous in this business to only take one type of person into it

I think you've got to have a range of people with different skills Etc

but yeah if if people were very emotional you found that out quite quickly

it didn't there were I'm not saying never to that but I think often that was not going to help them

just moving on to the market and how it's changed so with all the passive money Trend following and so on just how have things changed in the market

I think it makes the trends go on longer yeah that's definitely the case

you know and the and the quality of the competition goes up the whole time

so it it was easier to do it 20 30 years ago when not everyone was visiting the companies the amount of information wasn't there the ability to process information has changed

but funny enough you still get big anomalies this is this is the fascinating thing

and almost the dumb money produces the the anomalies at sometimes and and the trend goes on for longer so it's a longer wait and people get can't you know can't do the waiting as it were

but it does change

so some people think you know the markets have become more efficient over time people are much better therefore the the anomalies have disappeared

well no in some ways some of this creates new anomalies so the correction comes later but when it comes it's bigger

how do you build an organization uh where there is room for people who think differently like this how do how do how sorry how do you construct how do you make an organization how do you

there were common things to our approach the way we do it at Fidelity of having you know a team of analysts and a team of portfolio managers

and most people came in as analyst trained as analyst normally did three rotations as analyst in different sectors Industries they covered and then if we thought they had it in them off after that they gave a chance to be a portfolio manager

but so that was common how they approach things were different

we had some great growth managers as well as contrarian value managers income managers Etc

so what we didn't have was one style across the whole of fidelity

and in fact I was and particularly more in a management role as I've been the last 10 years terribly Keen to make sure that we had different funds with different approaches

because as as you know approach can stay out of favor for quite a while like value at the moment

and therefore you you need a a mixture of different funds and that that's what we Tred to do

if you get um a whole room to agree on something being a good idea is it then normally a good idea

no no

and that's that's the you know like decision making by committee investment is normally doesn't work

because by the time everyone agrees you probably catch the the tail end of something

yeah and it comes back as I was saying you know often the best opportunities you feel relatively uncomfortable

so I'm your analyst I come to you and I pitched these there and it's just like I think it's really great and you said yeah well done and then you do the exact opposite

yeah I mean the the analysts know you know the fund manager is not going to do everything that they say

but one of things obviously we look at is how much a fund is in line with what the analysts are saying and I think that's important

and so there's no requirement on our fund managers

I I found it was often timing because as a contrarian you were often a bit earlier

the other thing when my funds got very large you know the UK special situations at one stage I think it was five times bigger than the next biggest mutual fund in the UK

well because you were doing so well

because it had done well and that but that was a constraint in in in in in in the future

so I knew in order to get a decent position I couldn't often wait till the stock had turned and it was on its way up

I you know the liquidity was when the the stock price was still low

m M another thing that that I often say at slightly different point but when you run large funds I tended to have more Holdings um

and it's really important that you balance how much time you spend on looking at the positions you already have versus looking for new positions

often it's called Defensive investment versus offensive which is going out for new things

and the tendency is when you run a big fund to spend too much time defensively and not enough time offensively

what do you think is the right split of time

I I don't know if there's a right

I think it's it's it's making sure maybe a quarter of your time at least is spend offensively going out looking for new ideas

and the way I did that was particularly using the Fidelity team of analysts and some of the portfolio managers

I couldn't go to Every meeting of a stock I owned so I'd use them to report back to me

but I made sure I went to enough meetings of the ones I didn't own but I thought I might want to own

so that that was important but it's an interesting philosophical question

you know how much time do you spend on things you already like

I mean how how do you go back to your old favorite hotels

so do you check out some new things you know or

yeah you have to keep

do you have chicken and fries every night or do you sometimes try lasagna

but you can't forget Al conversely you can't forget about things you own because the world changes you know it never stays the same

is it more difficult to find young contrarians now given social media Eco Chambers that's an interesting question

I don't I don't think I can give you a definitive answer to that um

I think each era breeds you know the majority of people

if if you live through a time like to today the recent five years or whatever it's been about growth growth growth obviously most new investors are going to be influenced by that

they they don't have the long-term perspective to put this cycle in the context of the longer cycle

um so yeah I think there's an element you know we'll go through a good period for value and then probably all young people will want to be value investors

but that where does Europe fit into that just now um

I don't know on on Europe um

is is Europe in a way just the opposite of America so if if the US market goes down Europe will do relatively better

I don't think it's as black and white as that no

and look and not everything in America is on I mean there are a lot of very attractive value stocks in America

so I'm not going to paint tar the whole of America with the same brush

but but European markets are also near their Peak so it's not as if Europe hasn't moved to date

you know someone who spent four years in in in Hong Kong running a Chinese fund I mean you sort of feel that the you know the the East is it's going to be the their the the next decade or two is going to be dominated by the East rather than the west

and the trouble with Europe is they bog down with you know so much baggage from the past moving into the kind of um the governance models here

yeah when you are a contrarian in um um portfolio manager and you do the opposite of everybody else you can be wrong for a long period of time what are the implications for how you should remunerate people

okay that that's interesting

um you know most of our remuneration based on 1 three and five years and the most on the three and often it might be just the one and three years

I think then you've got to have some view of their long-term success

I I've had I you know in my time I had three bad years in a row or in a row yes and that was the worst time that was yeah it was sort of the 8991

yeah and Fidelity sto with me you know my I didn't get the bonus that that I got in the good times but they stuck with me

and I think how bad was it

oh you know it's it's bad after three bad years you you start to question

then it comes back you know none of us so believe in what they do that you know it's the sort of business that every day you think gosh you know do what I know and what I think I know and my experience is it still valid

you question yourself but I felt felt it was

but how do you remunerate I think management has to I think one gets over time but it does take time a view these managers with this style we think are really good at what they do

and when they come into a bad patch and the bad patches are probably longer because of the dumb money the passive money making the trends go on longer

um you you have to bear that in mind

I I can't be specific on remuneration but I think we were aware of that

yeah I think probably an in an institution is not more contrarian than the weakest link right

so if you have a management committee which doesn't accept it then you have a problem or a board which doesn't accept it

yes that that's that's true

but but you have to have the bo you know the management committee has to come back to this thing that we need different runners in the race

and you know the whole history of investment something that's done well for quite a few years is probably not going to be the thing that's going to do well for the next few years

I think that's one of the mistakes you know people think it's so strange they think these tech stocks can go up every day forever and ever

I mean they they don't realize there's a cycle to everything

it's not CU they're bad business businesses not you know it's nothing to do with the business it's it's to do with this um voting Factor the sentiment

the sentiment doing overdoing things and it it's why I think it's so important to measure sentiment

can you uh take the the contrarian to other parts of your life I mean writing operas is not necessarily mainstream

yeah I don't think you can

have people ask me that you know does that make your whole life contrarian

no I mean I have things that I love and things I don't love but they're not necessarily extremely contrarian

I know it's rare to find people who write operas but that that is rare rather than contrarian if you see what I mean

well Anthony not many people like you around anymore and fortunately uh it's been a true pleasure having you here big thank you for sharing your

it's been a delight to to talk over things with you thank you