Last week I spoke at a conference which celebrated the life and work of the great economist John Maynard Keynes.
Alongside his many other achievements, Lord Keynes was a gifted investor and his personal investment journey still has a great deal of relevance for us modern day small cap investors.
As well as investing his own money, making and losing more than one fortune along the way, Keynes managed the endowment fund for his Cambridge College.
Despite his towering intellect, his first seven years up to 1929 were disappointing compared with the stock market’s return. He then changed his approach and enjoyed terrific results in his final 18 years.
During the unsuccessful first period Keynes traded too much, took short term views and found it difficult to time the market with any consistency.
Dramatic outperformance came when he switched to a stock-picking approach.
Keynes focused on mid and smaller cap shares during his later golden period. He had a value bias – buying good companies when they looked cheap or out of favour, and held his stocks for a long time.
He also took large positions in his favourite companies where he felt he knew the business well and trusted management. All great advice which we would do well to follow today!