Banks - Terry Smith

[torata]

A typically acerbic, but very easy to read, account of why Terry Smith never invests in banks

FT
Direct: https://www.ft.com/content/831cee08-7250-44e4-b992-8b8d1ec1c516
or google: "FT Why I never invest in bank shares Terry Smith"
It's also been archived: https://archive.md/g9hTJ

torata

[simoan]

A typically acerbic, but very easy to read, account of why Terry Smith never invests in banks

FT
Direct: https://www.ft.com/content/831cee08-7250-44e4-b992-8b8d1ec1c516
or google: "FT Why I never invest in bank shares Terry Smith"
It's also been archived: https://archive.md/g9hTJ

torata

Actually the Return On Equity figure he quotes for the S&P bank sector is way better than any of the large UK banks manage to achieve. I agree with everything he says and don’t invest in banks for the same reason.

[GoSeigen]

Appeal to authority.

Why not get the view of an expert, instead the ramblings of someone who knows nothing about banks and clearly hasn't been near one in decades. The article simply peddles fallacy and myth.


GS

[Dod101]

Appeal to authority.

Why not get the view of an expert, instead the ramblings of someone who knows nothing about banks and clearly hasn't been near one in decades. The article simply peddles fallacy and myth.


GS

I stopped reading anything of Terry Smith some time ago. I am fed up of his pronouncements. He lost all credibility with me with his ridiculously high charges on his funds. Who does he think he is?

Dod

[GoSeigen]

Having said the above, I feel like an idiot today, I've had two shares lined up for ages to buy and they were both on offer yesterday, UBS was one of them, I bought the other. Today they're 15% more expensive, I hate chasing the price up so probably will not buy any.

Still find this investing psychology business difficult...

GS

[simoan]

So much derision and yet we’ve just witnessed the latest con from the Swiss banks. Selling something that looked like a bond that actually got wiped out before the equity! Never trust a banker.

[Arborbridge]

I stopped reading anything of Terry Smith some time ago. I am fed up of his pronouncements. He lost all credibility with me with his ridiculously high charges on his funds. Who does he think he is?

Dod

I agree - he is self opinionated and can be obnoxious: but I'm jolly glad I have invested with him!

Despite a rather bad 2022 he has returned over 10% pa for me since 2015 when I set up a little savings scheme to buy my next car. It's been quite a hit. I bought the car but didn't bother to cash it in.


Arb.

[simoan]

I stopped reading anything of Terry Smith some time ago. I am fed up of his pronouncements. He lost all credibility with me with his ridiculously high charges on his funds. Who does he think he is?

Dod

I agree - he is self opinionated and can be obnoxious: but I'm jolly glad I have invested with him!

Despite a rather bad 2022 he has returned over 10% pa for me since 2015 when I set up a little savings scheme to buy my next car. It's been quite a hit. I bought the car but didn't bother to cash it in.


Arb.

So being opinionated is somehow wrong is it? May as well close down this site then!! If the FT ask him to write a column, why shouldn’t he? His investment record speaks for itself and banks business models haven’t changed much since he was a banking analyst. He also happens to have authored one of the greatest investment books ever written and he had the balls to write it even though he knew he’d be sacked for publishing it.

[OhNoNotimAgain]

I agree - he is self opinionated and can be obnoxious: but I'm jolly glad I have invested with him!

Despite a rather bad 2022 he has returned over 10% pa for me since 2015 when I set up a little savings scheme to buy my next car. It's been quite a hit. I bought the car but didn't bother to cash it in.


Arb.

So being opinionated is somehow wrong is it? May as well close down this site then!! If the FT ask him to write a column, why shouldn’t he? His investment record speaks for itself and banks business models haven’t changed much since he was a banking analyst. He also happens to have authored one of the greatest investment books ever written and he had the balls to write it even though he knew he’d be sacked for publishing it.

I think he pinched much of it from everyone in his department, which was why he was sacked.
Like some other punters he got lucky buying expensive US shares before they got re-rated to being even more expensive.
Over the last three years, three years of intensive research, he has returned less than a UK index fund.

Distinguishing luck from skill is a skill not luck.

[MrFoolish]

Having said the above, I feel like an idiot today, I've had two shares lined up for ages to buy and they were both on offer yesterday, UBS was one of them, I bought the other. Today they're 15% more expensive, I hate chasing the price up so probably will not buy any.

Still find this investing psychology business difficult...

GS

Go on, name the one you did buy.

[Arborbridge]

So being opinionated is somehow wrong is it? May as well close down this site then!! If the FT ask him to write a column, why shouldn’t he? His investment record speaks for itself and banks business models haven’t changed much since he was a banking analyst. He also happens to have authored one of the greatest investment books ever written and he had the balls to write it even though he knew he’d be sacked for publishing it.

I think he pinched much of it from everyone in his department, which was why he was sacked.
Like some other punters he got lucky buying expensive US shares before they got re-rated to being even more expensive.
Over the last three years, three years of intensive research, he has returned less than a UK index fund.

Distinguishing luck from skill is a skill not luck.

From Dec 2015 to Dec 2021 my investment with him returned 18.32% pa: am I happy? You bet.

Could you find investments which have returned more? : You bet.

Am I bothered: no, because however well an investment returns, there will always be something better over a particular period of time.

Arb.

[simoan]

I think he pinched much of it from everyone in his department, which was why he was sacked.
Like some other punters he got lucky buying expensive US shares before they got re-rated to being even more expensive.
Over the last three years, three years of intensive research, he has returned less than a UK index fund.

Distinguishing luck from skill is a skill not luck.

From Dec 2015 to Dec 2021 my investment with him returned 18.32% pa: am I happy? You bet.

Could you find investments which have returned more? : You bet.

Arb.

Quoting absolute returns, over arbitrary time periods is pointless and proves nothing, especially if you don't adjust for risk. All that should matter to an investor is the future. I am happy with the performance since I first bought in 2013 but it's the future for the companies held by the fund that concerns me. No-one can outperform forever because reversion to the mean is one of the strongest forces in investment, so a period of underperformance should be expected. However, it would be a cold day in hell before I bought a FTSE 100 index tracker!

[Arborbridge]

From Dec 2015 to Dec 2021 my investment with him returned 18.32% pa: am I happy? You bet.

Could you find investments which have returned more? : You bet.

Arb.

Quoting absolute returns, over arbitrary time periods is pointless and proves nothing, especially if you don't adjust for risk. All that should matter to an investor is the future. I am happy with the performance since I first bought in 2013 but it's the future for the companies held by the fund that concerns me. No-one can outperform forever because reversion to the mean is one of the strongest forces in investment, so a period of underperformance should be expected. However, it would be a cold day in hell before I bought a FTSE 100 index tracker!

Yeah - gimme that crystal ball

In the meantime, all we can judge a manager or fund by, is what has happened in the past. If that is of no use, no indication of the future, why tear shreds off any manager for his past performance? - and why tear shreds off a manager if his past performance has been excellent.

All I said was in connection with Dod's view that Terry Smith isn't particularly pleasant - my response was that he may not be pleasant, but his fund has done OK - in fact very OK. That's the limit of my knowledge and all I wanted to say.

Arb.

[OhNoNotimAgain]

Quoting absolute returns, over arbitrary time periods is pointless and proves nothing, especially if you don't adjust for risk. All that should matter to an investor is the future. I am happy with the performance since I first bought in 2013 but it's the future for the companies held by the fund that concerns me. No-one can outperform forever because reversion to the mean is one of the strongest forces in investment, so a period of underperformance should be expected. However, it would be a cold day in hell before I bought a FTSE 100 index tracker!

Yeah - gimme that crystal ball

In the meantime, all we can judge a manager or fund by, is what has happened in the past. If that is of no use, no indication of the future, why tear shreds off any manager for his past performance? - and why tear shreds off a manager if his past performance has been excellent.

All I said was in connection with Dod's view that Terry Smith isn't particularly pleasant - my response was that he may not be pleasant, but his fund has done OK - in fact very OK. That's the limit of my knowledge and all I wanted to say.

Arb.

The future is unknown, all companies have the potential to grow or shrink , the only thing we do know are the starting valuations.
So are future returns likely to be higher where you are paying 9 times earnings or 22 times earnings?

[dealtn]

Yeah - gimme that crystal ball

In the meantime, all we can judge a manager or fund by, is what has happened in the past. If that is of no use, no indication of the future, why tear shreds off any manager for his past performance? - and why tear shreds off a manager if his past performance has been excellent.

All I said was in connection with Dod's view that Terry Smith isn't particularly pleasant - my response was that he may not be pleasant, but his fund has done OK - in fact very OK. That's the limit of my knowledge and all I wanted to say.

Arb.

The future is unknown, all companies have the potential to grow or shrink , the only thing we do know are the starting valuations.
So are future returns likely to be higher where you are paying 9 times earnings or 22 times earnings?

It depends what is represented by those earnings and what is expected to happen to those earnings. Your "9 times" and "22 times" are meaningless statements on their own without that context.

As you say, there is too much that is unknown, to value simply on a limited number of things that are known.

[Lootman]

The future is unknown, all companies have the potential to grow or shrink , the only thing we do know are the starting valuations.
So are future returns likely to be higher where you are paying 9 times earnings or 22 times earnings?

It depends what is represented by those earnings and what is expected to happen to those earnings. Your "9 times" and "22 times" are meaningless statements on their own without that context.

As you say, there is too much that is unknown, to value simply on a limited number of things that are known.

Yup, I thought Ohno thought that only dividends matter. Now apparently it is only price/earnings ratios that matter.

It is so hard to keep up with overly simplistic investment theories.

[Arborbridge]

The future is unknown, all companies have the potential to grow or shrink , the only thing we do know are the starting valuations.
So are future returns likely to be higher where you are paying 9 times earnings or 22 times earnings?

It depends what is represented by those earnings and what is expected to happen to those earnings. Your "9 times" and "22 times" are meaningless statements on their own without that context.

As you say, there is too much that is unknown, to value simply on a limited number of things that are known.

I was going to make the same or similar point. The 9 or 22 only has much relevance if we know the probable future values, which are unknown. Having said that, I believe it has been proven that buying at low PEs generally produce better returns - but that it not true of any particular company which I choose, only a generalisation. And companies with good prospects or future growth, or stability do have a habit of always appearing too expensive.

[Arborbridge]

It depends what is represented by those earnings and what is expected to happen to those earnings. Your "9 times" and "22 times" are meaningless statements on their own without that context.

As you say, there is too much that is unknown, to value simply on a limited number of things that are known.

Yup, I thought Ohno thought that only dividends matter. Now apparently it is only price/earnings ratios that matter.

It is so hard to keep up with overly simplistic investment theories.

Yes, but in fairness, value investing does call for low PEs and high Yield, so what he is saying may not be so wild

[OhNoNotimAgain]

Yup, I thought Ohno thought that only dividends matter. Now apparently it is only price/earnings ratios that matter.

It is so hard to keep up with overly simplistic investment theories.

Yes, but in fairness, value investing does call for low PEs and high Yield, so what he is saying may not be so wild

Value investing has beaten Smith and other "growth" funds over the last three years. The latter did very well when money was free. No it isn't, usual cliches about swimmers and tides apply.

[OhNoNotimAgain]

It depends what is represented by those earnings and what is expected to happen to those earnings. Your "9 times" and "22 times" are meaningless statements on their own without that context.

As you say, there is too much that is unknown, to value simply on a limited number of things that are known.

Yup, I thought Ohno thought that only dividends matter. Now apparently it is only price/earnings ratios that matter.

It is so hard to keep up with overly simplistic investment theories.

Investing is very simple, it's only the industry, abetted by social media, that wants to make it complicated because that is how the first lot make their money and the second lot try and appear smart by pretending to know stuff that is unknowable.
Reference Donald Rumsfeld.
Once you accept that you will never know the unknowable you achieve investment zen and act accordingly.