Patience is required

Investing can be a bit like religion in that it requires a good dose of faith.  When you buy into a company it could be years before you get any feedback on whether it was a good idea or not.  In the mean time you just have to kneel before a picture of Ben Graham and say “I believe” before you go to bed each night.  The same goes for the portfolio as a whole where you might under perform a simple stock/bond split for what seems like an eternity. 

As well as faith and patience, it also helps if you get your kicks somewhere other than the stock market.  Or, if you really want to get your kicks from your investments then perhaps take up day trading.  Put bluntly, the market can move sideways longer than you can stand the inaction (see 2010 for a good example).

Value investing as I practice it seems to sit rather uncomfortably in the middle of the active/passive continuum.  At one end you have passive indexing, where you don’t do anything at all for huge stretches of time and frankly don’t give a damn.  Once a year or so you get out of bed and rebalance and that’s about it.  At the other end you have day trading, or variations thereof.  Here you get to trade a lot, every day.  If you close your positions at the end of the day you see your realised profit and loss each day which is a nice time scale for feedback.  

The old school value investor has neither of these pleasures.  You just get to sit and watch, in my case once a week, watching the prices go up and down and up and down again.  Occasionally a dividend drops in which livens things up a bit.  Months may tick by (in the last year I’ve bought into four new companies) in which nothing happens.  Your faith will be tested by the grinding inactivity of it all and only the patient will stick with the game plan.

Value investing is not hard.  It is not complicated.  It is out there for all to see and should have long ago been vaporised by the efficient market.  But it is beyond dull for most people and that dullness is an effective barrier to entry.  That barrier is high enough to require a premium before anyone will do it, so in one sense the value premium is a dullness premium.  Remember the employees of Graham and Dodd, in their grey coats with stacks of forms, filling out a form for each company, checking to see if the numbers met their criteria?  That is the definition of boring to me.  

And to put the boot in one more time, Gordon Gekko was not a value investor, the masters of the universe were not value investors, nor the dot com venture capital crowd.  Value investing has a you-are-not-cool premium too.

I can’t do much about coolness, but to combat the dullness I’ve tried looking at value investing like a very slow game of chess with a certain Mr Market.  The moves come perhaps only once every quarter, the outcome is uncertain, but seeing the process as a game definitely helps to gets me in the right frame of mind.  More importantly, it keeps me in the game.

Bought and Sold

Nothing whatsoever, which is precisely the point of this post.


J Smart paid out a small dividend which brings the realised gains from that company to 3.5%, or 4.6% annualised.  Titon, now my largest holding by market value, paid out yet another dividend, taking realised returns to 8.5% or 4.6% annualised.  So although this was a down month for the market values of both the FTSE100 and my portfolio, my book value still went up very slightly, which to me is the most important thing.

FTSE 100 value

Today the FTSE 100 stands at 4916.  My rather patchy data puts the current 10 year real PE at 12, Richard Beddard thinks it’s 14 (although I think that’s nominal rather than real), which is close enough for me.  I’m currently estimating the long term average real PE10 as 13.8 (an amalgamation of various sources) so we are slightly on the cheap side.  On this basis I would allocate 75/25 to UK stocks/bonds in an ETF portfolio, using my asset allocation method that I’ve written about previously.

House prices

I think prices are likely to end up between 3 and 4 times average earnings.  Anything over 5x is crazy.  We are currently at about 5.5, which means I won’t be buying again any time soon.

Charts and tables

I’ve updated the current holdings, trade history and benchmark pages with the latest data, feel free to browse around.

Author: John Kingham

I cover both the theory and practice of investing in high-quality UK dividend stocks for long-term income and growth.

17 thoughts on “Patience is required”

  1. Do you invest in US market? Can I get your take on Supervalu (SVU)?Great post!

  2. Hi UKVI – that's right my LTPE is nominal, and I'm 75/25 shares/cash so there you go, we're in agreement again.I think of value investing as grimly fascinating, much like archaeology. You spend days, weeks, months knee deep in mud but you uncover the occasional find.

  3. @ARTi – Hi. No I don't do anything with US stocks, I'm not internationally diversified at all. As for SVU, from a brief look it seems to have a negative tangible value which I don't like, in other words there is too much debt for me to invest. Have a look at my checklist page and you'll get a good idea of what I think of any given company.@Richard – Grimly fascinating is one way to put it! I think other than the slow pace, I find it quite wearing having a huge amount of your net worth tied up in the hands of a bunch of people you've never met. However, I'm just too greedy to settle for passive indexing and for my greed I must suffer apparently.

  4. Hi UKVIA nice revamp of the site. Load speed seems to be greatly improved for me.Unlike yourself I've actually made a purchase. Moved 2% of total net worth from cash to the ASX200. As you know I use the CAPE or PE10 as my market valuation method and this resulted in me becoming sufficiently underweight to warrant a purchase. I'll hopefully get a post up tomorrow morning with all the details.

  5. Hi,I came across the site while googling 'UK value investors'. There don't seem to be many investors practicing Buffet / Dodd / Graham style investing on this side of the Atlantic. Do you know of many others and if so do you know if there is any kind of 'meetup' for a pint / coffee possible? I'd be keen to learn more about how you fit the investing activities around jobs / other tasks etc…

  6. @WillYou're right that there does not seem to be many investors practicing value investing on this side of the pond. UKVI is the only UK blog I follow regularly from a value investing perspective.Personally I'm also quite focused on determining value using the cyclically adjusted PE ratio. I am actively following the S&P500 PE10, the ASX200 PE10 and within a few days I also expect to have a FTSE100 PE10 up and running. That last one has taken me a long time to piece together and I hope to go live on my blog with it in a few days.Based on these PE10 ratio's I then move my target asset allocation for varying equity markets depending on whether the market looks over or under valued. I post everything on my blog as I am trying to build a bit of a community there. You might want to stop by and have a look. UKVI and I have slightly different approaches but its those variations that make it interesting. I know I've learnt a few trhings on here that have made me go off and conduct more research.

  7. @Will & RITWhen I started investing I wanted to read about what someone else had done, why they did it, how they felt about it and how it all panned out. Unfortunately there were no other value investor blogs that I could find. I have since stumbled over Richard Beddard at Interactive Investor who runs an imaginary value fund for his blog and some magazines. But I couldn't find any actual UK investors talking about their exploits, other than in forums which I'm not keen on. RIT above is not a stock picker, but he(?) takes value into account using PE10 as he's said, and his posts are about as well thought out as you are likely to find. And any other good blogs I find will end up in my blog roll.As of now though, uk value investing bloggers are still a very rare breed. Perhaps if you started one up you might swell our numbers? But as RIT would say, DYOR!

  8. Hi UKVIGreat suggestion for people to start up their own blogs. It really would be great to get a community of UK based bloggers. For those who don't want the bother of doing that it would be great to leave a comment either good or bad that could result in some discussion and get the mind turning over. I started my blog so that I was held to account but also to learn.I'm currently receiving about 50 to 100 unique visitors a day and it is very rare for a comment to be left. If I took away your comments and those from TI over at Monevator then they would be few and far between. That means today I have to travel the web far and wide for information.

  9. Hi guys,I'm very interested in value investing in the UK. I have often gone the mechanical route (low PE, etc), and whilst my returns are better than the Footsie, I am not satisfied that my approach is particularly good, or the returns are as high as I would hope.I would be interested in sharing ideas – maybe through a Yahoo Group, or something. If anyone is interested in further discourse, then hit me up at mcturra2000 at yahoo (dot) co (dot) uk.

  10. Will – One of the more common forums for value investors is Pauly Pilot's pub (sorry-not that kind) over at It's not a value investors per se but there is a distinct 'bargain' feel to the ideas that get thrown around. UKVI, I'm trying to get my blog going a bit but it never appears on google. Can I ask how you managed to get your blog so high on searches?

  11. @SparkyI just tried to access your blog from your comment however you have not enabled access to your blogger profile. Can I suggest enabling this which will enable people to find your blog from comments you leave.

  12. Sparky, I'm surprised that this blog gets so high up on Google's searches. It's all about links apparently, but I've never really tried that hard to harvest links. The main one's I know of are on the Interactive Investor blog, Stockopedia and a few on The links kind of grow from there and that's it. I think it's probably more to do with me being almost the only site with 'value investor' in the URL.@everybody – Regarding setting up discussion boards, it's a nice idea but I can really see why limit their members to 250. Otherwise you get so much content it starts to go against the grain of one of the ideas of value investing, which is that you don't turn over your holdings excessively, which you might end up doing if you see a million and one stock analyses. That's my take on it anyway and why I don't really comment on forums and that sort of thing. But if someone sets up something sensible I'm sure we'd all be interested.

  13. Hey UKVI/all,I've just found this page, so thanks for the excellent content and keep it coming!I wanted to go off topic a little and ask which search engines you use to filter stocks trading below book value/low P/Es etc? Is there an internet site you can recommend that will help me identify certain stocks, thus not having to go through each security on the FTSE 350 one by one?Also I'd be very interested to know if you had any value investing reading that you would recommend to a relative novice. I've read The Intelligent Investor and currently enjoying Security Analysis. I feel I have a decent grasp of fundamental tools (Awaiting CFA Leevl3 results) though would be keen to find even more reading on the topic? Any tips?Thanks in advance and congrats on the excellent blog!Regards,Daniel

  14. Hi DanielI tend to use Sharelock holmes. It's got all the criteria I use as well as a simple interface and no whizzy charts. As for books I think it might drag on a big for a comment so I'll do a post covering the various things I've read and how they have and haven't helped me. I think the real answer might be to just read everything you can and you'll gradually build your own mental model of what is and isn't important.

  15. Thanks a million UKVI…. Cutting corners won't work, so reading everything possible is the way forward.I look forward to the post… Maybe you could leave a bibliography on the website.I check out the link to Sharelock! Thanks again

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