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Quality Investing - Lawence Cunningham


dabuff
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  • 3 years later...
  • 3 months later...

I just finished reading this book. It sketches out the investment philosophy of AKO Capital, an equity fund based in London. The writers Torkell Tveitevoll Eide and Patrick Hargreaves are Portfolio Managers of this fund. Lawrence A. Cunningham, a writer of several value investing books, was hired for additional writing and editing.

 

According to AKO, three characteristics indicate quality investments: "strong, predictable cash generation; sustainably high returns on capital; and attractive growth opportunities". No surprises here. The thesis is that, although such companies are often priced at high valuations, these valuations may still be a bargain compared to the future earnings trajectory. In other words, the earning power of high quality companies is still under estimated by the market.

 

The book is dedicated to describing features of quality companies, recognizing their business models, avoiding pitfalls in identifying them and ways to implement a quality investing strategy. There are also 22 case studies, all describing European large caps: Unilever, L'oreal, Ryanair, Diageo, etc. No big surprises here, especially for European focused investors. The case studies are only a few pages each. In fact, all of the subjects of the book are described very succinctly, be it business cycles, industry structure, management quality and psychological biases while investing. There are no numerical examples, only qualitative remarks. Hence, the book feels more like a summary of a few books worth of content.

 

Since most members of this forum already read a lot of books on value investing, I don't think this particular book will add much value. It is well written though and I did enjoy reading it as a refreshment course on important aspects of long term value investing in quality companies.

 

 

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