How to invest in equities the David Webb way
By: Tim Bennett
17.01.2019
This week Tim Bennett asks what we can learn from a man who claims to make 20% a year from equity investing.

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How to invest in equities the David Webb way

Every now and again you come across someone who has been quietly beavering away and making a lot of money from equity investing. David Webb is an example. So, who is he and what can investors learn from his approach?

Who is David Webb?

A former Barclays banker, Webb is a private investor who long-since stopped needing to hold down a conventional day job thanks to his success as a private investor. His track record, from buying a mixture of public and private company shares at the right times, is impressive as the slide below reveals. The key question is how does he do it?

His core principles

Like most very successful investors, Webb follows his own set of rules and is not afraid to stick with them, regardless of what others may be up to. He operates in a market (Hong Kong) where regulatory standards and corporate governance have been deemed weak by many observers for years. His specialism is spotting those firms that have been marked down unduly harshly as a result and buying them while they are cheap. This is easier said than done and requires, amongst other things, some rigorous analysis.

His investing approach

These principles are applied through six key tenets.

You will note that;

  • He runs a concentrated portfolio and maintains it over a long time horizon
    He avoids stocks he doesn’t like, rather than actively shorting them. He is also happy to share his thoughts on companies in the public domain that he deems to be poor value (for more, see Webb-site.com)
    He is a details man, who likes to pore over financial statements and regulatory filings, sometimes until late into the night! This is important – whilst spotting valuation anomalies is easier with smaller companies than it is amongst large-caps, it still demands a lot of hard work

A word of caution

The obvious question for many investors will now be – great, so how do I become him? The short answer is you won’t. Leaving aside the fact that he operate in Hong Kong, stock pickers like him are, by definition, relatively rare in any market and he is careful to keep his exact process close to his chest. Nonetheless, everyone can learn lessons from looking at the approach of investors like Webb as they shape their own investing strategy. Having made his fortune, he has promised to be more open about how he does what he does in the future for the benefit of other investors. Anything he publishes on this will probably be well worth a read.