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Investors should continually challenge their perception of a business

05/09/2012

Nick Kirrage

Nick Kirrage

Fund Manager, Equity Value

Think of the single company about which you are most negative and note down all the reasons you hate it. Now imagine Warren Buffett bought a 5% stake in it this morning. How do you feel about that stock now? If the world’s most high-profile and well respected investor were suddenly to pop up on the company’s share register with 5%, how might that change the way you think about the stock?

That is not to say Warren Buffett necessarily gets it right every time – rather, it is just a little mental exercise to help identify whether bad emotions might be getting in the way of good judgement. You may be utterly convinced of one thing but what if someone you see as very clever or very successful suddenly thought the complete opposite to you? How does that change the way you think?

For every seller in the investment market, there is a buyer – and vice versa. To ensure you make rational and well thought out decisions when buying or selling, you should always ask yourself why someone else is so keen to be on the other side of the trade.

Author

Nick Kirrage

Nick Kirrage

Fund Manager, Equity Value

I joined Schroders in 2001, initially working as part of the Pan European research team providing insight and analysis on a broad range of sectors from Transport and Aerospace to Mining and Chemicals. In 2006, Kevin Murphy and I took over management of a fund that seeks to identify and exploit deeply out of favour investment opportunities. In 2010, Kevin and I also took over management of the team's flagship UK value fund seeking to offer income and capital growth.

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