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Special case - There is a value lesson to be found in Jose Mourinho's return to manage Chelsea

07/06/2013

Andrew Lyddon

Andrew Lyddon

Fund Manager, Equity Value

Regular visitors will be aware of our fondness for drawing value lessons from the world of sport so is there anything investors can learn from the news Jose Mourinho is heading back for his second spell as manager of Chelsea Football Club? Here on The Value Perspective, we certainly think so.

Although Mourinho enjoyed significant success in his first period in charge at Chelsea from 2004 to 2007, the omens for his return are not universally favourable. On a general note, for example, football managers including Kenny Dalglish, Kevin Keegan and Terry Venables have fared conspicuously worse after returning to clubs where they thrived the first time around.

More specifically, Mourinho’s first spell at Chelsea ended in his dismissal – albeit with an £18m pay-off dulling the pain somewhat – while, this time, neither party appears to have been the other’s first choice. Chelsea’s owner Roman Abramovich went to considerable lengths to try and entice former Barcelona boss Pep Guardiola to Stamford Bridge while Mourinho is widely believed to have harboured ambitions to succeed Sir Alex Ferguson as manager of Manchester United.

Regardless of any ill-feeling or thwarted ambition, however, Mourinho has continually shown himself to be a pragmatist – and as much in his business dealings as his football ones. As such, a four-year contract reported by The Times as being worth £50m presumably played some part in his decision to return to Chelsea and it is this which caught our eye here on The Value Perspective.

Every investor will most likely be able to point to some stocks with which they have had a very good experience and others with which they have fared far less well. But while you may be tempted to write off companies in the latter group as terrible businesses you never need look at again, you would do better to follow Mourinho’s pragmatic lead and assess the situation more carefully.

Could it be you were just unlucky the first time? And if you did make a mistake, what might it have been? Was there a balance sheet error, for example, or did you overpay in terms of valuation? 
Just because you did badly with a stock once, it does not automatically follow you should ‘blacklist’ it for ever and never invest there again. As ever, let valuation and balance sheet strength be your guides.

Over the years, Mourinho’s forays into the football transfer market have not always marked him out as a natural value investor. His return to Chelsea, however, suggests he is able to take emotion out of the equation when there are financial rewards to be had and that is certainly something The Value Perspective would applaud.

Author

Andrew Lyddon

Andrew Lyddon

Fund Manager, Equity Value

I joined Schroders as a graduate in 2005 and have spent most of my time in the business as part of the UK equities team. Between 2006 and 2010 I was a research analyst responsible for producing investment research on companies in the UK construction, business services and telecoms sectors. In mid 2010 I joined Kevin Murphy and Nick Kirrage on the UK value team.

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