The ‘value’ philosophy of England batsman Joe Root

Revelling in the aftermath of England’s series-levelling victory over India last Tuesday – where centuries from Joe Root and Jonny Bairstow helped their team chase down a record target of 378 in double-quick time – it was hard to think how life could get much better for the cricket fans on The Value Perspective. And then Root revealed his philosophy of what can only be called ‘Value batting’.

Do bear with us – we really can back that up – but first let’s add a little context. As recently as the end of March, the England cricket team was in disarray having lost consecutive Test series in Australia, India and the West Indies. Just months later, under new captain Ben Stokes and new coach Brendon McCullum, England have now won four consecutive tests after thrillingly chasing down targets of 277, 299, 296 and that 378.

Read more from The Value Perspective: Like cricketers, investors should be wary of feelings trumping facts

Stokes and former New Zealand captain McCullum have received plaudits for the way they have turned around the England team’s mentality, encouraging the players to bat and bowl with freedom and belief. Indeed, Stokes only seemed to be half-joking when he told the BBC part of him had been hoping the Indians would set his side a target nearer to 450 – just to see what his team could do.

Not a hint of a margin of error in evidence, then – and things became less value-oriented still when, after the game, Root went on to tell the BBC: “Ben says he wants us to play like rockstars.” Shaking our heads sadly, we reached for the remote control – but Root continued: “I’m not sure I will ever be as much of a rockstar as some of the other lads – like Jonny and Ben and the likes – but I am trying to keep up as much as I can.”

Joe Root has, of course, been England’s most consistently successful batsman of recent times but, asked to buy into the Stokes-McCullum worldview, he characterised his aim this summer as “almost try and take technique out of it and manage the game as best as possible. Without trying to sound too negative,” he added, “it’s manage risk well and play low-percentage cricket as much as you can with the highest value of runs.”

A style that works

Here on The Value Perspective, we are instinctively wary of any big-name individual who might be viewed as a ‘rockstar’ of investment. Like Root, however, even if it is not our style to go out guns-blazing, we must aim to keep up as much as we can over the long term and thus identify a style we are comfortable with and that works for us. With value, we focus on understanding risks so we can weigh them up against potential rewards.

We would argue there is no such thing as an asset class, or indeed any asset, that is ‘always safe’ or one that is ‘always risky’ – but rather, what you pay, not the growth you receive, is the biggest driver of future returns. In the search for safety and profit stability, however, investors often make the mistake of avoiding profit risk, but accepting elevated valuation risk – a risk that history suggests is ultimately more painful.

The seeds of any prolonged upswing are sown in the recession that takes place beforehand. It is the crushing of sentiment and valuation that occurs during those ‘uncertain’ periods that creates the conditions for significant share price increases over time. Or as an old expression holds: “You make most of your money in a bear market – you just don’t realise it at the time.”

Value investors can never say for certain when the market will recognise the intrinsic value of the companies in which they are invested but, by placing emphasis on strong business fundamentals and low valuations, value investors can recognise companies with considerable potential for sustainable long-term share price recoveries. For Root, risk is determined by the shots you play; for us by the price you pay.