Keith Ashworth-Lord and the Buffett way: Part 1 – The fund

Keith Ashworth-Lord and the Buffett way: Part 1 – The fund

The fund manager Keith Ashworth-Lord has handsomely beaten the market since since he started his Buffettology fund in March 2011. His investment approach is mapped out in the 2016 book Invest in the Best. Keith is a quality investor and the tome is the result of decades of investment thinking.

The approach outlined in Invest in the Best enabled Keith to write the book from his second home in Florida (i.e. it has delivered the dough).  The fund management group run by Keith, Sandford DeLand, is named after two towns near his Florida bolthole.

Keith Ashworth-Lord: “all the qualities of a young Warren Buffett”

Source: Sandford DeLand asset management

The fund is branded under the Buffettology label thanks to the help of Mary Buffett (formerly married to Warren Buffett’s son Peter). The name seemed a tad gimmicky when I came across it. Whatever next? A fund called: “I can’t believe it’s not Buffett.”

However, Keith’s performance to date has lived up to the Buffett brand. The UK Buffettology Fund is up 225% from March 2011 to the end of September 2018 versus an 82% gain for the average comparable fund.

Buffettlology performance since launch

Source: Sandford DeLand asset management

If you want an endorsement of Keith then look no further than Mary Buffett. She stated in the book that when she first met Keith nearly 20 years ago:

“he really had all the qualities a young Warren Buffett had. Patience, discipline and that ability to really look at an investment like he was going to buy the whole company”

Keith Ashworth-Lord is on the line-up for the two-day Mello London event in November (link). For those who can’t wait I would recommend the podcast interview with Keith from August 2017 (link).

Will the Buffettology fund continue to outperform?

The Buffettology fund is open-ended vehicle and the assets under management were recently close to £500m. This may make it more difficult to outperform given the fund’s bias towards small and mid-cap stocks.

However, quality investors tend to own positions over a relatively long period.  They therefore aren’t reliant on exiting positions at short notice or buying into new positions at short notice.

Keith will is capable of pulling the trigger if he has to and the fund recently sold out of Domino’s Pizza.  In my view, the fund’s emphasis on underlying business quality should enable it to perform well.

Buffettology fund top tend holdings at the end of September 2018

Source: Sandford DeLand asset management

Quality stocks continue to win

The bulk of the companies highlighted in Invest in the Best (2016) have continued to deliver the goods. They include Hargreaves Lansdown and Games Workshop. Keith uses operational and financial ratio analysis to identify firms like Games Workshop before the crowd.

Not all the examples in the book have passed the test of time. Dignity is described as having “highly predictable” demand but has recently been hit by increased competition. The quality of a business clearly needs to be assessed on a qualitative basis.

Dart Group and Revolution Bars aren’t mentioned in the book but the Buffettology fund has invested in both of them. They are notable because they appear to break the Keith’s rules with regard to business quality.

Games Workshop: A “great” business

Source: Games Workshop

Games Workshop 5-year share price performance

Source: Google finance

Business perspective investing delivers results

Business perspective investing is the cornerstone of Mr Ashworth-Lord’s approach. He focuses on the value of the underlying company rather market movements: “shares should not be confused with gaming chips.”

The subject is tackled in the second chapter with Keith noting that: “there are a relatively small number of truly outstanding companies.” The challenge is to find them and then buy them at an attractive price.

Keith’s two-stage process is to analyse the quality of the business and then to assess the price-to-value ratio. This is a similar process to Terry Smith’s three-stage process: 1) Invest in quality companies 2) don’t overpay 3) do nothing.

The quality investor Nick Train follows a similar approach with the first step being to create a list of high quality companies. Great investment minds clearly think alike. It is no coincidence that all three quality investors have performed well.

Summary

The investment approach of Keith Ashworth-Lord can be summarised in a quote from Phillip Fisher that appears in his book:

“There are a relatively small number of truly outstanding companies…when favourable prices exist, full advantage should be taken of the situation.”

Keith’s focus is on underlying business quality rather than share price relative strength, stop-losses and news flow. Shifting our attention towards higher quality businesses should inevitably improve our investment results.

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