[2025–2026] Week 16: Investing Against the Tide by Anthony Bolton
Reading assignment and questions for week 16 of the Value Investing Seminar
(Note: If you are just joining the seminar, please start by reading the Introduction)
A quick announcement: the first case study in the new weekly series, The 10-Minute Investment Autopsy, is out. You can read it here. This series is a great way for serious investors to continue to improve in a time-efficient way once the know the basics.
Onto John Neff. In my mind, Neff is a great example of a classic large-cap value investor. He looks for stable, predictable businesses. He doesn’t mind boring. And he insists on paying a low P/E.
A few things about Neff’s approach are worth noting. Since he is mostly a reversion to the mean investor, his holding period is medium in length. That makes sense - if he is right, the price to value gap isn’t going to stay open for decades in the most efficient capital markets in the world.
His approach exhibits a relatively high batting average with a moderate return on successful investments. You are just not very likely to find a large-cap stock trading at less than 50% of value. However, Neff demonstrates that he was able to find quite a few that were trading in the 60% to 75% of value range, resulting in good, but not spectacular, returns on his successful investments.
The math work both because he is more right than wrong (batting average) and because when he is wrong his losses are usually small. That’s different than an early stage Fisher-style investor who might have a lower batting average and higher losses on his ‘losers’ that would be more than offset by huge winners.
Neff’s 30+ year record shows that he beat the market by ~ 3% per year. That is probably the gold standard for what a large-cap manager can do over decades in the U.S. Given that Neff retired in the 1990s, I can’t help but wonder:
How well would his approach work in the current market environment
How, if at all, would he feel compelled to adjust his process
Note: For those who want to read ahead, our next reading will be Big Money Thinks Small by Joel Tillinghast.
Week 16 assignment is to read Investing Against the Tide by Anthony Bolton and answer the following questions:
Question 1: Please “map” Bolton as an investor on as many dimensions of an investment style as possible.
Question 2: What about Bolton’s background and circumstances made his approach the right one for him?
Question 3: What are your favorite Bolton investments? Why?
Question 4: What are your least favorite Bolton investments? Why?
Question 5: What are 1 or 2 stocks that Anthony Bolton might find attractive in the current environment?
Question 6: Come up with an AI prompt based on Bolton’s approach
Now it’s your turn:
Submit your answers in the comments below this article with all your answers in a single comment. I will engage with some of the answers each week and highlight some of the ones I find most insightful in next week’s seminar assignment article.
Engage with the answers of some of your fellow seminar members in the comments below. Remember – the goal is to learn together. Be kind, be respectful and try to add to our learning as a community.
Feel free to ask any questions about the reading in your comment.
Until next week,
Gary
About the author
Gary Mishuris, CFA is the Managing Partner and Chief Investment Officer of Silver Ring Value Partners, an investment firm that seeks to apply its intrinsic value approach to safely compound capital over the long-term. He also teaches the Value Investing Seminar at the F.W. Olin Graduate School of Business.
Q1: https://docs.google.com/document/d/e/2PACX-1vQb4ofaY3GZmlP9loRjEskcJmVBUrpL-7EBqDsnHHFSiMQEfXRpGK091KVK_t2LKQp-ZtFRYxBDAwYM/pub
Q2: Not much is said in the book about his background. Keying in on his education as an engineer, he paid attention to how components of his thesis might interact. He looked for secondary affects not just the immediate effects a of change. He liked to know how things worked and was curious. Perhaps his education caused him to lean more towards facts, numbers, patterns and some technical analysis. He was also very orderly and structured, especially in how he managed his portfolio reviews.
Q3: Nokia, a messy conglomerate with a hidden gem. A single division, Mobira, had sales growing ~50% a year. Loss from the other divisions were hiding the profitably Mobira. Once he found out the other divisions were going to be shed, he bought in while the company was still undervalued.
Q4: Polly Beck, the conglomerate that got more and more complex and had opaque accounting. Maybe he did, but he did not mention investigation into how the additional businesses (which were widely different from the starting business) were affecting the company.
Q5: I studied 2 that I do not believe Bolton would go for. Reporting here because it was still a good exercise to think through.
DG -- This is not as cheap as it was a few quarters ago; might have been interesting earlier though. Proven CEO brought back in to fix operational problems. Plan showing signs of improvement: reduce theft, simplify inventory, improve labor conditions, renovate stores to improve customer experience. Margins are slowly improving, inventory is coming down, same store sales growing and they are gaining market share (rural markets are their target and are largely underserved).
PTON-- possible super small initial position, but there are big challenges. Also, after looking into this, I ran across a post of someone trying to sell their Peloton that they had only used 2x--I'm not thinking that there is going to be a 'turn around'. Peloton sells premium fitness hardware at near-cost to onboard users into a high-margin recurring subscription ecosystem. They have pricing power and high switching cost for existing client base--if they can keep old users and get new users to buy the hardware. Cost cutting has improved gross margins and slightly improved operating margins. Attempting to branch into commercial business (hotels/gyms) and to integrate AI personalization. Execution of these is yet to show benefits. If hardware sales continue to decline, users won't get sucked into the subscription in the first place. Also, the CFO has recently left.
Q6:
Find recovery or takeover candidate stocks that meet Anthony Boltons criteria:
Strengthening financials
Fixable business problems
Low institutional ownership
Minimal broker enthusiasm
Poor recent share performance
For each stock found:
1) Analyze management performance. Assuming management has a clear turnaround plan, are they following it in measurable ways? Are they doing 'little things' better? Are they beginning to perform in line or better than competitors?
2) How does the company make money? How does it work?
3) What is being assumed in the current price? What key factors are already built in? How plausible and probable are these key factors?
3) Establish the downside at current price: Assume you are looking backwards from a 50% decline in current stock price and create a plausible scenario in which this happens.
Question 1: Please “map” Bolton as an investor on as many dimensions of an investment style as possible.
https://datawrapper.dwcdn.net/sia30/1/
Question 2: What about Bolton’s background and circumstances made his approach the right one for him?
Anthony Boulton is an English professional investor with an academic background. He went to Trinity College, Cambridge, as an undergraduate – famous for its music – and he now composes classical music in his retirement.
His whole approach reflects that: structured, organised, thorough, with an analytical process-driven system. Over the top of this sits an intellectual curiosity and questioning, which enables him to take a less conventional approach and take calculated risks to achieve a superior outcome.
He has a checklist-based approach, which I like because it improves the odds of a good outcome and removes judgement and "gut feel" from the places where it is less helpful.
For example
Do I have an investment thesis that I can easily explain? (From Peter Lynch – I like people who listen to others and credit them.)
Does the company have a clear, strong business franchise? Is the business model robust?
Does the company have a weak balance sheet? Does it pass the Altman Z score? If not, it's usually best avoided.
Always follow the cash, and make sure the cash flow backs up the story.
Does he trust the management? "Someone who has let down or disappointed investors once is more likely to do it again."
In all these cases he is not completely black and white, but he specifically says in some cases that he would have had a better outcome if he had been.
Question 3: What are your favourite Bolton investments? Why?
Cairn Energy: here the strengths were good management in an area where trust is vital. Layered on top was a good business model identified by that management of balancing low-risk cash flow-generating assets with big stakes in higher-risk exploration interests, which, if they succeed, would make shareholders a lot of money. The cash flow limits the downside risk and pays for the bets. A 7M investment yielded a £3bn outcome and pushed Cairn into the FTSE 100, making it a 100 bagger for its original investors. A great example of most of his principles in action.
Question 4: What are your least favourite Bolton investments? Why?
Autonomy. He bought this because of a tip from a colleague. He does not say so, but I don't think he understood what the company did. I say this because I never met anyone who could tell me convincingly how they made money or what they did. Words like "mining", "organising unstructured company proprietary data", and "helping drive insights" were bandied about along with astonishing growth, but details of how they did this? No one ever seemed to know, but the word "proprietary" was used a lot, I remember. He does admit that the only smart thing he did was to sell before the bubble fully burst. Rather depressingly, it was one of his best performers. Sometimes it's more important to be lucky than good, though you might have to put a value investor on a rack to get them to admit that...
Question 5: What are 1 or 2 stocks that Anthony Bolton might find attractive in the current environment?
I have picked Sage Group PLC.
Sage is an accounting and payroll software company based in the UK, but its business is international, with the UK only making up 20% of its market. It offers a series of packages, from a small company using Sage Line 50, with upgrades to multinational, multicurrency support for global companies. Like all software companies, it has been marked down by the indiscriminate sell-off due to the perceived AI threat. It is down from £13 per share to £8.40 in the last year.
I think this share would have appealed to Anthony Bolton. He used a range of valuation methods, and one he specifically mentions is historical PE. Currently it has a PE of 20. The last year you could buy it cheaper than this was 2018, then back to 2014 for the next opportunity, when it traded around a PE of 18. If it grows in line with broker forecasts, it has an FPE of 16. Its metrics are excellent; ROCE, CROCE and EBIT margin are all over 20%, all of which he mentions as hallmarks of a good company. It grows around 9% a year, and it's forecast to do that for the next 3 years. It has paid a dividend for 34 years.
He would have known how deeply entrenched it was in its customers and how many cheap alternatives have tried to displace it over the years, and how skilled it has been in defending itself. I think he would have thought the danger of AI modest because:
Companies don't choose accounting software on cost; they choose it for appropriateness, support, longevity, ecosystem and scalability. No one ever changes their accounting system without very good reason; it's expensive, risky, and rarely produces any benefit. It is usually done to avoid the pain of continuing to live with a system that the company has outgrown or is no longer adequately supported.
Every accountancy practice is familiar with Sage, so support is easily available, and there is no learning curve with your accountant to become familiar with an unknown system.
The packages are scalable, so moving up the ladder as the company evolves is relatively painless (no accounting change is without pain).
There is an ecosystem of support software agents that can build interfaces to other proprietary software and provide tailored software support.
An AI-based system would have to replicate all of this, and even then many companies would only switch when they had to, even if the new system was virtually free, because accounting software is a small cost to most businesses. The pain of transitioning systems is huge, the benefits are zero (accounts are accounts), and accounting disasters are the quickest way to bankruptcy of all. I remember a very successful listed consultancy company in the early 2000s that very nearly went bust when its accounting system was unable to raise invoices for more than a month due to software issues. Its share price did the most spectacular V-shaped drop and recovery, and lots of the company employees bought shares on the dip because they knew it was a sure thing.
Lastly, Sage has proved adept at buying promising competitors and either developing their products or killing them. Never underestimate what a good company with plenty of cash can do to stamp on competitors when they look threatening but are still small. Where it can't do that, it copies them: Xero has been an excellent cloud-based competitor for 20 years, and Sage responded by moving to the cloud, improving its offering and making it easy for small businesses to transition from Xero to Sage as their business grows and needs more features and integration. I think that Anthony Bolton would have appreciated all these kinds of institutional details which make general scares great buying opportunities if the scare does not really apply to the company under consideration.
Question 6: Come up with an AI prompt based on Bolton’s approach.
"As a financial analyst, make a list of companies in the UK FTSE 250 with strong fundamentals that have been heavily sold recently. List them in order of their likely recovery with reasons for whether they might recover or not."
Generated an interesting list.