28 years 140 times: When the Bayesian model of the "British Buffett"

Anthony Bolton excels in contrarian investing, but it is by no means as simple as "be greedy when others are fearful." He has a solid methodology that I refer to as: the victory of an experienced Bayesian.

"When you feel comfortable, it's often already a bit late." In contrast, good opportunities often arise in "uncomfortable" situations—when a company has just issued a profit warning, when the industry faces regulatory crackdowns, or when management is embroiled in a scandal.

Bodon's strategy is to look for mispriced assets at the extreme pessimistic end of this distribution.

But how do you differentiate between bottom fishing and catching a falling knife?

Bodden emphasizes that investing is a game of probabilities: "If you are right 55% to 60% of the time, you are a top expert."

His investment approach is a process of continuously searching for evidence to update probabilities:

1. Initial Probability: Identify "cheap" stocks based on valuation (low PE, low PB).

2. First update: Conduct consistency testing through company inspections.

If the management's words and actions are consistent and honest, it increases the probability of success; if the management is contradictory and behaves improperly, they should be eliminated. He said: "If you don't trust these people, you cannot invest."

Please note that Borton will conduct multiple inspections of the company, keeping detailed records for comparison, which is a method of falsification.

And those superficial exchanges seem meaningless to me, because bosses have their own charisma and many people are also good at performing.

3. Second update: Check the shareholder register.

Bodton shared a treasure-hunting method: If there are one or two powerful funds already involved in a stock, but most funds have not yet covered it, then it might be a treasure.

4. Third update: Observe the technical patterns of the stock price.

Boden does not dismiss technical analysis; he compares price trends with his fundamental assumptions. If both are consistent, he will gradually increase his position.

So, you see, he doesn't go against the trend just for the sake of going against it, but also verifies his contrarian judgment through the market and acts accordingly.

The above steps constitute a rigorous Bayesian update loop:

Bodton continuously utilizes independent and unrelated signals to adjust his prior probabilities regarding the intrinsic value of stocks, thereby gaining an advantage in stock selection.

So impressive, so strong, yet still learned a lesson in the A-shares. In 2010, Bodeen made a comeback to manage the Fidelity China Special Opportunities Fund. He continued to use his tried-and-true method, trusting audit reports and focusing on examining business logic. As a result... the fund experienced a significant drawdown.

Later, he quickly adjusted: increasing investigations to combat fraud, shifting towards investing in more transparent internet and consumer sectors (such as Tencent and Alibaba), and setting a higher safety margin. -- These points are also enlightening for stock investors.

Bodden summarized the 12 key traits of outstanding fund managers:

1. Insight; 2. Unique temperament; 3. Organizational skills; 4. Desire to analyze; 5. Detail-oriented generalist; 6. Desire to win; 7. Flexible beliefs; 8. Reverse thinking; 9. Self-awareness; 10. Experience; 11. Integrity; 12. Common sense. (by Lao Yu) #聪明的大脑 # Buffett #Investment