Book Review by Swen Lorenz: The Future is Small
One of the great advantages of working for Master Investor is that you get to personally meet an incredible array of high profile experts and investors ? most notably at our yearly Master Investor show, where one of our keynote speakers was Gervais Williams, the award winning fund manager and small cap expert.
Having spent a fair bit of time sitting next to Gervais and discussing the presentations of the other keynote speakers of Master Investor, I spent the following Sunday reading his book, which has actually been on the market since last November. Whereas my review might be considered slightly late, it?s all the more timely.
Shares of small companies have been lagging behind those of blue chips by a great degree, and if Gervais Williams? insights are anything to go by, this is going to change dramatically.
?The Future is small? contains an incredibly broad, but also incredibly clear, set of hard data about small cap stocks and how they compare with other investments. Williams naturally has a bias, given that he manages £3 billion in client assets that are mostly invested in this sector. However, his track record of successful investments and his experience in the sector should make everyone listen up. This is a book written by someone who knows the market for smaller companies like the back of his hand.
There are a number of compelling reasons why small caps are going to outperform their larger peers. For a start, the Law of Large Numbers works against large corporations. It?s so much harder to grow a bureaucratic, vast enterprise than it is to grow a smaller, more nimble one. Large companies are poor at innovation, whereas small companies can easily foster a culture of innovation and disruption. Large companies grow through acquisitions, whereas smaller companies tend to grow through organic growth, which is much more lucrative for investors. All of this comes together to make a compelling case for investing in smaller companies, especially during times of depressed valuations.
Williams spells out the principle reasons for investigating AIM listed smaller companies in greater detail ? ranging from the greater scope for misvaluation and opportunities to strike bargains, to a projected increase in institutional capital flowing into the sector ? all of which is backed up by data, and written in a style that is comprehensible even for those with relatively little experience.
Whereas some authors argue that attractively priced investments can now only be found in exotic countries or have to involve complex financial instruments, Gervais Williams shows that they might also quite simply be hiding in plain sight. The smaller companies listed on AIM are easy to access for UK investors, and may just hold a bigger array of opportunities than most investors currently realise.
Master Investor rating: A highly readable book that makes a convincing case, doesn?t take more than an afternoon to read in detail, and provides a real call to action for investors. It?s a book I?ll get out again in the future.
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