The Defensive Value Investor by John Kingham
If I were to simply repeat the book’s subtitle, “a complete step-by-step guide to building a high-yield, low-risk share portfolio”, my book review would be done. Because, really, that’s what Kingham has done.
For those of us unfamiliar with the term ‘defensive value investing,’ it’s a hybrid of defensive investing, meaning “buying the shares of high-quality companies that have been around for many years, paying and steadily growing their dividends.” And value investing, which “focuses primarily on whether or not a company’s shares represent good value for money at their current price.”
That’s covered in the preface of the book, so, so far so good. Kingham sets the scene pretty well and I feel myself well-grounded in the book.
But three pages in, I realise perhaps I’m not Kingham’s target audience when he warns, “it’s important you read it in order.” Is this because I usually read every other page on every other chapter…? I keep on reading anyway because the writing flows well and his explanations don’t make me feel like I’m in a classroom and I don’t have to Google things all the time.
Kingham splits The Defensive Value Investor into three parts: analysing a company’s accounts, analysing a company’s business, and managing your portfolio. That’s a good balance between quantitative and qualitative research, which is fundamental in investing—especially in Kingham’s world as this is what can get you lower risk and higher return.
This book is a detailed walkthrough of a strategy he swears by since 2010, when he used his background in computer programming to “turn [Ben] Graham’s rules into a complete and systematic investment strategy.” You learn how to construct your portfolio and manage it in a way that will reduce risk and increase return.
Every chapter ends with a detailed “rule of thumb” (brace yourself though, there’s a quite bunch) but they’re handy rules he uses on a regular basis to guide his decision-making, so there’s comfort in that. He even goes the extra mile of showing how his methods work with real-life examples.
Will I remember every single rule of thumb Kingham has offered in his 288-page book? Probably not (and, hey, I doubt that’s what he was intending, anyway). But it’s very likely the next time I’m reviewing my investments, I’ll be sure I don’t have more than 10% of my portfolio invested in one FTSE sector.
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