10 Key Lessons from Athony Bolton
Investing Against the Tide: Lessons from a Life Running Money
Everyone knows Peter Lynch, but have you heard of Antony Bolton, Fidelity's other great investor?
Antony Bolton, one of the UK’s most successful stock market investors and fund managers, is often overshadowed by other big names in the industry. Over his 28-year tenure managing Fidelity’s Special Situations Fund, Bolton consistently outperformed the market, delivering an impressive 19% annual return compared to just 13% for the FTSE All-Share Index. His exceptional track record has earned him a reputation as one of the UK's top investors
Source: FE Analytics
Bolton’s investment style is often characterized by his deep research into companies and his ability to identify undervalued assets. He became known for his contrarian approach, often investing in companies that were out of favor with the broader market. Later in his career, he expanded his expertise into private equity and has remained a key figure in financial circles.
Below, I have linked a great interview with Bolton by the Library of Mistakes (Highly recommend watching).
To succeed in investment, you have to work at it. Watch for the importance of hard work as you turn these pages. Note how often going the extra mile on research and analysis is what accounts for sustained success.
— Peter Lynch, Foreword in Investing Against the Tide
What Can Investors Learn from Bolton? – Here Are My 10 Key Takeaways
1. Selecting Stocks:
Bolton stresses key factors for picking stocks:
Is the business strong and sustainable?
Will it still be around and more valuable in 10 years?
Is it sensitive to interest rates?
He favours simple businesses, stating, “If the business model is very difficult to understand, I’m happy to pass on it.”
Investors should start by examining recent earnings, short positions, broker ratings, price history, top shareholders, and valuations. Bolton also emphasises the value of simplicity, stating, “If the business model is very difficult to understand, I’m happy to pass on it.”
2. The importance of strong management.
Strong management is a common theme in investing books. Bolton highlights the value of integrity and managers having “skin in the game”—preferring companies where executives hold significant shares.
He also emphasises insider deals, stating, “Every day I get a list of insider deals in UK companies that ranks the deals by significance.”
A quote from Phil Fisher sums it up well: “Getting to know the management of a company is like getting married. You never really know the girl until you live with her. Until you’ve lived with a management, you don’t really know them.”
3. Your own Investment Thesis.
Though brief, this chapter covers a crucial topic: knowing why you own a stock. Bolton stresses the importance of having a clear thesis rather than simply following trends. He cites Peter Lynch’s rule:
“You should be able to summarise in a few sentences why you own a particular company’s shares.”
Many investors may not fully understand their reasons for buying a stock—are they making an informed decision or just following someone else’s idea?
Bolton also warns against buying on impulse or tips and advises setting a target sell price, referring to this as a price band.
4. Sentiment
Bolton highlights how sentiment can cloud judgment, often leading investors to second-guess their own analysis. He gives an example: you’ve spent hours researching a stock, deciding to buy at 70p. When the price drops to 70p, doubt creeps in—what if the sellers know something you don’t?
He stresses the importance of trusting your own numbers rather than following the crowd, stating:
“Falling prices create uncertainty and concern, rising prices create confidence and conviction.” – Antony Bolton
This echoes Warren Buffett’s famous advice: “Be fearful when others are greedy and greedy when others are fearful.”
5. Porfilio Construction:
This chapter really resonated with me, as I’ve learned the hard way about being too overweight in a stock and lacking diversification.
Bolton stresses the importance of knowing whether your positions are overweight or underweight. He also highlights the need for sector diversification, reminding investors that you won’t get it right 100% of the time—aiming for a 55-60% success rate is enough if a few winners outperform.
He warns against becoming emotionally attached to stocks, advising investors to set a target price and stick to it.
A final key takeaway: keep a watchlist. Tracking stocks you’re interested in allows you to act when they reach your target price.
6. The Financials
Knowing how to read financial accounts is crucial. I remember hearing a fund manager say you’d be surprised at how many fund managers don’t read them—quite concerning!
Tim Steer sums it up well:
Bolton highlights how analysts at Fidelity were required to have models with earnings estimates. While we may be amateur investors, reading the accounts puts us ahead of the game. Knowing the financials and a bit of basic accounting can give you a significant edge—even the professionals with their models can still get it wrong!
7. RISK
Bolton writes that his biggest investment mistakes have been with companies that have poor balance sheets. A little basic digging into the balance sheet can provide valuable insights into a company.
He emphasises the importance of debt, a crucial factor that’s often overlooked. Bolton points out that buying a highly geared business is similar to buying an ungeared business on margin. A highly geared company can face serious trouble if business conditions change, which reinforces the need to carefully examine the balance sheet.
8. Valuations
“Buying cheap shares with a strong balance sheet gives you a margin of safety.”
Bolton stresses that buying when valuations are low compared to history increases your chances of making money. This reminds me of the saying, “Buy low, sell high”, and later, “Buy to the sound of cannons, sell to the sound of trumpets.”
He recommends five key ratios for valuing stocks:
P/E
EV/EBITDA
Free cash flow
Price to sales
Cash flow return on investment (CFROI)
Bolton also mentions CROCI (Cash Return on Capital Invested), a valuation metric used by Deutsche Bank, which adjusts financial statements to make P/E ratios comparable across sectors and markets.
He notes two valuation metrics he dislikes: PEG (Price to Expected Growth) and dividend discount cash flow models.
9. Bolton's Favourite Types of Shares
Bolton writes that he enjoys investing in unpopular shares, echoing Peter Lynch’s preference for dull or even ridiculous stocks. The idea is that these stocks often deter both institutional and private investors.
He also shares his approach to buying recovery stocks:
Find a recovery stock
Start with a small position and monitor
Gradually increase the position
He emphasises the importance of patience and timing the main entry point. Bolton also likes companies trading at a discount to their NAV (Net Asset Value).
10. Technical Analysis
Bolton highlights the importance of checking stock charts, particularly the 3- and 5-year charts, and reviewing recent news. He looks at how price moves in relation to news—whether recent developments have pushed the stock higher or lower.
It seems Bolton incorporates technical analysis alongside his main investment strategies. He mentions that if the technical analysis aligns with his thesis, he takes a larger position, and vice versa.
He also notes, “One of the great disciplines of technical analysis is that it forces you to cut losses and let profits run.”
A big thank you to the friend who recommended this book! If you've read it, I'd love to hear your thoughts and recommendations. Let me know what other books you’d suggest.
Thanks for reading,
Ollz
The information provided in this article is for informational purposes only and represents my personal opinions and analysis. It should not be construed as financial advice or a recommendation to buy or sell any securities. Investing in the stock market carries risks, and past performance is not necessarily indicative of future results. Readers are strongly encouraged to carry out their own research and seek advice from a qualified financial advisor before making any investment decisions. I do not accept any responsibility for any financial losses or consequences that may arise from reliance on the information presented in this article.