An industry legend, Bolton’s career spanned more than three decade where, for the most part, he achieved outstanding results managing the Fidelity Special Situations fund from December 1979 to December 2007, famously turning a £1,000 at launch investment into £147,000.
While he has officially retired as fund manager of the China Special Situations investment trust he will carry on as a consultant at Fidelity.
Keep it simple
So what does a heavyweight in the industry like Bolton say when he sums up the lessons learned over his stellar investment pathway? Two key messages he brought across are “invest in what you understand” and “know yourself”.
Putting these thoughts into action he reflected on his latest venture in China. When asked why he decided to go to China, he said he thought it would help him become a better UK investor if he knew more about that area of the world. Despite the challenges he faced managing the investment trust, he is confident and enthusiastic for investors to be in the ‘new China’. The current negative sentiment around China and low valuations present a real opportunity for Bolton.
Here are his top lessons learned while managing investments in China:
- Do not look at China using only Western rules;
- The financial challenges can be kept at bay for many years;
- How China executes its state-owned enterprise (SOE) reform programme will have a huge impact on state-owned businesses;
- Private companies make more money than state-owned companies;
- China is home to some of the best, and many of the worst, companies.
Elaborating on the last lesson, he stressed the fact that the scope for profit is substantial if investors put in the necessary legwork and get to the nuts and bolts of the individual companies. (He is overweight consumption, IT, and healthcare.)
Trust the numbers
“If you do your research, you can differentiate. There is a lot of data in China, which you can use to work out the differences from the official numbers. There is opportunity for under-researched shares,” he said.
He also commented how ‘H’ shares and ‘A’ shares invest very differently.
“In the ‘A’ share market investors love small companies. They view the big ones as boring so the small ones have the high evaluation. In Hong Kong, it’s the opposite situation. People want liquidity, but that’s an over-rated concept.”
Trust the numbers?
Bolton warned about corporate governance rules, which can present a fictitious company image: if a company sounds too good to be true, it probably is. If it is listed on the London Stock Exchange or the Deutsche Bourse, but not on the Hong Kong stock exchange, investors should be suspicious.
“I would be worried,” he said. “The Chinese are great liars.”
Summing up the investor prospects in China, he said the opportunity is all about putting in the research to identify those companies that are amongst the best he has seen
“There is opportunity out there. In the meantime, do your homework."
