Picking investments stock by stock however certainly does take time and the team will often spend more than a month analysing a single company before deciding whether to invest or not.
With a market of more than 10,000 stocks on offer, Preston insists the team has the benefit of “being picky” and only opting for shares they consider to have the best value.
This value is found in looking for the long-term and decisions are made on the basis that Orbis may hold the stock indefinitely, Preston says.
Clearly, the Orbis Global Equity Fund is in no way an investment for anyone with a time span shorter than five years.
“The timespan I use to analyse an investment is forever, it doesn’t mean we hold stocks forever, but what it does mean is that I’m looking at the long term,” Preston says.
“The deal when you buy an investment in a company is you pay the price today and then you receive the cash flows that that company can produce over the fullness of that company’s existence and so you have to make sure you’re going to get more than you pay.”
He considers ‘forever’ as the only relevant time horizon to use as it, “focuses your mind on the true intrinsic value of a company rather than what you think other people might pay for it at some time in the future”, he adds.
So, the creeping focus on short-term returns and performance is an aspect of the current industry that doesn’t sit well with the Oxford maths graduate who conducts his sums looking 20 or 30 years ahead.
He explains: “What we have seen since the 1960s is the average length of time an investment is held has compressed, it used to be measured in years and now its measured in months.
“So the average holding time for a share is a handful of months and that indicates that a lot of the stock market has become very short term.”
