Tim Guinness's firm uses 30 equal-weighted stocks to diversify risk. This forces a "one-in, one-out" policy, compelling the team to sell their least-favored holding to add a new one, thus overcoming the common investor weakness of being poor at selling.
Tim Guinness's firm uses four factors—value, quality, earnings, and momentum—to screen 8,000 stocks down to 80. While momentum is crucial for this initial filtering, it is not a primary factor in the final "last mile" decision, which is based on a deep dive into company fundamentals and valuation.
Despite its decline in popularity, Tim Guinness uses balance sheet gearing (debt to net tangible assets) as a critical risk tool. His experience through multiple banking crises taught him that when total debt and creditors exceed twice the net tangible assets, a company requires careful scrutiny.
Despite his background running a successful energy fund, Tim Guinness believes global oil demand will peak in the next five to seven years, followed by a steady 1-2% annual decline. He notes that a strong oil price can paradoxically accelerate the transition to renewables by making them more competitive.
Tim Guinness prioritizes recruiting graduates with engineering degrees for investment roles. He believes engineers are uniquely trained to make decisions with incomplete information and can handle complex numerical and statistical analysis, which are critical skills for evaluating companies.
Facing a revenue crisis in the 2008 crash, Tim Guinness made his team redundant but immediately offered to re-hire them at half their salary. This transparent but painful move retained key talent, with nine of ten affected staff accepting. Pay was restored within 15 months.
Tim Guinness identifies the biggest risk to asset management firms as disintermediation by platforms and wealth managers who can launch their own funds. To secure their future, he believes firms like his must evolve by moving into the platform and wealth management business to own the end-customer relationship.
Tim Guinness claims that despite the rise of passive investing, it is not difficult for thoughtful active managers to outperform. He calls indices "stupid" because they are inherently momentum-driven and mechanically buy high. He argues a disciplined approach can overcome the fee hurdle that holds many back.