An Interview With Paul Scott And Graham Neary - Your Questions Answered

by: Stockopedia
An interview with Paul Scott and Graham Neary your questions answered

It has been five years since Paul Scott kicked off the Small Cap Value Report on Stockopedia. Recently he has been joined by Graham Neary, and together they offer up a daily assessment of company news with the sort of quality and forensic detail that you just can’t find anywhere else.

Regular readers will have at least some idea about their backgrounds and careers, but there are always more questions. So at a recent get together of everyone in the same place at Stockopedia HQ in Oxford, I took them to a bar and invited them to answer as many as possible. If we didn’t manage to cover your question, we will be doing this again in the future. It’s a long read, but it’s really interesting stuff and hopefully the Q&A format makes it easy to navigate...

Ben: First of all, let’s talk about your investment style and how it has changed over time?

Paul: Well, I started out with a very much value-focused approach, just looking for pricing anomalies in small-caps. The beauty of the small-cap space is that it’s an inefficient market. You get more pricing anomalies than you do with mid- and large-caps because far fewer people are looking at them and researching them.

Like most people, my approach has changed over time and I’m gradually learning more as I go along. I also adapt my approach depending on whether it’s a bull market or a bear market. Given that we’ve been in a strong bull market in the last two or three years, it dawned on me that actually a value-based, low-P/E, high dividend yield approach really wasn’t working. In fact, it was often picking up bad companies that were value shares because something was going wrong for any number of reasons.

It was the same with asset-backed situations, which are the other strand of value, where you’re looking for low P/E, high yield and high net tangible assets. In a bull market, people aren’t really interested in the net asset value of a company and whether it has got freeholds or not. They don’t care because they’re looking for growth companies.

Ben: Graham, how about you, what’s your background and how would you describe your investment style and how it has changed?

Graham: Well, I’d been doing internships in economic research and investment strategy and then I took a full time position doing technical analysis for a couple of years. Even though I was doing that by day, I’d read Ben Graham’s Intelligent Investor and Security Analysis, and I’d read up on Warren Buffett and I knew that fundamentals were crucial, so I was keen to get into a more fundamentals-oriented role. So I got into an assistant fund manager role, which evolved into a portfolio manager role on the buy-side for a fairly conventional institution. That was looking for FTSE 350 companies to invest in.

It took me a few years to eventually fix on the idea that Joel Greenblatt was actually correct and that his Magic Formula [to find good, cheap stocks] was a good framework. So I was using that and also doing individual company analysis on the dangerous looking ones. That’s because the Magic Formula can’t tell you if something terrible is about to happen. So I was trying to take the risk out of the Magic Formula and I got a fantastic return doing that. Admittedly it was only over two-and-a-half years, but I trounced the FTSE and it was partly as a result of my sector bias as well.

Meanwhile, in my own personal portfolio I was trying a lot of deep value stuff - but it didn’t work. I went to the AGMs of one particular company several times, where there was a large difference between the share price and the net asset value. But it don’t go anywhere.

I tried a lot of different deep value stuff. Given that I was only twenty-something at the time, I ended up owning decent size percentages of some tiny, deep value situations, but they just didn’t work.

Paul: That’s similar to my action groups. If we go back to 2001-02 I set up and ran five shareholder action groups targeting deep value companies. I had to learn how to set up websites and got all the press involved. I identified companies whose net cash balance was more than double their market cap. These were normally the remnants of the dotcom boom and I persuaded management in all five cases to stop squandering all this cash and to find a way of returning it to shareholders. That’s how I initially got started as a professional investor. I made about a 1,600 percent return in 18 months. I turned £10,000 into £160,000 in 18 months in a bear market. It was highly effective and that’s why I gave up my job in September 2002. I was starting to make more money from shares than from my job.

I was expecting to do more and more of these action groups. But it was at the turning point where the bear market couldn’t get any worse. Almost to the day I gave up my job was the bottom of the bear market.

In 2003, I found one broker who would let me gear up on small- and micro-caps, and that was Hargreave Hale. Spreadex and IG wouldn’t go below £50 million, which was where I thought the opportunities were. Hargreave Hale actually wanted to interview me to see if I was a suitable client. I gave them all my money, which was about £200,000, and by the end of 2003 I was a millionaire.

So it was down to combining good timing, a lot of luck, stock selection and gearing at the right time. But it very nearly went badly wrong. When the Iraq war started in March 2003 my portfolio dropped to about £90,000 and I had to liquidate nearly all the longs and I took out a big FTSE call option. That’s because I wanted more upside but I couldn’t afford any more downside. The market bottomed in September 2002, rallied over the winter but then went right back down again when that war started. So I very, very nearly fell at the first hurdle.

But with a bit of luck, and the help of that call option, the portfolio was zooming along by June 2003. I closed the call option and went back into all these micro-caps that were ridiculously undervalued. By that point I was looking at profitable companies that were close to or below net asset value. The market was throwing bargains at you. So I geared up four-times and just went for it. By the end of 2003 I’d made over £1 million. But then I lost it all in 2008!

So it has been a total rollercoaster for me. I made too much money too quickly in 2003, hubris set in and I thought I couldn’t lose. Come 2008, I ran into the financial crisis highly geared in illiquid stocks and it all fell apart.

Ben: On reflection, do you think those experiences have made you a better investor and better at adapting to the market conditions?

Paul: To an extent, yes. I’ve learnt all my investing decisions the hard way. 2008 taught me that you need to keep an eye on the exit and you need to consider what will happen to liquidity if there is some sort of awful event. Not necessarily a minor event, but if the financial system starts to cave in again - which it might well do.

So for that reason, this time my risk management is much better. I’m keeping the gearing lower than it was and I have a general rule that I want to be able to exit every position I hold within a maximum of two days in a bear market. So I position-size accordingly. If something is very small and illiquid, I wouldn’t have more than £30,000 - 40,000 worth of it. If it’s nice and liquid then I’ll have £500,000 of it. I think liquidity is so important.

Ben: How has your approach to investing changed, Graham?

Graham: Well, I don’t do deep value investing anymore. My current portfolio is a mixture of companies that I like and where I’m not so hung up on valuations. I should say that my investment in Volvere could be classified as deep value because I did buy that at a big discount to NAV, which itself understated the intrinsic value of the company. So it’s not that I’ve forsworn doing deep value ever again, but I’ve made every type of deep value mistake. I’ve bought fraudulent foreign companies where fortunately I realised there was a problem and got out. I’ve invested in real estate companies that were trading at a discount where the management were milking it. I’ve invested in companies which didn’t have intellectual property over the things they were distributing. I’ve invested in consultancy companies in cyclical industries like architecture and events where they’re just vulnerable to headwinds they can’t control and they’re paying huge staff costs. But these things all looked like value at the time. I’m far more selective now. I tried value investing in a naive way and now I’m more interested in good businesses.

Ben: I’m guessing you know your universe of companies quite well, but do you have ways of actively finding new ideas?

Graham: Well, actually I use Stockopedia to open up the consumer cyclicals, the industrials and the financials. I mostly work in retail, industrial and financial companies, so I open them up and rank them by, say, quality or quality and value. Then I maintain a spreadsheet of their current price versus the price that I think they’re worth and I come back to it every once in awhile. I still run a very concentrated portfolio - I only have eight stocks at the moment.

Ben: Is that kind of concentration deliberate?

Graham: It’s actually more diversified than I’ve been. In the last few years I’ve actually had more like five or six. But I don’t regret it at all because it accelerated my learning curve. I felt the pain when it didn’t work out but I’ve had some winners. I’ve had H&T, which has more than doubled what I paid for it, and that position ended up being a quarter of my portfolio.

When I mentioned that on Stockopedia, I think people thought I was a bit crazy. But this is where I’m a bit different from Paul in my current strategy. I’m buying things with the intention of basically just leaving them there. That’s why, for me, liquidity isn’t such a big deal, and it’s why I ended up holding quite big stakes in things. My intention has been to buy and hold it until it does well.

Paul: I have different approaches for different portfolios. One of our questions is about SIPPs, and my SIPP was my ‘start again fund’ after I was on my arse for several years after 2008. I’ve been very public about the fact that I lost £5 million between 2007 and 2008 and had to sell my house and walk away with nothing. In 2012, almost by accident, I remembered that I had some old pension policies that I’d paid into in the 1990s. It occurred to me that I could turn them into a SIPP, which is what I did in 2012, and I managed to get started again with £67,000, which I didn’t think was bad.

That’s nearly £300,000 now, and like Graham, it’s only got six or seven stocks in it. They are conviction buys and stuff that I think will be great companies long-term. I only trade probably a couple of times a year in it, and so far so good. Sometimes I even forget I’ve got positions in there. Take Somero Enterprises, which I put in the SIPP at £1.20 and there’s been a nice flow of dividends and it’s about £2.90 now. Gear4Music is also in the SIPP, and that’s probably 20 percent of it, which is too much.

So I think you can have different strategies for different pots in an overall portfolio. I don’t think you have to have one specific strategy. I run a couple of accounts for family members which, again, have a different approach.

Ben: Do you have a strong view on the number of stocks that should be in a portfolio? This is something that really puzzles a lot of people, but is there an answer?

Paul: Well, while we can’t give advice, in my personal opinion it’s just whatever you’re comfortable with. A friend of mine, who is an investing god, gave me the best piece of advice that I keep on a piece of paper next to my computer - “Do more of what works.”

For me personally, I have between 40 and 50 stocks in my overall portfolio. Anything above 40 starts to get difficult to monitor and I start to find I’m losing the plot. At 50 I’d be looking to cut out some of the tiny positions. I concentrate very heavily, so the top seven or eight stocks are maybe three-quarters of the portfolio, and that works for me.

I’ve then got this long tail of things, and you might ask me, why? Well, those are the ideas and the things that gestate. They’re the ones where I just want to dip my toe in and monitor them. Once it’s in your portfolio and you’ve got money in it, you really do follow it and you’re more likely to spot a turning point if you think it might be a turnaround type situation.

Ben: In terms of ideas, you’re very much guided by news, aren’t you?

Paul: Yes, I’m watching the news all the time and reading RNS stories every day, and I find that way you don’t need to get ideas from anywhere else - you’re actually ahead of the curve. Say, for example, that a widely-followed journalist publishes a story on a particular small-cap stock, it’s likely that I’ve already bought it a day or two before because I read the original source of the news. With small-caps you have an inefficient market where trading on good and bad news flow, for me, really works.

It’s important to remember that the market price of small-caps is artificial. If you are buying shares in Next or Shell, or any large-cap, there is such a liquid market that anyone who wants to trade can trade. But with small-caps you’ve actually got two distinct markets. The private investors, who often trade in very small size, are the people who set the price. The market makers don’t hold any stock and they will just go wherever supply and demand is.

Graham: Are you saying they’re not trying to hit people’s stop losses!?

Paul: I didn’t ask that question - I think I’d have been shown the door if I had! I don’t think market makers are actually playing the games that people think they are. But I suspect there are people behind them that are playing games.

Graham: I asked that entirely in jest because there are a lot of conspiracy theories about this. They’re always blamed for playing games.

Paul: Yes, a tree-shake! But in all seriousness, Ian Cassel, whose a really smart guy and a very good commentator on Twitter, says you should always buy the stock that the institutions are going to want to buy. That is why I backed up the truck and bought as many Gear4Music shares as I could. They put out a game-changing RNS saying revenues were up 70 percent, all organic and I thought “this thing’s going to fly once a few people notice it.” So I bought as much stock as I could, and it has gone through the roof. That is because the institutions are scrambling over themselves to buy the stock - it’s so illiquid, there is no stock in the market. So they have no choice but to keep hitting the offer and that pushed the price up and up and up and up. All I do is top-slice a few every now and again. Of course, if they put out a bad trading statement, that will go into reverse.

Ben: I think it’s fair to say that you’re both popular with your readers both for highlighting opportunities and raising red flags about companies. So when you’re analysing a company, what are the first things you’re looking for?

Graham: From a business owner perspective - which is the Buffett/Munger perspective - you care about competitive advantage. That is something that I care about very much and it determines for me my whole view on whether it deserves its valuation or not. I’m looking for something that has some kind of intellectual property, which can be a licence to print money.

As an example, I love retailers that have franchises. That is because they have this IP that they rent out to franchisees who pay them for advice and brand names and perhaps a central warehouse. There are a lot of consumer goods that have IP, and it’s the same with media companies.

To switch that around and ask what the red flag would be, it would be when the stock is undifferentiated and where, apart from the name, it’s pretty much the exact same as any other company. From a competitive positioning point of view, that’s the red flag. I could give you a long list of financial red flags in terms of bad ratios, bad balance sheets, bad income statements but there are other red flags too. There are corporate governance, shareholder structure and financial reporting red flags. For instance, does the company report on the 31 December, on the very last day before it would get suspended?

I think most companies work in good faith but there is a tendency to put a positive spin on things. So it’s important to take a sceptical approach. The phrase used by Ronald Reagan was ‘trust, but verify.’ Don’t assume that they’re out to take investors’ money and take them for a ride, but do take the time to verify it.

Ian Cassel talks about this idea of the ‘intelligent fanatic.' You find the person who is totally devoted to their product or their industry. They may not be the greatest salesman, but you find somebody that is obsessed with making a great company. That is an important risk factor in small-caps - management tends to be more important in terms of guiding success or failure compared to the big-caps.

Paul: On accounting red flags, the bodies are always buried on the balance sheet. We’re talking here about companies that are inflating their profits. So if a company is inflating its profits, it has put excessive credits through the profit & loss account. Therefore, the debit entries will be somewhere on the balance sheet - so that is where you look.

For me, excessive debtors is the big giveaway. You can just compare the debtors balance (that is receivables) to the annual turnover, and if it’s more than about 60 days, something might be wrong. Normally, if a company is inflating its profits then the debtors figure will be wildly bigger than it should be.

The other big one is intangible assets. So you look on the balance sheet to see what the intangibles are, and with a company that is fiddling its figures, they’ll normally be huge. Then you look on the cash flow statement to see what internal costs are being capitalised on to the balance sheet - and that is a big giveaway.

Also, I would flag up an unscheduled change of auditor as a massive red flag. Companies should change their auditors but often don’t. But the time to do it is normally just after the accounts have been published - in the middle of the year for a 31st December year-end company. So if they suddenly announce an unscheduled change of auditor in the autumn, or even after the year-end date, that is a massive red flag. That is because it wasn’t planned and it will nearly always be because the auditors have found something and the company want to get rid of them and get some new people in. That was the case with Globo, for example, which changed auditors twice in relatively quick succession. That is telling you everything you need to know about that company.

Ben: Psychology is such an important element of investing, and there are so many ways we all get things wrong. Are you conscious of making daft mistakes?

Paul: Yes, you’ve got to avoid forming an emotional attachment with shares. It’s when you become emotionally attached and you refuse to sell, even though you’re given a tidal wave of reasons to sell.

Graham: I’ve had my fair share of unsuccessful investments, although I think I’ve only had one go to zero. I don’t want to admit…

Paul: Go on!

Graham: This, again, was my naive deep value stuff - it was Albemarle & Bond. That had a huge NAV but I now understand that a huge NAV is not such an attractive thing. When you take a ‘quality’ approach, you want return on invested capital, and that means you actually want the balance sheet to be small. If the balance sheet is small relative to profitability that is the sign of a good business.

Going back to what Paul said about the bodies being hidden on the balance sheet, if a company has huge inventories, huge receivables, huge PPE [property, plant & equipment] and huge intangibles - these are all ways in which capital has been tied up. If profitability is low relative to the size of those things, it’s the sign of a bad business. It can also be a red flag in the sense that past profits may be artificially high because things have been put there instead of going through the income statement. So it’s really a change of perspective, where before I thought a big balance sheet was a good thing, I now actually prefer a small balance sheet.

Paul: I agree with everything Graham said, with one caveat which is that I personally love companies that have freehold property. The reason is that whilst it might be inefficient, it’s the asset class that banks give the most credit for. The banks are not just going to pull the plug on something that is trading badly if they’ve got rock solid security over freehold property.

Ben: Okay, we’ve talked about red flags. What are the things that you really look for in an investment. What features really drive shareholder value?

Paul: I’ve got my own qualitative list of eleven points, which I cribbed mainly from Mark Minervini and then added some of my own. I’m looking for things like organic growth and pricing power. It should be a business that can really charge a decent whack on top of its costs and its products are in strong demand.

I look for a solid balance sheet, so they’re not going to dilute me - it may not go bust, but an emergency placing is no good to me. I like businesses that generate cash and can pay dividends, even if it’s a small amount. Who would want more than a growth company that is chucking out cash as it grows?

I also like entrepreneurial management, so it’s great if the founder is still running the business and has a decent slug of equity. I think owner-managed businesses are great.

Those are the sorts of things on my list - but the interesting thing for me is that P/E isn’t on the list. I like a business to score at least ten out of eleven on the qualitative list. Only really then do I look at the numbers in more detail. That process really screens out the rubbish.

Graham: The other thing is - and there is evidence to back this up - if you take stock market gains overall (say the S&P or the FTSE) and if you attribute them to particular stocks, you’ll find that it’s a fairly small number of stocks which are responsible for an oversize proportion of those gains. In other words, most stocks don’t actually move that much, but there is a small number that do really well. That has been exaggerated over the past few years with the FAANGS, but it is something that holds in general. So there is a small number of stocks that grow a lot and produce most of the gains in the stock market, and my goal is to try and be exposed to them.

Paul: I think with small-caps there will always be pricing anomalies, and a lot more of them than there are with mid- and large-caps. The current market is hugely receptive to massively repricing small-caps. People can look at an RNS, see that the company is trading its socks off and it will double in price. That can happen in a few days, which for me makes these perfect market conditions.

Having said that, I’ve noticed that over the past weeks and months there are areas where it has tailed off a lot. A lot of the favourite stocks, like Boohoo.Com, Fever Tree and Treatt - a lot of the growth stocks that are popular with private investors - have dropped a lot. I tend to look at those sorts of trends more than the indices. I don’t care what the FTSE All Share is doing because it doesn’t matter to me in my world.

Ben: It does seem that there is a lot of excitement and expectation in some of those prices, but that can deflate very quickly can’t it?

Paul: Prices move fast because the market makers don’t want to be caught either way, long or short. Neutral-book market makers is a recipe for huge volatility, even on some quite big stocks. Then you’ve got some people who are just banking their profits because they don’t want to see them melt away. That selling feeds on itself and you end up with a spike down and then a load of people buying the dip. It’s just a dynamic between those two. I would say though that I don’t trade those sorts of movements because I can’t get the liquidity. I’ll top-slice when they are high but I don’t want to be selling when something is falling.

Graham: I don’t trade very often; I can go months without making a trade, but I don’t consider that to be being asleep. Over the past few years I’ve been fully invested in maybe six positions, but I’ve not being doing anything, I’ve not been buying or selling, I’m just watching it.

Paul: But that is the right thing to do. If your analysis is correct on a stock then doing nothing is absolutely the right thing to do.

Graham: I have made mistakes and I have learned from them. But I don’t want to change that approach of not really tinkering with my portfolio. You have to be in a stock for a decent period of time to get the multi-bag and in order to let the company perform.

This is something that bothers me a little bit about the sell-side in particular. There is a sense that we, the investors, are doing all the work with our trading, but it’s actually the companies that are doing the work. We buy them, they do the work and the share price goes up or they pay us dividends. So there should be more emphasis on what the company is doing rather than the things that we’re doing.

Ben: There are some strong arguments in favour of both of your approaches, but I suspect that very strong concentration would leave many investors struggling to sleep at night.

Paul: I agree. I think concentration for most people is the wrong thing to do, particularly if you can’t watch the screen all day or give your full attention to it. I think it depends on how old you are, how big your portfolio is, your appetite for risk, what you can afford to lose. It’s different for everyone. A concentrated portfolio is high risk, there is no getting away from it. It’s something I only did when I was sufficiently confident in my stock-picking ability.

Graham: Yeah, I certainly don’t recommend anyone do what I do…

Paul: Me neither!

Graham: For example, if you buy Northamber at 24p and it has got a net asset value of 76p, you could put a quarter of your portfolio in that and while there is risk attached, arguably the share price can’t really go that much lower.

Paul: Famous last words!

Graham: I’ve literally invested in companies like that. The point about my deep value stuff is that while it didn’t work in the sense that they didn’t go up much, they didn’t go down much either.

Paul: That is a very good point. Going back to trading and selling, I don’t really do short term trading apart from my hedging stuff, which nearly always goes wrong. But one of the main reasons why I sell things is that I’ve simply found a new idea. One of the things about the Small Cap Value Report is that I just keep finding interesting stocks. I’d say there are probably two or three stocks a week where I think to myself that I can see good upside on them, and I buy some. But sooner or later you run out of cash, so that is one of my key reasons for selling.

There is also a risk of becoming over-geared when you keep buying stuff, so you need to have discipline every now and again. But it is no bad thing, every so often, to look at your portfolio and find that you need to sell something. It forces you to look at the weaker things.

Ben: You mentioned Mark Minervini earlier, and he’s interesting because he looks for a very specific set up before buying a stock, and he sells it quickly if it doesn’t do what he expects. Do you have moments when a share you’ve bought almost instantly disappoints you and it’s clear you’ve made the wrong call?

Paul: Yes, being too impulsive is one of the big dangers. You get the butterflies and the excitement because you think you’ve found something amazing. But you skip big parts of your research process - and I think we all do it. You hit the button and start buying stock and then you realise a few days later that you’ve made an awful mistake. There is some massive problem that you weren’t aware of. In that situation I’ll cut it without a second thought - usually!!

The worst thing you can do is go on to a bulletin board and engage with everyone and soak up the positive energy and end up part of the gang. Worse still you become the cheerleader who tells everyone what a great stock it is! Before you know it you’re emotionally attached to that share.

Graham: Selling when you’ve made a mistake is absolutely crucial. When you realise you’re wrong you need to get rid of it because there is literally no point in holding it.

Paul: Sometimes you don’t even need to be wrong. It may be that the risk/reward isn’t what you thought. For me to buy something I like to see relatively limited risk - although there is always a 30 percent risk of a profit warning no matter how good the balance sheet is. So you price in that 30 percent downside and ask, how much money is that and how would I feel about losing that much money? So I position-size accordingly. If that figure is huge and would really hurt me, then I’ll back away and make it smaller. Then I like to see 50 percent upside minimum.

A lot of traders doing things a lot more short term than Graham and I will look for maybe 10 or 20 percent upside. That doesn’t interest me because if I’m taking the downside risk of a profit warning then I want more than 10 or 20 percent upside.

I buy after a current trading update with bang up to date information, which has got to be at least ‘in line.’

Graham: The other thing is that you’re often dealing with some kind of spread. So trying to just make five or 10 percent when you’ve already paid one or two percent or more, to me that is like going to the casino where the odds are stacked in the house’s favour.

Paul: I agree with the point conceptually but the interesting thing is that the real market spread is often not the same as the quoted market spread. Even the Level 2 on small-caps won’t include the RSP prices. The best way around that is to either have a telephone broker, where you can ask the real price. Or you can set up an online trading account and enter a dummy trade. Buy and sell on the same stock and press cancel before the 15 seconds elapse. That will tell you what the real price is, and in what size.

Ben: On the subject of Level 2, do you have a view on the best place to get that data from?

Paul: I use MoneyAM, but I find it’s more useful for SETS stocks, because with those you can see the full order book and you can see patterns emerging. Generally, I think it has limited value with small-caps.

Ben: There has been a lot of talk about a possible correction in the market. Can you ever predict and prepare for those events?

Graham: Well, for personal reasons [Graham is buying a house] I’m 40 percent cash at the moment. But I feel like it is probably a decent time to switch from the stock market anyway. Many people agree we’re overvalued, so if there is a huge bear market I don’t mind. But if that did happen and I thought the indices were undervalued, I’d have no problem in principle with buying call options on the market or on leveraging up in a responsible way.

Paul: I agree with Graham that the market is clearly priced nearly to perfection now. There are very obvious pockets of euphoria and the market is giving every indication to me that it’s very close to the top, at least in the short term. But like we’ve seen in US markets, which very much set the tone, they are just grinding up. Every time there is a small correction, they bounce back within days.

Ben: Wrapping up then, are you feeling confident and optimistic or slightly concerned about the future?

Graham: Well, I’m 60 percent invested and I like the stocks I own. I may buy a few small positions if I see things I like, but I’m not trying to time a boom or a crash.

Paul: I look mainly at the US indices for direction, and there is some force pulling that market up every time it tries to correct. It’s only correcting two or three percent and going straight back up again. That screams to me that the market wants to go up more. My only fear is when that ‘buy the dip’ mentality stops working the market could dive. But whether you think it’s mad or not, the primary trend is still upwards.

I keep my eye on the exit and don’t oversize illiquid positions. I’ve always got at the back of my mind, ‘how quickly could I sell? and ‘what would make me sell?’ But like Graham, I’m driven very much by the fundamentals of each individual company. I’m buying companies on good news flow, that are beating expectations and are reasonably priced.

Ben: Paul and Graham, we covered a lot of ground - thanks very much.