Anthony Bolton | Podcast | In Good Company | Norges Bank Investment Management

Episode Overview

• Legendary investor Anthony Bolton explains the core philosophy of his contrarian investment strategy, where market popularity is viewed as risk and unpopularity signals opportunity.
• The discussion covers the essential psychological traits for a contrarian investor, including patience, emotional discipline, and a genuine comfort with being different from the crowd.
• Bolton shares his practical methods for identifying opportunities, the importance of challenging one's own thesis by seeking opposing views, and the career risks involved.
• He provides his current market outlook, identifying China as an early-stage bull market, viewing the US market as having unfavorable odds, and seeing cryptocurrency as a sign of excess.

Key Concepts

• Contrarian Philosophy: The central thesis is that popularity equals risk, while unpopularity presents opportunity. The most profitable investments are often the most uncomfortable to make.
• Psychology of a Contrarian: Successful contrarian investors must be comfortable being different, unemotional, patient, and humble. They need strong conviction to withstand periods of underperformance.
• Investment Process: Involves identifying asymmetric returns (high upside, low downside), analyzing charts for timing, and actively seeking out bearish arguments to challenge one's own investment case and avoid confirmation bias.
• Market Dynamics: Markets often move during the "journey" toward an anticipated event and peak upon its "arrival." Modern bear markets have become sharper and shorter in duration.
• Current Market Views: Bolton is bullish on China, believing it is in the early stages of a new bull market. Conversely, he is cautious on the US market due to high valuations and sees the rise of cryptocurrency as a sign of speculative excess.
• Groupthink and Career Risk: The pressure for short-term results and the tendency for investment committees to seek consensus makes true contrarianism rare and career-threatening, as decisions are often made at the tail end of a trend.

Quotes

• At 0:48 - "My view of investing, the popularity is risk. And conversely, unpopularity is opportunity." - Anthony Bolton summarizing his core investment philosophy.
• At 3:04 - "I often found the best opportunities were the uncomfortable ones. By the time it was comfortable, it was late." - Anthony Bolton on the inverse relationship between comfort and good investment timing.
• At 14:42 - "My view today is that we're in the early stage of a new bull market in China." - Bolton sharing his significant contrarian call and bullish outlook on Chinese equities.
• At 17:39 - "The other thing I think is really important in investment is listen to the other view... I'd be spending most of my time listening to the bears of Google to see what's changing." - Bolton describing his process for avoiding confirmation bias by actively seeking out dissenting opinions.
• At 27:00 - "Decision-making by committee in investment... normally doesn't work, because by the time everyone agrees, you probably catch the tail end of something." - Bolton critiquing the danger of groupthink, which runs counter to a successful contrarian approach.

Takeaways

• Actively seek out and analyze unpopular investments and the arguments against your own thesis to avoid confirmation bias and identify opportunities the market is overlooking.
• Develop the emotional discipline to hold your convictions through periods of underperformance and to sell when an investment becomes comfortable and widely accepted.
• Use widespread market sentiment and high valuations as key risk indicators; treat crowd enthusiasm as a warning sign rather than a confirmation to invest.