John Maynard Keynes was a famous economist and a successful investor, who managed his own portfolio as well as the endowment fund of King’s College, Cambridge. He also advised several governments and institutions on financial matters12.
Keynes’s stock selection process was based on his theory of economics, which emphasized the importance of aggregate demand, expectations, and uncertainty in influencing economic activity and investment decisions. He also applied his insights from psychology, history, and philosophy to his investment practice12.
According to Keynes, investors should look for companies that have strong earnings potential, high dividend yields, and low debt levels. He also preferred companies that had a competitive edge in their industries, a stable market position, and a loyal customer base. He avoided speculative stocks that were driven by market sentiment or fads12.
Keynes also used several methods to evaluate and select stocks, such as:
- Fundamental analysis, which involved studying the financial statements, business models, and growth prospects of companies.
- Value investing, which involved buying stocks that were trading below their intrinsic value or fair value, based on their earnings power or asset value.
- Contrarian investing, which involved going against the prevailing market trends or opinions, and buying stocks that were unpopular or undervalued by the majority of investors123.
Keynes also adopted a long-term and flexible approach to investing. He held his stocks for several years, unless there was a significant change in their fundamentals or valuation. He also adjusted his portfolio according to the changing economic and market conditions. He was not afraid to admit his mistakes and change his mind when new information or evidence emerged123.