An essential skill for investors

Book review: The Signs Were There Tim Steer looks at the red flags that suggest not only that a firm is in trouble, but also that the management is trying to hide the fact with some creative accounting.

Dr Matthew Partridge
By
published
in Features

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The Clues for Investors that a Company is Heading For a FallBy Tim SteerProfile Books (£14.99) Buy on Amazon

Investors generally spend most of their time looking for companies that are doing well or at least better than expected.But spotting signs that a firm is in trouble is also a useful skill, especially if you own its shares. This book by former Artemis fund manager Tim Steer looksat the red flags that suggest not only that a firm is in trouble, but also that the management is trying to hide the fact with some creative accounting.

The book is divided into ten chapters, each of which is focused on a particular theme. Each theme is then illustrated with two or three case studies. For example, chapter seven uses the examples of Northern Rock and Cattles as two companies that were destroyed by a combination of bad debts and too much leverage. Similarly, the experiences of Guardian IT, Tribal Group and Conviviality illustrate the downsides to acquisitions. The book then concludes with a 20-page look at what can be done to ensure similar scandals are caught earlier or prevented altogether.

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Much of that involves dipping into the balance sheets of companies, so if you don't like the idea of engaging in detailed accounting you might be tempted to decide this isn't the book for you. That would be a mistake, as there are a lot of useful hints and tips such as the reminder that auditors are designed to be watchdogs, not bloodhounds that could end up saving you a lot of money. Highly recommended.

Dr Matthew Partridge
Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri

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