Paul Hill is more than just a smart investor as he is a fine equity analyst, too, at equity research firm Equity Development, a company that specialises in small-cap equity research, my own hunting ground. In fact, it was after reading his equity research note on hospital super bug buster Tristel (TSTL) a couple of years ago that I recommended buying into this special situation. By the time I advised exiting the holding earlier this year, the shares had more than doubled in value. It wasn't an isolated example of successful stock-picking either, as between March 2000 and April 2016 Mr Hill has purchased no fewer than 200 stocks, held them for approximately two years on average, and has achieved a hit rate of winners to losers of 1.6 times.
Importantly, the average gain on those winners is double the financial hit on the losers, hence the thumping 15 per cent average annual gain on his portfolio. To achieve this return, Mr Hill typically buys what he describes as "under-researched" and "out-of-favour" small- and micro-caps (market value less than £100m) where pricing anomalies tend to be greatest. He also follows some hard and fast rules which he has outlined in an in depth 73-page research note that can be viewed for free at www.equitydevelopment.co.uk/doc/1490.pdf . I would advise doing just that because it's full of some of the most sensible observations I have come across in the 25 years I have followed equity markets, and ones that I also follow in my own stock-picking.