The idea behind bargain shares is very simple. It's to invest in companies where the true worth of the assets is not reflected in the share price, usually for some temporary reason, but where we can reasonably expect that it will be in due course.
It is the very essence of stock-picking, and whatever fans of passive investment might say, it works: our portfolios have beaten the FTSE All-Share index in 12 out of the 14 years in which we have run them. During that time, they've generated a compound annual return of 15 per cent, which means that £10,000 invested in our first bargain portfolio, and reinvested every subsequent year in the following portfolio, would now be worth an impressive £70,000. To put this smart performance into perspective, the same investment in a FTSE All-Share tracker would only be worth £17,300 including the reinvestment of dividends.