“There are undoubtedly more mercurially-tempered people in the stock market now than for a many good years and the duration of their stay will be limited to how long they think profits can be made quickly and effortlessly(…)
I make no attempt to forecast the general market – my efforts are devoted to finding undervalued securities. However, I do believe that widespread public belief in the inevitability of profits from investment in stocks will lead to eventual trouble. Should this occur, prices, but not intrinsic values in my opinion, of even undervalued securities can be expected to be substantially affected.”
(Warren Buffett, Letter to his partners 1958 “The general Stock Market”)
albeit it’s useless to time the market, I feel the urge to update you very briefly about the most important thing for all of us: our future. Some of you, especially in European countries that face a slow and weak recovery from Covid, (and maybe debatable political choices of their governments), may need to put on notice again my essential recommendation: we are here all together for outstanding, not mediocre results, that are achievable only over the long term.
Even if possible I don’t expect anyone of you to withdraw money from MT Capital after just 5 years. The magic of compounding will be totally missed for those who will do that. At risk of being redundant I will outline again why, very briefly.
- The gains you are obtaining so far are just the inception for our standards. They have importance to me in relation to the fact that they are obtained with virtually no investments made in the “fashionable” area of tech, crypto or something we are not competent about. I expect, just like Buffett in 1958, that history will “rhyme” again. Even if I don’t know when and in which proportion. It means that the price of our securities can go down but the values of the businesses I have been choosing over time will remain intact. And with them their capabilities of earning money and positive operating cash flows and profits in the future. In fact I hope that Mr. Market will be giving me the opportunity to buy more of what we already have and apply my full strategy of gaining for you much more over a longer time span.
- The real important signals of our future growth are contained in what is happening now and in the next few years, that is: A) we avoided many losses, NOT investing in many businesses. B) I’ve been respecting my established rules and so we have 11 stocks as of November 2021 with only one losing a bit of money (the smaller position) and the one with the major gain being the bigger one (38%of the entire portfolio). It means a key thing: we are on the right path and we are owners of businesses that are wonderful and we don’t want to sell just because the stock market will go down. C) They are and will be part of the American Tailwind. Dancing in and out of the market is not our game and will do no good to our basket of good businesses.
- We want to have , and now we have, other 4 stocks (totaling 15 positions) as of January 2022 that we want to be down and in red for the time being. Because we want to buy them at low prices maybe for a long time. That would take our overall temporary result to get down, hopefully like in march 2020, but then up substantially in the future.
- In order to pursue this “Buffett/Value” proposition we are also looking closely to some controlled businesses that we want to acquire as direct owners. We don’t even consider to invest in start-ups until they don’t show at least a good initial record and the capability of not losing money. But in the States the system is not like in Italy or Europe in general. A new business can die easily in its infancy, but if it doesn’t, the growth can be based on an economic structure that works efficiently.
This was a simple remainder of our “Ground Rules”. We are newborns awakening. If someone thinks that the profit made so far are what we are looking for, that someone is not on our same page. Read again our IPS (Investment Plan Statement). I work everyday including Saturdays and Sundays for partners that want to stay (and add more) and do more than ok over the long term. I don’t work and plan results for those who plan to leave in the short term, collecting from our table the mediocre results they should deserve. Partners don’t pay a management fee for a reason. I’m all invested, me and my family, with you, and I’m cooking the same food we will be sharing, so to speak.
If you are there it’s because we also share the same principles and values in Life. So this brief letter was just a remainder of the “second rules” that are “don’t forget the first rules” that mean “don’t forget what you already know” before venturing out in uncharted territories. Don’t. We won’t, so stick with me.
I wish you all you desire and hold in your hearts for you and your loved ones. We are still not too many so that I happen to know everyone of you personally and I know you deserve as human beings to live all the ambitions you have for your lives. That’s why I’m here on this beautiful sunny Sunday working for you. Good people of America around me are doing the same (some in the snow today though). You put the money in the right land.