Which way? Investing.

Discussion in 'Journals' started by themickey, Sep 12, 2021.

  1. themickey

    themickey

    I'm placing this theme in Journals, it's really about investing ideas, long term wealth creation, these just musings which I will add to from time to time.
    Mods may wish to move if they do not approve.
     
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  2. themickey

    themickey

    https://www.afr.com/markets/equity-...built-on-earnings-that-endure-20210908-p58pur

    A bear-proof fence built on earnings that endure
    William McInnes Reporter Sep 13, 2021

    If most investors were only allowed to select 15 companies for a global portfolio, few would choose to buy a 155-year-old paint manufacturer based in Cleveland, Ohio.

    But Sherwin-Williams is one of the quiet achievers for Claremont Global, a quality, high-conviction global fund spun out of Evans&Partners. Claremont portfolio manager Bob Desmond describes it as “a boring company that just sells paint”, but his admiration goes beyond its palette of bestselling colours, from Origami White to Iron Ore.

    “The thing in this company that’s quite amazing is the culture,” he says.

    “It comes from Cleveland in the Midwest and these companies are down to earth, they serve their customers, their employees, their shareholders, they’re not arrogant, and they stick to what they’re good at.”

    In the last five years, Sherwin-Williams has tripled investors' capital and risen more than 50 per cent since its pre-COVID-19 levels.

    “The continent was opening up but while the continent was getting better, Zimbabwe was getting worse,” he says. “So I decided to leave Zimbabwe in 2001, sadly.”

    After working for Seilern Investment Management in the UK for eight years he came to Australia and joined Evans&Partners as a senior equity analyst. In 2017, he became head of international equities for the firm and was put in charge of what is now Claremont Global.

    Along the way he has witnessed some of the biggest economic crises of the last three centuries.

    “I literally landed in London on the day of 9/11,” he says. “Since then we’ve had the GFC, the euro sovereign crisis, we’ve had Brexit, we’ve had Trump and we’ve had COVID.

    “So instead of trying to predict everything, I just think it’s easier to own the best so that when the worst happens, I can still sleep well at night.”

    One of Desmond’s key filters for a quality company is being able to stand the test of time and outgrow a downturn.

    “When we look at a new business, we always look at how that business performs in a recession,” he says. “If it’s resilient in a recession, that’s a really good place to start. If I look at the portfolio, the average age of the company is over 80 years old. They’ve seen a few cycles, have been around a while, and they’re pretty durable.

    "The newest company in our portfolio is Alphabet.”

    Strong growth prospects are also important, as well as a good balance sheet.

    “We’re trying to get a return of 8 to 12 per cent per annum, and we want most of that to come from earnings growth,” says Desmond. “So we want businesses that have higher returns on capital, lots of opportunities to deploy that capital, incremental capital and higher rates of return, because of future growth opportunities.”

    The portfolio aims to avoid cyclical companies and doesn’t invest in banks, insurance or resource companies.

    Desmond says value and timing count: “It doesn’t matter if it’s the best business in the world, if you pay the wrong price, it’s not gonna work out for you,” he says.

    Claremont has purchased a stake in Nike after monitoring the stock for more than a decade. “A few years back we owned Adidas for a while and we were looking at Nike as a competitor,” he says.

    “But we realised Nike was the better business in our opinion. They were taking share in Adidas’ home market and we felt Nike was beating them on the innovation.

    “The real crux of Nike is they have scale. They’re 70 per cent bigger than Adidas, their biggest competitor, and it’s almost a two-horse race.

    “We also love businesses that control their distribution. About 15 per cent of sales come from Nike.com and management have said they’d like to get that closer to 30 per cent in the next few years.”

    In late March, Nike said it would not use materials from the of Xinjiang region, citing the reports of forced labor of Uyghurs,sparking backlash from China.

    The outrage triggered a heavy fall in Nike’s share price, providing the perfect entry point for Claremont.

    “That’s kind of how we roll. We tend to follow things for a few years and then there will be a little bump, and that gives us the entry opportunity."

    Despite having the opportunity to invest across the globe, most of Claremont’s portfolio is made up of US companies. “It’s not for any particular reason, it’s just that the businesses we want to own are in the US,” the fund manager says.

    “They have enormous advantages in terms of a huge domestic market to start with and they have a lot of businesses in the industries we want to own."

    Holding a best-in-class portfolio means that in the event of a downturn, he doesn't have to be a seller when market panic sets in, because the earnings will be durable.

    “When the market’s in trouble, if you own quality, you stick with your investment and you sleep well at night,” says Desmond. “That means clients then stick with the strategy and get the returns they deserve.”
     
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  3. Investing, long term wealth creation....that basically consists of buying and holding/investing the top five tech companies, or the S&P.
    Absorbing the ups, downs, and gaps...averaging out, but finishing decently ahead, overall.

    This is ET. There's nothing ...elite...about doing, trading/investing, deploying, that strategy.
    Ideally, a trader should have close to precise timing on the buy points, sell points, and conviction and backbone, and intelligence and foresight, wisdom and philosophy.
     
    Last edited: Sep 12, 2021
  4. themickey

    themickey

    That's a little like how I operate, I strive to buy small positions in a number of quality stocks and just attempt to hold rather than continual knee jerk/silly stop loss type trading.
    If a particular holding has really bad news, eg corrupt directors or loss of a major customer, then I may sell.
    As well, rather than as above post small number of holdings, I prefer a large number, its easier I find.
     
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  5. themickey

    themickey

    Try it, more difficult than you think. :)
    For starters, requires nerves to sit through drawdowns. :)
     
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  6. iprph90

    iprph90

  7. BKR88

    BKR88

    I've been adding to my farmland investments recently.
    ***Graph below isn't completely accurate though IMHO.

    farmland.2.png
     
    Last edited: Sep 12, 2021
    Darc likes this.
  8. deaddog

    deaddog

    Are your returns anywhere close to holding SPY?
     
  9. deaddog

    deaddog

    You might be interested in a couple book by David Allen Carter
    The 12% solution and The stock market cash trigger.
    All about long term wealth creation with a twist.
     
  10. themickey

    themickey

    My 2c theory.
    If 90% of stock market players lose, never mind whom, traders or investors, what does that say.
    To me it says the markets as observed by the crowd of uninformed players, is counter intuitive.
    My experience, and I've been in this game decades, is the more I believe a 'trade' will be a sure bet, the more often it disappoints.
    The crowd is more often wrong. This can be further extrapolated, when the crowd is bearish, more often the mkt will rise.

    Going on, I like to think this way, a sure bet will perhaps fail, a doubtful bet can fly.
    So if I think in terms of multiple ratchets, the upthrust is pushing the load (making profit) and the reverse thrust is losing money, wasting time.
    Multiple ratchets clicking both ways, some winners, some losers.
    Winners can go to infinity, losers can only at max lose the capital invested.
    Trade/invest small, trade all the best opportunities, hold on for the ride upward.
     
    #10     Sep 12, 2021
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