Monthly Commentary

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The Return of Classic Coke: Are Big Brands A Decade Late to the Party

A trip to the local Waitrose supermarket last week revealed something many of you will have noticed as well. Classic Coke is back for the first time since the ill-fated and short-lived rebrand to New Coke in the early 1980s. This time around, in the new age of health conscious consumers and with pressure growing to address obesity - one of the major public health issues of our time - Coca-Cola has decided to change its Coke Zero brand to look and feel like the full fat version, with Classic Coke the option for those with (very) sweet tooths. Make no mistake, this is a pivotal moment for the business. Coming as it does 36 years after the introduction of Diet Coke, this rebrand is an acknowledgment that the business has reached a tipping point. But is it far too late? Read more »

Berkshire Hathaway's $100 Billion Question

We recently returned from our annual trip to the Berkshire Hathaway annual meeting in Omaha, Nebraska, with the same renewed enthusiasm and conviction in investing in quality and value for the long-term that we always have after the event. Berkshire is currently trading at all-time highs and generates more cash to reinvest than ever before (over $100 billion at last count). Warren Buffett and Charlie Munger were in great form as they withstood six hours of questioning by investors, analysts and financial journalists. While there, we also had the opportunity to present the investment case for one of our own holdings, Essilor, at a value investment conference, reminding everyone of the need to protect their eyes from UV radiation and blue light. Read more »

It's Still the Fundamentals, Stupid!

One of our core convictions is that ‘it’s the fundamentals, stupid!’ We have written to you about this a number of times in the past five years when news has been uncertain and markets have been volatile. We see little point in following news flows and reacting to short-term opinion, after all we invest in quality over the long-term. One of the biggest issues, however, is the incessant news flow that seems to require shorter and shorter news cycles. This creates uncertainty and, together with the dominance of technical trading, means investors can be affected as volatility increases across the board. Along with others, we have been surprised by how low volatility has been over the past several years, and we have been expecting it to increase as it has done recently. Volatility itself is not risk and does not create losses, making wrong decisions does. Read more »

As Much Digital Freedom as Possible, as Much Regulation as Necessary

Last month we said it was ‘welcome back to the good old days.’ The global economy and financial markets are entering a more typical phase: Persistent growth, sustained inflation and rising rates, all moderate, should provide an environment in which our investments in assets that have quality and value can generate good returns. We are optimistic (not just because we see little sense in being anything else), but we have not forgotten that those good old days were far from dull or uneventful, that they were full of risks or uncertainties, and that markets were subject to occasional bouts of volatility and re-versals as is their nature. On the contrary, we expect our normalizing environment to provide plenty more events, risks and volatility to come. Read more »

2018: It's All About The Fundamentals

It is easier to be a critic than a creator, a consultant than an entrepreneur, or a commentator than an investor. The two headlines are from the Financial Times, the hometown newspaper for people like us. One is from December 2016, the other from December last year. In our comment last month we wrote about “Same procedure as last year? Same procedure as every year!”. It always appears smarter to be worried about a myriad of problems than to be optimistic and chart a course to reach a goal. One of our core beliefs is that in preserving and growing long-term wealth, the biggest risk comes from taking no risks. That is why we do a lot of work to make they are the right ones. Read more »

Time in the Market is more Important than Market Timing

The Dow Jones Industrial index goes back to 1885 but is not the most fashionable these days. Its oldest constituents are GE (added in 1907), Exxon (1928) and Procter & Gamble (1932). Its most recent are Goldman Sachs, Nike and Visa (all 2013), Apple (2015) and DowDuPont (2017). Yet, it does not include any of the leading internet companies driving today’s digital transformation, like Alphabet or Amazon, for the simple reason that their share prices are too high and their addition would distort this rather old school priceweighted index. Nonetheless, this exclusive historic club, where inclusion is at the discretion of the editors of The Wall Street Journal does still offer an important lesson in market timing. Read more »

Getting Back to Business

Whatever happened to September being the month we all come back to from our various summer exploits to get back to business? The news flow about geopolitical issues has been unrelenting, especially the escalating rhetoric around the Korean peninsula. There have been devastating natural disasters that have affected the Caribbean, the US and Mexico that have dominated the headlines for days but have repercussions that will be felt for years if not for decades. By contrast, after the French elections in May, the Germany elections provided a vote for Angela Merkel and the strong and stable leadership she has provided (albeit with a more complicated political set up). Read more »

Summer Reading: Alexander Hamilton by Ron Chernow

August is a time to catch up on summer reading. This year one of the books we are reading is Ron Chernow’s authoritative biography of Alexander Hamilton, one of the founding fathers of the United States. Like with the investment greats, Benjamin Graham, Philip Fisher, Warren Buffett or Charlie Munger, reading the writings of the founding fathers or histories about how they devised a system of government that has led to unprecedented stability and prosperity for the United States and for much of the world, is always interesting and educational, and one can always find new insights and an astonishing relevance to issues facing us today. Read more »