Fellow Partners,
We have been enduring a bevy of bad headlines about capital markets. CNBC has run their famous "Markets In Turmoil" special which, historically, has meant better times were ahead.
There is much to decry — war, inflation, and slowing growth among them — and these variables are impacting our investments. But relatively little of what we are witnessing today will matter to the businesses we own years from now.
Capital markets act as a pendulum that swings between maximum optimism and maximum pessimism. We are certainly closer to maximum pessimism today.
This 1981 New Yorker cartoon nails it:
At all times — and especially times of strong volatility — we should be focused on our businesses. You will be pleased to know that, on average, our businesses have grown 22% over the past year. That type of performance will matter for a long time. Today's market sentiment will not. The pendulum will eventually reverse its course.
As we have discussed we continue to zig while others zag. We are not selling in this market — we are buying — at prices we are likely to envy years from now. Buying when there's blood in the streets is easy to say in up markets; it is psychologically nearly impossible to do in strong down markets. But we're doing it. That is the power of what I have long said is our greatest competitive advantage: patience.
You will receive notes from me shortly that go into greater detail on today's market structure and the current seasons the market is enduring. This thought experiment is a good summary:
Imagine you were going to buy a business today that you were required to sell next month, next quarter, or next year. How much would you pay? Given the substantial uncertainty currently dominating capital markets, your answer would be much less than you thought the business was actually worth.
We can capitalize on times like these because we seek to have the longest view in the market and our partnership is structured to act on it. We do not have to sell our wonderful businesses next month, quarter, or year, and will continue as proud and supportive owners as long as they continue their business performance. Rest well in the confidence that we are likely to be rewarded for this behavior.
This is a trying period. I am available to speak with you any time, and always enjoy hearing from you. Please don’t hesitate to reach out.
All the best,
John
Founder and Managing Partner