Portfolio Update - Q2 2023
Portfolio returns (in €)
2019: +30.2%
2020: +41.8%
2021: +47.4%
2022: -29.9%
2023 YTD - Q2: +29.4%
"It is because we know how to combine patience and action, that time is not only our ally – time is on our side”
Jerôme François, CEO of TFF Group
Time is a unique, irreplicable and uncontrollable asset. You can't stop it. You can't handle it to your liking. The passage of time can benefit or hurt a business, but it’s never indifferent. When trying to choose between one business or another, investing in the one that has time in its favor seems the most sensible decision.
While some business models are racing against the clock, others have time on their side. Some businesses get weaker over time, but others adapt, improve and thrive. Time is a friend for resilient businesses with management teams that think and work, not in order to meet goals for the next few quarters, but for years or decades to come.
Time is a friend for businesses with competitive advantages and for upright, honest and capable management teams who think like owners and for the long term.
Time – like competitive advantages – is dynamic. Nothing is permanent. Nothing is static. Selecting those companies that constantly challenge mean reversion is key. It is a complex job, and sometimes it is more of an art than a science. That's why I love this job.
The current macroeconomic environment is more uncertain than ever. The market has many concerns and no one seems to have clear answers. I stick with my investment philosophy – as boring and simple as usual – in order to navigate volatility. Being patient, being inactive when there is nothing to do and acting only when required has never been so difficult, but so well rewarded at the same time. Whoever keeps a cool head and doesn’t get seduced by trends or influenced by market fears wins this infinite game. From the trade war with China in 2018 to the pandemic, the war in Ukraine, hyperinflation, the banking crisis of 2023… there’s been plenty of reasons to remain pessimistic as investors. What we often forget is that over the long term, stocks will track corporate earnings no matter how dire the world looks today. If I had spent 90% of my time predicting how the economy would develop since the trade war in 2018, I would have wasted 90% of my time.
Time plays in favor of resilient businesses. You don't have to worry about macroeconomic events when you select companies that will keep doing what they do best for another decade (or two, or three).
Some investors rack their brains trying to predict how much corporate profits might temporarily shrink in 2023 and 2024 if a recession hits, and forget that in order to generate good long-term returns, the first thing you have to do is think long term. Financial markets will always fear and worry. I think the best way to protect yourself is to own good businesses and tolerate volatility.
During the second quarter of 2023 I made only two trades (1 sell, 1 buy). I explain both in more detail below, along with some comments about the portfolio and some things I've been reading that seemed interesting enough to share.
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