Q1 2023 Portfolio Update
Noteworthy posts, Q1 2023:
Portfolio changes, Q1 2023:
During the 1995 Berkshire Hathaway shareholder meeting (link to question), Warren Buffett and Charlie Munger were asked how their own investment styles compared to well-known investors like Ben Graham and Phil Fisher.
In response, Munger said something that I found interesting: “What was interesting to me about the Phil Fisher businesses is that a very great many of them didn’t last as wonderful businesses. One of his businesses was Title Insurance and Trust Company, which dominated the state of California. It had the biggest title plant, which was maintained by hand, and it had great fiscal solvency, integrity, and so forth. It just dominated a lucrative field. And along came the computer - and now you could create for a few million dollars a title plant and keep it up without an army of clerks… In due course, in the state of California, the aggregate earnings of all the title insurance companies combined went below zero - starting with a virtual monopoly for Title Insurance and Trust Company. So, very few companies are so safe that you can just look ahead 20 years. Technology is sometimes your friend, and sometimes it’s your bitter enemy. If Title Insurance and Trust Company had been smart, they would’ve looked on that computer, which they saw as a cost reducer, as one of the worst curses that ever came to man.”
It’s thought-provoking to consider that comment in light of how Buffett and Munger have played the game throughout their investment careers; even if you look back to the 1970’s and 1980’s, a period when Berkshire Hathaway was operating with much smaller amounts of capital than what they’re responsible for deploying currently, many of the most significant investment decisions were large allocations to positions that would be held for decades with little / no activity in the interim (two names that come to mind are GEICO and Coca-Cola – and that’s before considering wholly-owned businesses).
How can we bridge that divide? I think the most plausible explanation, which admittedly aligns with my own investment philosophy, is they didn’t view the impermanence that’s a reality of capitalism as a reason to alter their time horizon; instead, they dedicated a large percentage of their time and effort to the task of trying to identify those “very few companies”. Given that two of the greatest investors to ever play the game have faced their own share of blunders in pursuit of that goal, it’s safe to say that this approach isn’t easy or without risk; on the other hand, when executed effectively, they’ve clearly demonstrated that it can be a path to long-term investment success.
If nothing else, I can confidently say that I approach the game with a clear vision: the overwhelming majority of my time and effort is focused on trying to run a similar playbook to the one that Buffett and Munger have employed in recent decades. Naturally, I can offer no assurances to you about my ability to successfully do so over the long run; that said, I hope you’ve come to the conclusion during your time as a subscriber that I take this task seriously.
As it relates to that idea, an important question for investors to consider is where the short-term ends and the long-term begins. As I’ve discussed recently on companies like Home Depot and Floor & Decor, I think it would be foolish to disregard the question of the (likely) short-term headwinds in those businesses, particularly if you believe it’s a relevant consideration for ascertaining the true underlying earnings power of those companies. On the other hand, becoming overly concerned with short-term worries is a great way to miss out on the opportunity to partner with a management team that you trust and respect in a business that you would like to own over the long run. My answer is to try and appropriately consider the potential long-term impact of the various short-term developments, while remaining cognizant of the fact that too much emphasis on the short-term can pull you away from the primary objective. This has been, and will continue to be, a work in progress.
Q1 2023 Update
Here's a portfolio breakdown as of Friday’s close: