söndag 20 september 2015

Vikten av att göra ingenting, Vito Maidas brev genom åren

(Det har väl gått snart 7-9 månader sedan jag gick igenom samtliga brev från Vito Maida och sammanställde lite utdrag. Kanske kan dessa utdrag vara av intresse. Inlägget skulle lagts upp för x antal månader sedan, men det blev ej så.)

Inkommande gigantiskt inlägg. 

Inför millennieskiftet jobbade Vito Maida på ett större förvaltningsbolag och han vägrade att spekulera i teknikaktier under IT-manin i Kanada. Istället för att spekulera i IT-manin köpte han kanadensiska råvarubolag och lite guld. Vito Maida fick sluta på grund av sin positionering och startade upp Patient Capital Management (PCM). Kort efter uppstarten av PCM sprack IT-bubblan och guld sköt upp. Maida identifierar tidigt möjligheter och är en av de unikare placerarna jag funnit. Inför finanskrisen blankade PCM Wachovia, Bear Stearns och Lehman Brothers efter att han fått tillåtes att göra detta av en av sina klienter, men det är ett avsteg från hans normala metodik.

Nedan finns utdrag från Maidas brev till investerare från uppstarten av Patient Capital Management (PCM) fram till idag med fokus på perioden inför finanskrisen. PCMs resultat säger en del om vikten av att kunna göra absolut ingenting och inte sänka sitt avkastningskrav. Det är ganska otroligt hur man de senaste 15 åren kunnat kraftigt överprestera index genom att konstant ha en betydande kassa. PCMs kassa var som lägst under djupet av finanskrisen och uppgick då till drygt 30%.

Vito Maida är en exceptionellt skicklig kapitalplacerare och den goda avkastningen trots stora kassa positioner kan hänföras till detta. Är man disciplinerad och svingar bara när risk/reward är extremt bra behöver man inte vara fullt investerad någon gång för att slå index, såvida man kontinuerligt letar efter investeringar och bara håller en kassa när det inte finns bättre alternativ. Det är väldigt viktigt att poängtera att storleken på PCMs kassa beror på vilka investeringsmöjligheter som existerar.

PCMs (Patient Capital Managements) historiska avkastning finnes här.

Avkastningen är i många avseende imponerande, men avgifter är ej medräknade. Avkastningen blir väldigt imponerande när man justerar för risken förvaltarna på Patient Capital Management tagit. Alla Vito Maidas brev finnes här. Vito Maida köper helst lågt värderade större kvalitetsbolag och vill ha drygt 20 bolag i portföljen. Förvaltarna på PCM har förstås fel från och till, men ofta har de fått någorlunda rätt.

Jag börjar med ett utdrag från ett "brev" 2007-03 och därefter följer utdrag från utvalda brev från Vito Maida mellan 2000-2011 i kronologisk ordning. Grön färg indikerar en någorlunda positiv ton i Vito Maidas brev om aktier. Fokus har lagts på perioden fram till och strax efter finanskrisen. Fokus har även lagts på hans mentalitet kring bubblor, centralbanker, värdering och kassapositionering.

Det är förståeligt om TVn framstår som mer attraktiv än Vito Maidas brev och det är ett gott tecken på att man är psykiskt stabil. Om man inte gillar att kolla på TV kan man alltid skriva något narcissistiskt inlägg på Facebook om vad som skedde under dagen eller vad man åt till frukost.

"However, we believe that there is one enduring competitive advantage. The ability and desire of an investment organization or individual to stay true to a value based investment philosophy. A philosophy that requires behaviour that is contrary to human nature and holding unpopular beliefs and principles in the face of unrelenting pressures. These traits are a matter of temperament and character; they cannot be taught or bought. As Warren Buffett says, “you either have it or you don’t.”

This is the very reason why over a long period of time only true value investors have produced superior returns. Very few people can actually buy when others are selling and sell when others are buying. Only a very few are comfortable going against the crowd for a sustained period of time."  (Vito Maida, 2007-03)

Our objective is to provide a compound annual return of 5% per year above the S&P 500
and TSE 300 over a long period of time. We will always sacrifice short-term returns in
order to meet our long-term goal. This means that in some years our returns may not meet
our objective. So be it! I will not speculate or risk your capital and ours to meet some
annual benchmark. Long term investing is a marathon not a sprint! Our focus is also on
the preservation of capital. As Warren Buffet has stated: “The first rule of investing is not
to lose money. The second and third rules are not forgetting the first one.”

Some prospective investors view our cash positions as a deterrent to committing their money to us. They question as some of you have, the validity of paying a management fee for managing cash. At PCM we employ a disciplined philosophy and process. The portfolio is a result of that philosophy and process. The work that we do is no different in a market where opportunities are few and far between than in a market where ample bargains exist. It just so happens that currently our process is leading to very few quality companies at reasonable prices. Even though our high cash position has made it harder to gather new assets from prospective clients, we are not willing to risk your capital and ours by investing in stocks that we believe are still significantly over-valued. Because of this disciplined philosophy, in the last two years we have managed to provide positive returns in negative markets, while giving clients the comfort of significantly less risk than the overall market.

The bull is back!

It’s true. Just ask your local broker. Listen to the cheery business commentators on the
television and radio. Better still ask your boy genius fund manager; he too believes that it’s
true. Listen closely … all you will hear is bull.

Even though GDP growth for the third quarter was reported to be an astounding 7.2% we
at PCM aren’t buying into the bullishness. We believe that such a torrid pace is
unsustainable and has been fuelled by unprecedented monetary and fiscal stimulus, tax
rebates, and mortgage refinancing

 (...)Market participants are once again abandoning any fear of risk in light of all this
bullishness. Ever the contrarians, we believe that it is at times such as these that it is
prudent to focus on risk.


Despite the challenging investment climate over the past five year period and our difficulty
in finding investments that meet our very strict criteria we have managed to outperform all
of the major North American equity indices. It is important to note that we have achieved
this performance with cash balances that have averaged approximately eighty per cent
over the past five years.

(...)While we are pleased with our performance we are disappointed that we haven’t been able to find more investment opportunities that meet our very high standards for quality, safety and value. When we have found these investment opportunities they have performed very well. Over the past five years our equity investments for our taxable and non-taxable portfolios have returned 25.53% and 39.70% respectively.

These expensive valuations will inevitably lead to the “worst of times.” Excessive
valuations always lead to substantial losses. History tells us that this outcome is a certainty;
the only uncertainty is the timing of such losses.

These are also the “worst of times” for many value investors.

(...)Mr. Greenspan has been lauded as perhaps the greatest Federal Reserve Chairman ever.
Many would argue that under his leadership we have experienced the best of economic

We view his tenure somewhat differently. In our opinion, Mr. Greenspan allowed several
investment bubbles to grow to dangerous levels and then aggressively liquefied the
financial system to avoid serious economic consequences once the bubbles burst. In turn,
this excessive monetary stimulus has lead to a broad based inflation in virtually every asset
class; the current housing bubble being the most dangerous. Perhaps, more importantly
Mr. Greenspan’s bailouts conditioned investors to believe that the consideration of risk is
of secondary importance when making investment decisions.

As we enter 2007 we are again witnessing a period when investors are greedily buying. The
absence of fear and complacency towards risk truly astounds us. As is usually the case, the
cause for optimism and complacency is rooted in sharply rising short term security prices.

(...)Market participants believe that the Federal Reserve has engineered a “soft landing” for
2007; a perfect economy. Growth is expected to moderate to sustainable levels while
interest rates and inflation are forecast to fall. In addition, this perfect scenario envisages
corporate profitability that is expected to continue growing at a double digit rates and
remain at record levels as a percentage of GDP.

(...)In our view, this optimism is premature; significant risks are being overlooked. Both the
housing and automotive sectors are experiencing serious declines. Companies in both
industries are reporting steep declines in activity and profits. Historically a steep drop in
these important drivers of economic activity has foreshadowed a significant slowdown in
GDP growth.

(...)In times like this it is understandable that people get excited. The feeling of optimism is reinforced by the “crowd.” It is easy to believe that trees do grow to the sky and that the
sun always shines. But the history of financial markets shows us that it is precisely during
these times that caution should prevail. Mr. Market always seems to show us that risk does
exist; especially when it is least expected.

Today this equity overvaluation is gaining momentum and is on the cusp of turning into a
bubble. Unlike the tech mania of 2000 or the Japanese stock market frenzy of 1989
virtually every asset class is overvalued today. As legendary value investor Jeremy
Grantham says: “Everything is in a bubble.” From real estate to junk bonds to art to
cyclical companies all assets are overvalued around the globe. In our view, there are very
few investments where investors are being rewarded for the risk assumed. To paraphrase
the academics “the risk premium is very low.” As stewards of your capital we say: “the
potential to permanently lose a substantial amount of capital is very real and very high! “

(...)Mortgage companies and sub-prime lenders are also reporting higher loan losses and delinquencies. The highly levered U.S. consumer is starting to show the strain of too much debt in the face of declining home values and a continuing negative savings rate. Should this condition spread to a wider number of Americans a slowdown will surely follow. Because the U.S. has been the engine of global growth the slowdown could turn into a global recession. Again, look out below!

(...) However, we believe that there is one enduring competitive advantage. The ability and
desire of an investment organization or individual to stay true to a value based investment
philosophy. A philosophy that requires behaviour that is contrary to human nature and
holding unpopular beliefs and principles in the face of unrelenting pressures. These traits
are a matter of temperament and character; they cannot be taught or bought. As Warren
Buffett says, “you either have it or you don’t.”

This is the very reason why over a long period of time only true value investors have
produced superior returns. Very few people can actually buy when others are selling and
sell when others are buying. Only a very few are comfortable going against the crowd for a
sustained period of time."

2008-03 (läs 2005-12 igen om Greenspan)

"The root of the current problems lay in the loose monetary policies put in place earlier in the century by then Federal Reserve Chairman Alan Greenspan. He dropped interest rates far to low and kept them there far to long in response to a mild economic slowdown following the bursting of the internet bubble and the terrorist attacks. The result of these low rates was to encourage excess borrowing in all areas of the economy. Most importantly consumers went on a borrowing binge; using the rising values of their homes as ATM machines.

(...)In contrast to our cautious view, many market participants believe that the worst of the
turmoil has passed. They argue that the aggressive interest rate cuts mentioned above,
government bailouts of troubled financial institutions and increased fiscal stimulus will
result in a resumption of growth in the latter half of this year. Equity investors appear to
share this view. The Dow Jones Industrial Average has increased by approximately eleven
per cent since its low point in mid March.

We strongly disagree with this view. In fact we strongly believe that there is more trouble
to come. Historically, there has never been a time when real estate values have declined
dramatically without serious economic fallout."

At PCM we have traveled down a road not taken by many for a long time. Steadfast in our
unshakeable beliefs that risk and reward eventually balance out, that valuation is the key
determinant of long term returns and that the prudent and steady ultimately win the race we
stayed the course..

(...)There is no doubt that the current situation is disconcerting. Several financial institutions around the world are in a state of crisis, global economies are now in recession, unemployment is rising and newspaper headlines are quite scary. Conditions are likely to get worse before they get better. So we are buying! We have turned greedy when others have turned fearful. We are once again on the road less traveled. For the long term investor, shares of many high quality businesses are now priced to offer an acceptable return.

While the above facts are sobering what is most important to us is the level of equity
valuations. In essence do valuations reflect the risk of the current environment and do
they provide an acceptable rate of return given those risks? In our estimation, current
aggregate equity prices have run far ahead of economic fundamentals.

(...)The very good news is that we are approximately sixty per cent invested; the highest that
we have ever been in our High Net Worth client portfolios. Most importantly, our
investments are still trading at a discount to their estimated intrinsic value and many
provide high dividends with the potential to increase over time.

At the root of this enthusiasm in financial markets is the old adage; don’t fight the Fed. This approach essentially says that as long as the Federal Reserve is pursuing loose monetary policies money will flow into financial markets driving prices upward. This belief coupled with the view that government authorities will bail out financial markets in the event of trouble has once again resulted in excess valuations across several asset classes. Not only are most broad based equity indices overvalued but fixed income markets, commodity prices, emerging market equity and bond markets are all severely overvalued.

We believe that relying on Central Bankers to pump up and/or bail out financial markets is SPECULATION! Current policies implemented by the Federal Reserve create speculative rallies resulting in boom and bust cycles. There is ample historical evidence that these situations end badly. The substantial loses in Japanese equities in 1989, the technology bubble in 2000 and the financial meltdown in 2008 all had their roots in low interest rates and the strong belief that monetary authorities would prevent problems in financial markets.

“It’s like déjà vu all over again.”
Yogi Berra

It has happened again!

Global central banks have created another bubble! The easy monetary policies and near
zero interest rates of the past two years have increased the appetite for risk. The lack of
interest income has pushed many investors to attempt to replace this income with capital
gains. In addition, low interest rates have encouraged speculators to borrow money and
invest the proceeds in the hope of making an interest rate spread or earning capital gains.
As we have seen in the past, these situations can only end badly.

2011-09 (greklandskrisen)
“Buy when there’s blood in the streets!’
Baron Rothschild

Equity markets have been extremely volatile lately and we love it!

(...)We welcome volatility! Our approach has worked quite effectively for many years and
through all sorts of tumultuous periods. Quality, value and most importantly time and
patience are the key ingredients to successful and low risk long term returns. These pillars
are the foundation of our philosophy and process and give us the confidence to buy when
others are fearful and sell when others are greedy. We could not implement our strategy
without your confidence and support. Thank you!


9 kommentarer:

  1. Nassim Taleb wrote in his book Antifragile:
    If you "have optionality," you don't' have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things thapt take place in our brain cells. For you don't have to be right that often.
    Optionality. That's the key. Cash gives you options other assets don't. It lets you take advantage of some situations and protects you from others. And you don't have to forecast what those situations might be. It's the closest thing to finance's get-out-of-jail-free card.

    1. Taleb är förstås briljant som vanligt. Kassa är onekligen flexibelt och skapar möjligheter som annars kan vara svåra att utnyttja. Inte minst anser jag det är viktigt med en kassa när marknaden "löper amok" för när väl partajet tar slut så är det svårt att agera rationellt om man förlorat 30-40%.

  2. Det fantastiska är att det verkar som de flesta "värdeinvesterare" alltid är fullinvesterade och alltid köper nya aktier så fort de får pengar i slutet av månaden.

    För mig verkar det inte så klokt och genomtänkt. Och det är mycket enkelt att bevisa det finns stora variationer på inköpskurserna (enskilda aktier) eller börsen (index). Det är bara att se på historiska siffror.

    Om inte annat kan man lätt se att det var bättre att köpa bra aktier i oktober 2002 än i mars 2000, och samma sak för oktober 2008 jämfört med juli 2007.

    Nu har vi en ny topp (OMXS) i april 2015. Hur svårt kan det vara att vänta in lägre kurser även denna gång.
    "Tålamod och investeringskapital är allt som behövs" som jag brukar säga.

    Själv har jag 99% av investeringskapitalet på bankkonto redo att användas när det blir dax.
    Då spelar den låga räntan ingen roll, det är säkerhet och tillgänglighet för investeringskapitalet som är det viktigaste.
    Det är tyvärr allt för få som tänker i dessa banor.


    1. @Besser Det är för att de flesta amatörer som kallar sig värdeinvesterare inte egentligen är det. Man vill vara men är inte. Det kallas för insikt, vilket tar ett tag att komma till.


    2. Visserligen. Personligen tror jag det är väldigt svårt att hitta värdecase. Jag köper när ett företag jag tycker om värderas till normala nivåer eller strax där under. Om de har toklåg värdering är det oftast något som är fel. Har gått på ett antal minor genom åren där marknaden vetat något jag inte vetat. Exempel är Tesco som jag köpte innan företagen officiellt fick problem. Kursen var liksom för bra för att inte köpa på den tiden. Samma sak med Bonheur. Undantaget är när hela havet stormar och man kan kasta pil på OMX och ändå få bra avkastning på ett par års sikt. Men när alla företag är övervärderade och bara ett fåtal inte är det ska man ställa sig frågan varför detta case är för bra för att vara sant?

    3. @Besser
      Håller kort och gott med. De flesta underskattar hur extremt högt värderade aktier är idag och risken är att det inte är annorlunda denna gången heller. Inflationen är nära noll, tillväxten svag och värderingar på utdelningsbolag (ex. Securitas) extremt höga. Om man kör in sitt kapital på börsen har man begränsad uppsida, men stor nedsida. Vem satsar egentligen i en sådan situation?

    4. @Anonym
      Har haft extremt svårt att hitta case och det enda jag funnit den senaste tiden har varit extremcykliskt och potentiella värdefällor. Jag funderar personligen på om VOlkswagen kan vara intressant, men det lutar åt att det också är en värdefälla. Den som lever får se.