Small Update on Strategic Shift
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Hello everyone,
I am writing today to detail some small strategic changes to both our investment strategy and the newsletter/blog that accompanies it.
Over the past month I opened UTMA brokerage accounts for my kids. We’ve had 529 accounts since they were born for tax-advantaged college savings, but I’ve decided I want the two of them to be stakeholders in the work I’m doing and, hopefully, to benefit from the success of our individual stock selections.
This decision has reinforced my mindset to focus on long-term stock selections. Hudson and Nolan are five years old, thus I feel it is in their best interest that I select investments/companies I can reasonably predict will be around (and thriving) for ten, fifteen, twenty years into the future (when I will hopefully release these UTMA accounts into their personal management.)
Everyone says they invest for the long-term. I’ve said it for the past eight months while writing this newsletter. We all know long-term thinking produces the best results.
However, if I’m forced to take a critical look at myself, I have let my ego get in the way of this goal. I’m a value investor at heart. I love looking at beaten down and broken companies in an attempt to find mispriced assets. I genuinely find that process compelling and mentally stimulating. Unfortunately, I don’t think that’s my only personal motivation.
Like most folks who write about investing or manage investment decisions for others, I also desperately want to appear intelligent. I want to find mispriced companies for the mental exercise and to make money on the mispricing, sure, but I also want people to notice my work and praise me for my intellectual rigor. This doesn’t make me unique. Most people want to be noticed for the work they’re doing.
An example of how I think this plays out to the detriment of long-term investing is an investment like Ingles Markets. I shared in my last post research I personally worked on and wrote up (in addition to research from others that are much better at this) that proves the company is undervalued and is masking the real estate assets it owns. The numbers are the numbers, as they say, and the spreadsheet doesn’t lie. BUT, at the end of the day, we’re talking about a regional grocery store with ownership that seems to be content to let the market think its value is much lower than it is. Even if I believe the market will eventually figure out what’s happening and start bidding up the price, I’m not sure the company is worthy of a twenty year investment.
Ultimately, while I will still use the value investing framework to find underpriced companies, ideally I don’t want to have to make a decision to sell said company once it reaches full value. I’d like to make as few decisions as possible.
The logical outcome of this decision is that my investment criteria and the minimum benchmarks required to enter our portfolio becomes much higher. This is a good thing and will only be positive for future returns.
One of the great blessing of having kids is they force you to look past yourself and your own ego. This is another great personal example.
Secondly, I have decided all accounts under management will follow one strategy. Prior to this decision I had my own personal portfolio of individual stocks, and what I called a “Default Portfolio” with index funds, bonds, and gold. Our new focus will be primarily individual stocks, with small allocations to bonds and gold. The default portfolio was an attempt to hedge against my own ignorance. I have removed that crutch to see if I can walk on my own.
2025 has started off with a bang for our portfolio. I hope it continues that way, but if not, trust that I’ll share my work, as transparently as possible, once the quarter ends.
Thank you for reading and for going along on this ride with me,
Tyler