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In early May, Berkshire Hathaway Inc. held their annual shareholder meeting in Omaha. While some of you may agree or disagree with Berkshire Chairman and CEO Warren Buffett on certain matters, we believe his investment philosophy is world class. We have attended the shareholder meeting on multiple occasions in the past, but for the third year in a row via a partnership with Yahoo Finance (incidentally owned by Verizon), Berkshire has streamed the meeting live via the internet. We’ve been able to enjoy all the festivities from the comfort of our own homes.
Opening day for baseball season is upon us with a slate of games scheduled this weekend and we couldn’t help but notice the Texas Rangers’ Prince Fielder is set to make $72mm over the next three seasons. What is unusual about this is that Mr. Fielder hasn’t played in a game since the 2016 season and is officially retired from Major League Baseball. Yet, apparently due to a second neck injury, and the wear and tear of twelve seasons spent in Milwaukee, Detroit, and Texas, Prince retired after playing in 89 games in 2016 and walked away with a career low .212 batting average during that injury-riddled campaign. As far as we know, he may still have a great shot at a long, contented and happy/healthy life, and we wish no ill upon him!
Ever wonder what you might have done if you had bought a ticket to the super lotto drawing the last time it made headlines this past summer and you had won?! We don’t know for sure if it’s ever come close toa billion-dollar payout, but we are certain you’d have some fun spending $500mm or more if you had it. With mega lotto bucks on your mind and for the purpose of this letter, we want you to think on a grand and magnificent scale by considering a cool $1 trillion or more to spend on some investments. Yes, that’s $1 trillion with a T, but keep in mind it’s not all that far fetched to think there may soon be a single company with that price tag attached to it. Amazon, Apple, and Facebook are ones that come to mind when you ponder which company might breach $1T first.
These past few weeks have brought an unprecedented number of natural disasters to the Caribbean, Mexico, and the U.S. For some of our clients, you have been in the cross hairs of two hurricanes that have slammed both Florida and Texas. It’s been a tough September, hasn’t it? On top of that, as for your portfolio, wasn’t this supposed to be the month where the market corrected, as many had predicted?
The other day, a group of us got together to review CORDA’s business disruption plan. What prompted this was the potential for the summer’s first storm to hit the Gulf Coast somewhere between Houston and New Orleans. As a Houston-based firm, we have to be prepared for the likely scenario of a hurricane or flood impacting our immediate area and for the possibility our main office building is damaged or closed. It had been since last year’s hurricane season that we reviewed our plan, therefore, we wanted to make sure all 19 of our employees knew their responsibilities and our back up office locations in Austin and Dallas prepared for “business as usual” in the case we had to re-locate on a moment’s notice.
Last quarter’s letter focused on the unpredictability of the political process and a Federal Reserve in a gradual tightening mode and how the seasoned investor could set herself/himself up to win against unusual forces of volatility in the coming years. The culprits of the expected volatility include political and monetary forces, terrorism, economic growth or stagnancy, changes to the environment, and a host of other events that can move the markets on any given day.
As we head into a New Year, we are prone to reflect on the past and it seems somewhat mandatory to drag out our crystal ball to help set a course for the upcoming year. Our customary optimism about owning high quality, cash flowing, and shareholder friendly businesses at the right price is a permanent feature to our investment plan, virtually set in stone. However, you can be assured we maintain a cautious mindset about how to deploy capital in an ever changing environment.
“I think that you will all agree that we are living in most interesting times. I never remember myself a time in which our history was so full, in which day by day brought us new objects of interest, and let me say, new objects of anxiety.” Joseph Chamberlain, 1898.
It seems nobody was looking for the Brexit vote to go the way it did last week. Immediately following the vote, we were shocked to read (or were we?) the most searched phrases on Google in the U.K. were: “What is the EU?” and “What does it mean to leave the EU?” So even after the votes were counted, it seems many weren’t quite aware what they may have voted for in the first place!
Lately, the market has been more volatile than ever, it seems. Last August, and most recently in January, the stock market suffered some fairly substantial drawdowns. What did you learn from those two experiences?
There is a quote from Benjamin Graham, the father of value investing, that comes to mind when considering the price action of the stock market. He said; “Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal.
Almost every American investor has seen the film, “It’s a Wonderful Life.” The film stars James Stewart as George Bailey, a man who has given up on his dreams in order to help others and whose imminent suicide on Christmas Eve brings about the intervention of his guardian angel, Clarence Odbody, played by Henry Travers. Clarence shows George all the lives he has touched and how different life in his community of Bedford Falls would be had he never been born.
The secret to growing wealth was spelled out by Benjamin Graham over seventy five years ago when he wrote, “The real money in investing will have to be made – as most of it has been in the past – not out of buying and selling, but out of owning and holding securities, receiving dividends and interest, and benefiting from their long-term increase in value”…
One of the most common questions we have received here at Corda over the past six months has revolved around the current price of oil and what its impact will be to the energy related businesses that we presently own, or those that we may consider for purchase one day in the future…