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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…