Interesting insights - September 2024
Fall is upon us, and the markets are trucking on.
Dear readers,
Yet another month has passed. Fall has thoroughly started here in Norway, and I’ve moved all my shorts (the short-pants, not options) up to my loft and dusted off my woolen sweaters. I love these transition times of the year, both fall and spring bring something new with them.
Oh well, I’m not writing this to yapp about the coming and going of seasons, and I’m very sure none of you are reading it for my sentiment on temperatures.
September is usually a lull month in the markets, with statistically the highest chance of negative returns. It has not been this way this year, and the month passed by with indices moving further up and to the right. Particularly sentiment towards the Chinese market flipped entirely around, and all the patient investors who’ve dared to be contrarian regarding China have had some great days at the end of the month. Congratulations to all!
For myself, it’s been yet another hectic month working. I have several articles as drafts, but time and motivation has gotten in the way. Anyway, I would like to thank all my readers for sticking with me in this slower period of releases. Rest assured, in the near future I’ll release content that is more than these periodic monthly releases.
Portfolio news
As to be expected, stuff has happened. This is a brief overview of important news related to my portfolio. Oh well, there has been nothing really major to report on.
A typical theme of my first period of writing is my intention to concentrate my portfolio. I always struggle between the allure and excitement of new ideas, and sticking with my best ideas that I already have in my portfolio.
This month I have sold my position in MercadoLibre. The rationale for this is that the company operates in a fast moving sector and market, with several high quality competitors. It’s simply not easy predicting who or how many actors will win. I have had, and still have, the assumption that MercadoLibre will continue to win and leverage their physical moat of a world-class delivery infrastructure in tough geographical environments, but it is simply too hard to know. I therefore (probably a mistake) made the decision to sell my position in MercadLibre, with a 50% gain since I opened my position.
It’s a shame to see such an excellent company leave my portfolio, but I want to hone my strategy of owning slower-but-surer growing companies in more consolidated sectors.
Thankfully, the DOJ gave me an excellent opportunity to redeploy this fresh cash straight into such a company. There’s no surer growing company in the world than Visa. They keep on trucking on, and more and more people have Visa cards in their pockets. Reading the lawsuit shows many good arguments for why Visa is a great investment going forward, and I am happy for this opportunity to make it a core position of my portfolio.
I also bought my first shares of Hermès, which is in my opinion the very embodiment of companies I want to earn. Thankfully I managed to snag these shares before the Chinese government posted news about upcoming stimulus packages to strengthen their economy which propelled the entire luxury sector up double digits over a few days.
I also got to increase my position in SanLorenzo to be the biggest position in the portfolio around the same time, and I almost doubled my position at around €33.5 a share.
My luxury shopping came at the expense of my wallet, but also my “lowest” conviction holding: Lumine. I exited with a short term profit of 10%. I prefer not to hold sub 5% positions without the outlook of attractive buy prices coming up. It was simply a necessity sale to fund my Yachting business. CSU and Topicus remain significant portions of my portfolio.
I’ve also opened a (very) small position in the Swedish EMS company, AQ Group on the last day of the month. It is a library card position, motivating me to both read about the company, but also follow market reactions closely. I would love to make it a bigger part of my portfolio, so let’s see how it goes. I wrote about my rationale behind AQ Group on my Twitter account. You can read the thread here. But I also greatly enjoy how AQ Group writes about their core values, which can be found in the below PDF:
Without further ado, this is how my holdings look currently:
Paradox Interactive
My biggest contrarian play in the portfolio is Paradox Interactive. The company is the leading developer and distributor of grand strategy games, and is a bit of an oddball in my portfolio. Read about it here:
As stated in my deep dive post, I believed the market to have misunderstood Paradox’s predicaments. Recently this sentiment has been shared by professional analysts, and we have seen both Danske Bank and Svenske Handelsbanken upgrade their view on the stock going forward.
Paradox has released several updates and DLCs lately, and these are usually very high margin products that lead to strong financial results. Q3’2023 was a very slow quarter for Paradox, without any major releases and slow growth. I am sure that we will see a strong Q3 this fall, followed by a weak Q4. The Q4 comps are very tough due to the release of Cities Skylines 2. Despite the initial flop of the game, they sold a ton of copies of it. This is bound to create some comparable headwinds going forward, which for a long-term investor should be viewed as nothing but noise.
The number of players for Paradox game portfolio continues to look good, and especially Mechabellum seems to be a great addition from Paradox Arc. It is also good to see CS2 trucking on.
I also want to share this video made by the content creator on Cities Skylines nicknamed FewCandy. She participated in the community day with the game studio behind Cities, Colossal Order:
It is nice to see the company taking these steps to both interact, learn from and co-operate with their important community content creators. This is an important step for Paradox (and Colossal Order) to make quality content that creates value for their players. It’s well worth the watch.
SanLorenzo
My biggest position has had some ups and downs in September. This seems to be nothing but short term noise moving the share price a bit down and a bit up.
In more meaningful news, the company has been present in the Cannes and Monaco boat shows. Supposedly they have had a good intake of orders in these shows, with Intessa reporting sales to be strong for the Cannes show and chatter showing that Monaco sales are going to be just as strong. Whilst the market has been prepared to sell shares at historically low levels, the order intake seems to chug on.
This update analysis by Intesa SanPaolo gives a good look into SanLorenzo position and Cannes order intake.
What I’ve read and listened to this month
I want to start with this piece, as I believe it is one of the more important aspects to properly understand for succeeding in investing (but is relevant for anything we would like to master):
An absolute must listen to from Founders about Brad Jacobs career and his book “How to make a few billion dollars”:
Great episode on Hermes by TIP and Shree Viswanathan:
For the Nordic-speaking people out there, I highly enjoyed this episode of StockUp on investing in green companies:
Another TIP episode I really enjoyed, with Morgan Housel:
Great article on the great business of Otis:
Are the markets really efficient or not? An endless debate in the investing world. Here’s an interesting perspective on it:
I tend to want to share stuff that is open for my readers to read, so I’m always delighted when I can share some free content from Compounding Tortoise - who continues to deliver the most value for readers and partners than what you can find anywhere online. Here is his take on lessons learned from Chuck Akres success:
That’s it for this month’s update! I wish all my readers a great start to the tenth month of 2024. Any feedback or comments on my content is highly appreciated, be it positive or negative.
You really help out by sharing or liking my posts and content, both here on Substack or on other platforms. Thank you for reading.
Thanks for the mention, and happy to see the double on $SL! Much better than my timing at 34.65 haha - now we can watch it rally toward 50 :-)
Bold move with MercadoLibre, but if you don’t fully understand the market dynamics or lack conviction, it’s probably best to exit during the good times rather than the bad. Can’t argue with adding to Visa, though - I did the same.