Enjoy the View
by Steven Visscher, Mawer Investment Management
I recently returned from a vacation in Nicaragua. For nearly three weeks I wandered around the country – hiking to the top of picturesque volcanoes, getting lost in colonial towns and lazing away on uncrowded beaches. With my responsibilities at work in the capable hands of colleagues, I opted not to take a cellphone or check emails. I did not read a single newspaper or watch a moment of television. I was oblivious to everything that was happening in the world. My brother who accompanied me was surprised that I could shut out the world for this length of time. This is one of the virtues of investing with a long-term perspective.
Emphasizing long-term rather than short-term implications has shaped the way we manage our firm, but also the way in which we invest for our clients. We encourage our clients to share this philosophy. But doing so is not always easy. Human nature tends to focus on recent or imminent events. The daily business section typically reports on yesterday’s employment data, today’s winners and losers, and tomorrow’s earnings expectations. Even the industry practice of quarterly performance reporting tends to steer the focus to the short-term.
But how much of this news is vital?
Our investment thesis is not contingent on whether a company meets the next quarterly earnings target, wins a pending lawsuit, or finds oil with their next well. We think longer-term than that. We seek companies with business models that are resilient and sustainable due to some form of enduring competitive advantage. Then we exercise patience and allow skilled management teams to execute their business plans. In some cases the rewards are immediate, but it often takes time before value is created, or before other investors recognize the value being created. An investment may offer 100% upside over the next decade, but rarely will that occur in a straight line.
My brother quickly grasped the concept…
So while we’re on the beach, your colleagues will be following the news, but not necessarily making changes unless they think this news has long-term implications?
Exactly! Monitoring news is important, but unless something extraordinary happens, all of the companies we own today will still exist in three weeks. Interest and dividend payments will likely occur as scheduled. Some companies will make headlines, but most will quietly execute their business plans with little fanfare. The next three weeks matter, but not nearly as much as the next ten years.
But what if something extraordinary does happen while we are on vacation?
It could. The global recession in 2008 was extraordinary. Markets plunged. Companies went bankrupt. But if we selected the right companies for our portfolios, and investors had the right asset mix strategy prior to those events, then they hopefully were able to withstand those temporary losses and keep focused on the long-term. Patient investors recovered all of their capital, and have since climbed to new highs. An extraordinary event will happen again someday. Maybe even during these next three weeks. But keeping a long-term perspective can minimize the long-term damage. So try to relax and enjoy the view.
Steven Visscher
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