The craft of investing

With regard to energy, transitioning to an economy with a smaller CO2 footprint will take time and money, and will likely require a realistic revision to avoid supply problems.

Confidence has deteriorated somewhat, but both domestic spending and foreign trade continue to be strong.

The strength of the results presented in late April once again reassures us about long-term investment in an uncertain environment.

Our confidence in quality, through selecting the companies in our portfolio from a micro, bottom-up approach, is reaffirmed in crisis situations.

EDM’s investment style, which emphasises stock picking rather than predicting short-term market trends, does not require us to make changes in light of this new scenario.

Klarman ably describes what the art of valuation consists of, which—he notes—is always imperfect insofar as it relies on assumed sales growth and estimated profits in an uncertain environment.

Despite the fact that the crisis in Ukraine may signify downward revisions for economic growth in 2022, particularly with regard to profit growth in the industrial sector, its impact on the portfolios overall is minimal.

At this particular moment of uncertainty, stepping away from the noise and focusing on the reality of the companies in which we invest is the best recipe.

Energy costs and higher inflation will affect companies. However, given their elevated quality, the majority of our companies have pricing power and will therefore be able to transfer any cost increases to their customers.

We have proceeded to review the investment thesis of each company in light of the new situation, in a process of reorganisation and optimisation, eliminating those that seem to be more adversely affected.

Year-on-year inflation is reaching new highs, but should ease throughout the year, the war in Ukraine permitting.  

Over the course of the year, we often wonder why the market or a specific share is up or down. And we have no response. Many times there is no fundamental answer; it is merely the result of flow movements—beyond our control.