Kurm has consistently applied the techniques of value investment over the years. Kurm both avoided the excess of the bubble of 1999-2000 and was recently able, for example, to take advantage of a cheap MCI, underpriced due to negative sentiment about the telecoms sector.
I have been both communicating the philosophy of value investment and commenting on the investment environment in my letters to you. Today’s “hot†sectors appear to be commodities and mining, and investors should note the maxim: “Be greedy when others are fearful and fearful when others are greedy.â€
Today, in mining and commodities we are seeing a great deal of interest, driven by belief in a long-term cyclical upswing, in turn driven by China’s huge marginal and absolute contribution to demand and the slow reaction or unresponsive nature of the supply-side. However, the huge number of public offering of stocks in the mining sector, in particular, by well–informed insiders to an eager public is a classic contrarian indicator.
By remaining in businesses which are reasonably easy to understand, and whose future is reasonably predictable, the investor can come to an idea of the value of the business, and the thus the right price at which to invest profitably. For quite some time, investors considered pharmaceuticals to be defensive stocks, but with many drugs now coming off-patent and drug discovery not being so fruitful in terms of yielding “blockbusters,†that view has changed, and the valuation depends on being able to predict the future earnings power, and not historical profits. Other areas where there seem to be anomalies in valuation relate again to the internet, where companies like Google, albeit well-run by honest and intelligent owner-managers, are valued by looking far into the future, and Chinese internet companies have valuations combining at least two different sources of optimism.
On 7th July, the world again suffered from a terrorist attack, this time striking London. While our sympathies lie with those who have lost loved ones, let us hope that we can all move forward from this to peace and prosperity. It is very clear that life is full of surprises and events which we think are not likely, actually happen more often than we think. Recently, Warren Buffett and Charlie Munger explained how they spent a great deal of time looking at the impact of high-impact, low-probability events.
To make things worse, the financial system has a huge amount of leverage. With Kurm’s investments in the insurance business in particular, thinking about the bombings and Hurricane Katrina, it is important to know that Kurm’s investee companies are all run by individuals with conservative attitudes to risk and leverage, as well as a high degree of business acumen. Many are still run by the entrepreneurs who founded them.
With a focus on the preservation of capital and its growth, and a conservative approach, Kurm should be well placed in the event of any crisis, to weather the storm and to take advantage of any potential opportunities.
The views expressed and comments made on this website are not personal advice based on your circumstances. The purpose of this website is to provide information and analysis to help you make your own informed investment decisions. If you are not confident making your own investment decisions you should contact a firm which is authorised and regulated by the Financial Conduct Authority (such as Ashik Shah & Co. Ltd.) so that a qualified financial adviser, after considering your personal circumstances and investment objectives, can make personal recommendations of investments which are suitable for you. Whether you make your own investment decisions or prefer to follow the recommendations of a financial adviser you should always remember that your capital will be at risk and that investments can go down in value as well as up.