3-Bullet Sunday (Market Drawdowns, Terry Smith and Howard Marks)
Happy Sunday,
Plenty of investment managers letters released this week, I’ve selected two that I found most insightful.
Enjoy!
I. Dealing With Market Drawdowns
A good friend asked me what were the lessons I learned from this volatile period, and just to be clear, by volatile I mean drawdown.
Nobody really calls out volatility when stocks are rising.
It is a good question, and one worth reflecting on.
Because a bull market is a terrible teacher and the hard lessons are always learned during extended drawdowns like this.
See my latest post on handling volatility and what strategies I'm implementing.
Read Here→ Dealing With Market Drawdowns
II. Howard Marks’ Latest Memo: Selling Out
Volatility is the price to pay for holding on to multi-baggers:
Howard also wrote about why people sell and the psychology behind it.
Timely memo!
Read Here→ Selling Out
III. Fundsmith Annual Letter
Why Terry Smith doesn’t rotate into the recovery sector:
“Of course, you could try to trade out of the former and into the latter at an appropriate time but it is not what we seek to do as the vast majority of the returns which our Fund generates come from the ability of the companies we own to invest their retained earnings at a high rate of return because they own businesses with good returns and growth opportunities. In our view it would be a mistake to sell some of these good businesses in order to invest temporarily in companies which are much worse but which have greater recovery potential.”
My favorite quote which he repeats often:
“Someone once said that no one ever got poor by taking profits. This may be true but I doubt they got very rich by this approach either, as I’ve observed before. We continue to pursue a policy of trying to run our winners.”
Read Here→ Fundsmith’s 12th Annual Letter
That’s all from me this week.
If you enjoyed this week’s newsletter, please share it with your friends!
Till next time!
Thomas Chua
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