A Divergent Market

2023 was quite a year! Coming out of the very volatile market of 2022, our portfolio managers were able to take advantage of that fear selling to bolster returns for future years. It was a year that emphasized the need to follow an investment philosophy based on patience and only buying quality companies when they are trading at quality prices. Looking ahead, I believe 2024 will continue to be a divided market. In my analysis of multiple companies over the course of 2023, I found many that were expensive back in the exuberant market of 2021, have fallen over 60%, and now trade at market prices 30% BELOW their intrinsic value. However, on the flip side of that same coin, I found companies that have fallen over 80% from their 2021 highs but are still 30% OVER valued. I’ve included a chart below to give a better idea of this phenomenon.

Our portfolio managers have been actively trimming/selling companies that have gone up relative to their intrinsic value. They have been shifting assets over to those companies that have been fear sold while simultaneously avoiding that frothy side of the market. Avoiding those expensive companies was a focus in 2023 and should remain a main focus for 2024. If we stick to the plan, I think there is a lot of opportunity in the market today.

Below you can see a chart of one of our main balanced funds (relative to its index) that has annualized a compound rate of return of 11% since the global financial crisis.

Figure 1: Chart from CapIntel

As always, please reach out if you have any questions. We would very much like to set up a meeting to go over your portfolio!