Average Q3 Letter
Dear Investors,
As you know, there has been significant uncertainty in the markets these last few quarters & it’s felt like there has been weeks where decades happen (we’re underperforming by 1500bps).
That said, we always “skate where the puck is going” -
Dear Investors,
As you know, there has been significant uncertainty in the markets these last few quarters & it’s felt like there has been weeks where decades happen (we’re underperforming by 1500bps).
That said, we always “skate where the puck is going” -
and looking ahead, we believe we’re well positioned for anything the market throws our way (not only did we overpay for terrible assets at the top but we aggressively degrossed at the lows). We continue to believe in the adage in the long term “the market is a weighing machine” -
but to hold this belief is not enough, we must also have the stomach to weather volatility such as we’ve experienced the last few quarters (we incurred massive tax burdens by selling winners to average up our positions in terrible companies that we’re valuing on 2035 adj ebitda)
Turning our attention to the global macroeconomic environment, we notched small gains in our short gilts position (10bp of aum) & short european industrials w exposure to energy prices as we believe when the tide goes out (russia invades ukraine) we see who was swimming naked -
(irresponsible energy policy leading to over reliance of russian exports). This also applies to many of the high flying technology companies which have seen their valuations halved or worse due to inflation & an environment w rising interest rates (many of which we’re still long)
We are however, cautiously optimistic about the future (i mean rates can’t keep going up forever, can they? can they?) as our analysis shows that the consumer remains relatively strong despite various macro headwinds & increasing fears of a recession (we cherry picked this data)
We know these results aren’t what you hoped for & we feel your pain (100bps of our own net worth is invested alongside your capital) and though its undoubtedly true that the degree of danger in the world has increased dramatically this past year - danger is also an opportunity
(we’re going to look at a bunch of potential distressed deals that no one at the firm understands or knows how to value). We firmly believe we are now better positioned for the next quarter & the coming years and as a very wise man once said - “may you live in interesting times”
I’m sure most would agree the times we’re living in are as infesting as any times before. I’ll leave you all w a quote (one of my favorites) - “A man cannot step in the same river twice, for its not the same river & he’s not the same man” this is true of markets and also of life.
Before fees, our flagship fund has lost 3967 bps or (39.67%) on a ytd basis compared to a loss of 2349 bps (23.49%) for the S&P and 3308 (33.08%) for the Nasdaq. This excludes the marks on our private investments. We remain confident in our strategies & appreciate your trust.
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