A letter a day!

A letter a day!

Letter #02 2002

Interim report #June 2002

1. The Partnership has been invested in twenty-one companies in seven countries (Dominated by USA , followed by Hong Kong and Thailand). It had notable concentration in relatively few sectors: media and publishing; leisure, entertainment and casinos; and hotels and real estate. Smaller investments were made in telecoms and cable; consumer durables and finance; and computer services and office automation.

2. In the letter a beautiful advice is shared from the book “Where are the customer Yachts?”

“When there is a stock-market boom, and everyone is scrambling for common stocks, take all your common stocks and sell them. Take the proceeds and buy conservative bonds. No doubt the stocks you sold will go higher. Pay no attention to this – just wait for the depression which will come sooner or later. When this depression – or panic – becomes a national catastrophe, sell out the bonds (perhaps at a loss) and buy back the stocks. No doubt the stocks will go lower still. Again, pay no attention. Wait for the next boom. Continue to repeat this operation as long as you live, and you’ll have the pleasure of dying rich”

The operative phrase here is “pay no attention”. This is not easily done. Many investors are professionally required to “pay attention” to the latest trend for fear of missing out (pay attention and be invested!)

3.The investment time frames are very compressed, and few investors it seems don’t bother to assess the real value of a business but instead respond to the latest data point to determine share price direction. This is momentum investing and is the mechanism by which expensive shares become very expensive, just as cheap shares may become very cheap.

4.The partnership sold xerox corporation (Monsato company)

As per Nick sleep, the company showed decent profits despite of no visible growth in the revenue. On the other side management guided revenue growth of 15% when the current growth was around 5%. In order to achieve this guidance, management tried to push too hard to grow the earnings and started booking profits on long term lease contracts.

Annual performance #Dec 2002

1.The Partnership results had been achieved without leverage, shorting or financial derivatives of any kind, nor did they wish to employ such techniques.
Rather results have been achieved the old-fashioned way, through buying securities in reasonable businesses at discounted prices.

2.In analyzing a company, assess the merits of investing in all levels of the capital structure but to date it has been concluded that the common and preferred shares have been the more attractive investments.

3.One of Nomad’s key competitive advantages was the aggregate patience of its investors.