Bizarre Trends and Value in Plain Sight
Weekly 48 2024
This week, I started writing this text multiple times, only to delete it again each time. The madness I often encounter has become almost incomprehensible. Still, I’ve decided not to go into detail about everything that left me shaking my head or tempted me to complain. Instead, I want to revisit the message I shared on Tuesday.
Sometimes, the stock market offers moments when you feel a massive opportunity is right there. I feel that way now about European small caps. For American large caps, the opposite is true. That doesn’t mean the madness in the U.S. can’t escalate further, though.
One comment I received on my post was that we’re not yet in a state of euphoria, as there aren’t masses of IPOs and mergers. However, the lack of IPOs has more to do with the nature of the market. We’re in a highly concentrated market where going public doesn’t align well with the current dynamics.
An example of the madness: in a week when American missiles are being used to strike Russian targets (via Ukraine), that news takes a backseat to NVIDIA’s quarterly earnings. These results were once again incredibly strong, yet the market reacted with disappointment. That says everything about the expectations people have nowadays.
The most striking—and perhaps funniest—thing I read this week on social media was an interview with Michael Saylor of MicroStrategy. That he’s taking on massive debt to buy Bitcoin is a matter for him, his shareholders, and his creditors to worry about. But if that isn’t already a red flag, the following statement surely should be:
"If I had an hour alone with Warren Buffett in a calm environment, I would walk out, and Warren would say, ‘This Bitcoin is a great idea, Charlie would have liked it, I’m going to buy some.’"
After watching ten minutes of the interview, I’m confident Buffett wouldn’t have the patience to hear him out for a full hour. Buffett spent decades conversing with what he called the “quickest 30-second mind he ever met,” Charlie Munger. And what did Munger say about Bitcoin?
"It’s like somebody else is trading turds, and you decide, ‘I can’t be left out.’"
If I have to choose between who understands things better—Saylor or Munger—I know where my preference lies.
During chaotic weeks like this, I choose to step back and focus on new stock ideas. It brings me peace. Moreover, after the recent sales, I’d like to add a new stock to the portfolio next week.
The biggest challenge is often comparing potential new additions to the existing portfolio. And that challenge has grown as we’ve recently been able to add several cheap companies.
One such company is Tessenderlo, which is criticized because Luc Tack is unpopular.
I won’t deny that there’s work to be done on corporate governance at Tessenderlo. But condemning Tack while giving others like Saverys (Euronav, now CMB.Tech) and D’Ieteren a pass—even though they’ve actively cost small shareholders money—is hard for me to justify. Tack hasn’t done that (yet).
Moreover, he’s proven himself as an excellent capital allocator, first at Picanol and later at Tessenderlo. Even the unions speak positively of him, despite the layoffs at Picanol in Ypres. They know he did everything he could to take care of the employees. How often do you hear that? Maybe his bad reputation is somewhat exaggerated.
Of course, we also know from that same article that the struggles in the loom industry are far from over. So, we’ll need to be patient for any revival in the share price.
Articles and updates this week
This past week, we received the quarterly results from K+S and Nextensa
Read the K+S update: Bottoming out
Read the Nextensa update: Misunderstood
This past Tuesday, the article “Denial, Acceptance, or Exaggeration” was published. Which phase are we in right now?