Investing a lifelong journey

When analyzing Sofina, I (it's been a while) came across the following quote from the then-chairman of the board, David Verey:

"The work of an investor is never done. Investing is an ongoing activity. We are happy to report on it annually, but it remains an ongoing story. Our efforts now will translate into tomorrow's results. Only time will tell for each of our decisions whether we ultimately made the most sensible choices."

I find this very beautifully articulated because I am often confronted with this idea myself. You want to achieve top results every year. But it is inherent to investing that this will not be possible every year. You never know in advance whether your assessments will be met by the company, exceeded, or if you were too optimistic. Along the way, significant changes can occur in the technological field, alternative products can enter the market, or there may be a hiccup in a very strong tandem (Tessenderlo), which makes you look at the company differently. If you then take a snapshot at fixed intervals, such as an annual report for Sofina, or if you review your portfolio monthly or quarterly, the numbers often do not tell the whole story.

Past vs future

It's possible that in the portfolio, there are some positions showing impressive returns but are nearing the end of their investability. On the other hand, a stock recently purchased might show a 20% loss.

Emotionally, it might seem like those stocks with substantial gains, sometimes tens or hundreds of per cent, are the best stocks at that moment, and the loser is the worst. However, often the opposite is true. The potential of the loser is often much greater. Intellectually, everyone understands this, but emotions can take over in the stock market. People fall in love with stocks (the winners) and often panic with losses.

Continuous monitoring

The idea that the work is never done is true. Indeed, you're constantly engaged with your investments, whether it's finding new investment candidates or monitoring your current positions and changes in the market. Investing can be a lifelong pursuit without ever becoming dull. 

It's also true that all the efforts we put in today will only bear fruit later; that could be tomorrow, but it could also be in a year, three years, or even longer. It's often very frustrating that the market doesn't immediately recognize the work we do today. You might feel tempted to make more buy or sell decisions just because it would seem like the hard work behind it yields immediate results.

Don't be tempted into excessive action

What's unique about what I do is that you only see the decisions to buy or sell. It's only when I decide to buy or sell a stock that I document it. All the work of (partial) analyses of dozens of other companies per year gets filed away or discarded by me. Whether the decisions to buy, file away, or discard were the right ones will only be determined by time.

For those of us who primarily focus on small caps, that moment of recognition has been hard to reach for some time, leaving us with a portfolio full of undervalued stocks where we're waiting to see if these were the right decisions. For now, only the publication of the results is providing us with validation; the stock price has yet to catch up. Is the turning point approaching so that we also get the recognition we seek through rising stock prices?