VD 109: Cynical

In this issue:

• Cynical

• Stock in focus: Wolters Kluwer

• The Rationality Test: Kinsale Capital

• What I’ve been reading these past few weeks

• News from our companies

• Doubler Portfolio update

Cynical

“Cynicism is an attitude defined by deep mistrust, bitterness, and a lack of belief in the goodness of people or their sincere intentions. It often manifests through sharp, mocking, or painful remarks, rooted in disappointment or powerlessness. It’s a dismissive, often insensitive outlook on life.”

This is exactly how I’m experiencing current world events. It’s making me cynical. No, I don’t believe for a second that the United States is taking action in Venezuela and Iran for the sake of the local populations. As always, it comes down to one thing: money, in this case in the form of oil. It is no coincidence that one of the first targets bombed was an oil terminal. Similarly, it’s no accident that Iran seems to be aiming for the same: inflicting damage by hitting other terminals and restricting oil transport.

However, just because the motives aren’t sincere doesn’t mean the outcome can’t be positive for the people on the ground. Let’s hope for that above all: a good outcome for the Iranian population.

While Europe has nothing to do with this, we will certainly feel the consequences. If oil and gas prices rise, it will have a direct impact on our companies, which were already suffering under higher energy costs due to the war in Ukraine.

It is, therefore, quite cynical of me to view European Commission President Ursula von der Leyen’s message—that nuclear energy will be necessary for Europe’s future—as a positive fallout of these wars. The single dumbest energy move in recent years was abandoning nuclear power. That was even worse than the massive, expensive subsidies for green energy.

As an investor, I don’t like being cynical. To believe in companies and invest in them, you need to look at the future with a degree of optimism. So, I’m trying to shake it off and focus on what this means for our businesses. Higher gas prices will weigh on companies like Tessenderlo and K+S, though they do benefit from the flip side: higher fertilizer prices. Companies with interests in the region, such as Ackermans & van Haaren (via DEME) or HAL Trust (via Vopak), naturally carry higher risks now.

We can’t yet estimate how long this conflict will last. The longer it drags on, the more it will hurt generally through higher inflation. What is certain, however, is that our companies will survive, and they remain very attractively priced.

There’s no need to take immediate action. We can keep our focus on investigating the opportunities these wars—and the AI disruption—might create.

Market Overview

Despite sharp moves in individual stocks, we can’t yet speak of “blood in the streets” or cheap markets. The US market remains significantly overvalued according to the Buffett Indicator.

Consequently, there is no real sign of a downturn in the S&P 500 yet:

The FTSE All-World looks almost identical, which is logical given the weight of US equities.

Only in the Euro Stoxx 600 is a slight dip visible, driven by the realization that we in Europe will be the first to suffer from higher oil prices. Even then, the decline is negligible.

While we see steep drops in some individual names, this is absolutely not a general “buy” moment. Markets are still trading very high, with expected returns lower than risk-free interest rates. The drops in those individual stocks are usually easy to explain: they were simply way too expensive before. Some are now fairly priced, while others remain pricey. So far, I have yet to encounter the first major decliner that has actually become cheap.

To make a profit in the coming years, you will be more dependent than ever on buying the right stocks at the right price. Doing your homework is essential; don’t just rely on a price drop or relative comparisons.