One Word: Booze
In our 25+ years of investing, the hardest time to be an investor is years into a bull market. This is especially true for a value investor. Quite simply, a bull market tests your ability to stay disciplined and not make investments that are probably overvalued. The reason being, many stocks have run-up to overvalued levels, thus reducing the number of potential investments (on a valuation basis). But, as investment managers, we still need to make investments and the trap of overpaying for a hot stock is even more present during these times.
One bright spot during a bull market (other than people making money) is that it forces us to hone in on our investment strategy / philosophy. Many times, this drives us back to our “boring” but favorite themes. In this case, the theme is: people like to drink alcohol during good and bad times. To simplify… Booze!
During bull markets, especially this one that is driven by technology, the “boring” companies get left behind. Which makes no sense and really just creates buying opportunities. The business of making & selling booze, even though it is a very stable business, has capitalized on the use of technology as well. Profit margins have expanded, product innovation is through the roof, and distribution is or will be global for most, if not all, major producers. All of these positive developments over the past decade should lead to more successes for years to come.
As we meet with clients (and prospects) throughout the year, we love discussing some of our most “boring” companies. Finding well run companies in this industry, with vast historical success and priced right (for us) is as good as it gets!