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from the SMT annual report
The Drawdowns of Today
Moderna has experienced a 70 per cent. fall from the highs of last year. While the market focus has been on the longevity of Covid vaccine revenues we have felt this overlooks the progress being made to apply its mRNA technology to a broader range of healthcare problems such as flu, Zika, HIV and even cancer. It is hard to argue significant value is being placed upon that broader potential platform when the company is valued by the market on a mere five-times earnings and has nearly one-third of its market cap in cash. We have therefore used the falls in the share price to add. This has in large part been funded by reductions to Amazon and Tesla.
Delivery Hero, is a local delivery company headquartered in Berlin but operating across 50 countries around the world from Argentina to Singapore. It suffered a particularly precipitous fall in its share price. Nonetheless, when re-visiting our investment case and accompanying scenario analysis we assessed that, if anything, the likelihoods of success may have actually increased. Our biggest concern had been competition in the key market of South Korea. Nonetheless, the most recent evidence is that it is growing rapidly and continuing to hold its near 80 per cent. market share in the
country. Looking across all the markets it operates in revenues grew over 50% annually in the first three months of this year with a significant long-term growth opportunity still remaining. Continued progress does not appear to be recognised by the market. Indeed, over the last two years revenues have increased nearly four-fold and yet the share price has fallen over 50 per cent. during that same period.
We would far rather endure painful drawdowns such as these than too readily abandon the companies and founders that have the potential to deliver the rare outlier returns we seek. We remain deeply enthused by some of the long-term changes we are seeing in the world and the companies bringing those changes to life. The continuing digitisation of our society, the intersection of biology and information technology and the much needed energy transition,
each offer tremendous long-term structural opportunities
This is worth a watch
https://www.youtube.com/watch?v=16OTs9Tql7Y
On the contrary, being old(and tired) may limit your acceptance and understanding of the digital world we live in and the potential returns that can be made from disruptive companies. You guys should stick to bank and energy stocks perhaps which pay dividends but do not offer attractive compounding returns. I would rather my companies reinvest capital to grow rather than paying dividends. A good article was written by Terry smith on dividends if you want to get up to speed (and yes I am a massive Fundsmith fan having first invested 8 years ago and now holding a substantial investment there ((this has also been hammered recently)).
Well said Lord. Markets typically overshoot. If the war ends and inflation gets under control by year end, we could see a 15-20 percent bounce minimum in the tech sector. A few percentage increases in interest rates won’t be harming the fundamentals of high quality growth stocks, many of which can simply pass on their increased costs to the consumer… looks at the recent large price rise Microsoft implemented. Who is going to move away from Microsoft? No one as there is no other option.
Age is irrelevant. Anyone with a brain (young or old) can analyse history. And history shows high quality growth businesses outperform. History also shows if you are patient and have time on your side you will make a good return, even simply following a tracker fund. There has been a rotation but I expect in the near term there will be some rotation back. You are 6 months late flagging these warnings. I’m not sure what your purpose is here.
Thanks oldandtired for your patronising comment. You know nothing about me. I may well be a lot smarter than you. As I said, I do not care about the next month / months or even 5 years. Look at the long term chart of the S&P and Nasdaq. It's up. Just like property. It all depends on your time horizon. I invest a relatively large chunk of money each monthly and let it compound. Retirement at 55 is my goal.
And this isn't a "punt". Maybe the reason you are still here at your age is because you have been making "punts" all your "investing" career?
The world we live in today is very very different to 2000 so you cannot compare the two time periods. I am only 35 and have 5% of my portfolio here for many many years. In any case, look at SMT performance going back to 1993. It has returned 1600%. That will do me when I am 65 thank you very much.
Why didn't you jump on here 6 months ago. You would have been much more credible then. Either you are an intelligent de-ramped or an unintelligent "investor".
" growth story has ended for now but it will come back but it tuck 16 years last time."
took 16 years? Nike is a growth company. If you held Nike during this 16 year period, you'd have done pretty well today. Same for starbucks, same for Amazon, same for Apple, same for Google. The list goes on.
BTW I also like North sea oil and gas. Recently X4 on Kistos. Bought myself a Ferarri 488 Pista with the proceeds ;)
I disagree. Tesla does have a moat. It has the first mover advantage, scale and production capabilities no other car maker has for EVs and the brand. Cars are not it's only source of review. Battery storage is the future and it is a leader in this area. Tesla has the brightest and best working for it and will therefore continue to innovate. If you were a leading engineer graduate, would you prefer to work for Tesla or Vauxhall or Nissan? I think we know the answer.
I am talking about Amazon, Kering, Ferarri, AirBnB to name a few. People buy in to SMT knowing the risks but also knowing the massive potential upside. Over 10 years this has out-performed and I believe 10 years from now it will also have outperformed. Each to their own though.
CHRI5P, sorry but you are talking nonsense. You cannot compare 2000 decade to now. We are in a different world. If you bought Amazon in early 2000s you'd be a multimillionaire now. Whereas if you held cash you certainly wouldn't. Tech, AI, digitalisation and clean energy are the future. Many of the companies SMT holds are leaders in their field, highly profitable and have strong balance sheets (Amazon, Tesla). Raising interest rates a few percent isn't going to make a difference to their balance sheets. The hit to growth stocks is overdone IMHO and will bounce back strongly for the quality stocks with "moats" around their business. Value stocks trade on lower P/Es because they are simply not as good businesses. Compare banks / energy and resources against growth companies over the last 50 years and come back to me.
Also people think Tesla is just a car company. It's not.
Twonko, the strategy here is buy and hold for the long term unless the fundamentals change. The pandemic was an exceptional event and the managers cannot / should not be expected to trade unless underlying fundamentals have changed ignoring the pandemic. Perhaps you would be better day trading?
remember also that SMT is not the only share impacted. Historically excellent performing funds are also down substantially.. Fundsmith (down 13% in 3 months), Smithson (down 17% in 6 months), Rathbone Global Opps (down 17% in 3 months). valuations have been high but there are many great businesses in these funds that will do well over the long term.
I too should have top sliced. In fact I kept buying all the way up to 1500, having first bought at 600. I am still up overall but not by much. SMT fell 50% after dot.com crash. It also fell 50% in 2008, so there have been bigger falls than this. If inflation is transitory, which a number of experts think may be the case, then we may quickly move back into mid 1000s.
I think with SMT you have to take a view, regardless of recent share price declines. Do you believe the managers can spot great opportunities and deliver outstanding returns over the long term. The only thing I can judge this on is their past performance and they have shown themselves adept at doing this.
SMT is not a tech fund. It owns lots of businesses that use tech but they are not 100% tech businesses i.e they have products which they sell with strong margins. Companies which do not use tech are getting left behind.
I was up 80% on my STM holding a few months ago, and now only 35% up (I have £45k total SMT). It hurts, and had I seen this coming I would have sold and bought back lower. But you can always say that with investments... always ifs and buts where you could have made more money. I have come to the conclusion that if you believe in the process and managers and have a long time horizon (I am 36), you should hold the fund at a percentage of your portfolio you are comfortable with (8% of my portfolio is SMT) and sit back and leave it.
I welcome other thoughts
ATB