Sentiment follows price.
September has been a month away from the markets for us.
We’ve been out of cash, happy with our holdings, and in no particular rush to watch the continued volatility in some of our key positions play out. We haven’t even opened our brokerage account in roughly a month—not since we last added to a few of our holdings on September 3rd.
Tomorrow, new cash comes in, which means we’ll have to revisit the market and decide which opportunities are worth adding to. That’s what we’ll focus on today.
But we’ve learned that not checking your holdings for weeks at a time has its advantages. The less often we look, the easier it becomes to distance ourselves from the crowd. More importantly, it becomes much easier to separate the business from the stock.
We know some of our holdings are getting put through the wringer. Yet when we look at the businesses rather than their share prices, we still see the good earnings reports in the rear-view mirror, while we can’t yet see all of the bear cases playing out in the reports ahead. Time will tell whether the market is right. Looking at you, Shift4, Topicus, EQT, Lemonade and Adyen.
Because even after years of accumulating investing knowledge and experience, it’s difficult not to let the price on the screen influence how we feel about the company behind it. A rising share price can make a business feel better than it did yesterday. A falling one can make the same business suddenly feel a lot less attractive.
We think there’s little doubt that investors’ opinions of a business are heavily influenced by its price. Sometimes, price follows sentiment. And sometimes, sentiment follows price.
Portfolio Update
Not much have changed since last time. But the expected returns going forward are up — a strong sign that our portfolio value has declined this month… But, like Buffett would have praised, a net buyer of an item for the foreseeable future, should hope for lower prices — not higher.