December 2023

To Our Business Partners


Last month we talked about how short-termism has affected the investment process over the last several years.  We think a major contributor to that phenomenon has been the rapid growth of computing power in the hands of Wall Street and investors.  Such power gives the user the ability to make very precise calculations, and with it a false sense of accuracy and confidence.  Accordingly, stock prices often react, sometimes significantly, when their results differ from the precise manufactured numbers.  While this may be great sport for day traders, it usually creates a short term effect that does little for the long-term results of investors.

Superinvestor Warren Buffett, paraphrasing economist John Maynard Keynes, said that he’d “rather be approximately right than precisely wrong.”  He was acknowledging the fact that many investors are trying to inject a level of precision into an environment where such precision simply doesn’t exist.  Companies in the public marketplace are broadly diverse among countries, locations, operating divisions, products/services, employees, etc.  Companies can be valued numerous different ways under numerous different assumptions.  And the investor is expected to believe that analysts can accurately predict the earnings power of companies down to the penny?!

Needless to say, this exercise of calculating single-point estimates is patently counterproductive.  We lifted the tagline, MARGIN OF SAFETY from Benjamin Graham to illustrate that there is a gap or difference between the PRICE of a security and the VALUE of the underlying business.  It’s a recognition that any calculations we as business analysts make are APPROXIMATIONS and have to be treated as such.  Just as a bridge builder constructs a bridge with the capacity to handle much more weight than the bridge is ever expected to bear, we strive to commit capital at prices that reflect the chance of miscalculations or unexpected events occurring.  We’d rather be approximately right than precisely wrong!


The November rally in stock prices did nothing to help us find undervalued merchandise in the marketplace, as the ratio of price to estimated value ticked up to a still-high 87% from 86%. We’re still waiting patiently to put more of your capital to work at satisfactory prices, which we would define at less than 67 cents for a dollar’s worth of company value.


After three straight months of decline, stock market indexes rebounded sharply in November. As has been the case for most of the year, performance has been dominated by a handful of heavily weighted technology stocks, as reflected by a nearly 11% gain in the NASDAQ Composite.  Most of the other indexes we monitor gained 8-9%. The year-to-date numbers continue to reflect this tech stock dominance, with the NASDAQ advancing almost 36% and the S&P 500 up 19%.  Most of the other indexes have advanced from 2-5%. Despite the significant advances of the major indexes so far this year, all the indexes we monitor have negative returns over the last two-year period, within a very broad range of -1% to -19%.   Our group* of portfolio stocks has trailed the indexes in the month of November but compares favorably to the indexes over the year to date and, more importantly, has produced positive results over the last two years.

Steve Nichols, CFA • Bill Warnke, CFA •  Andy Ramer, CFA

*The group of “portfolio stocks” — our Equity Composite for the purpose of evaluating investment performance — consists of 19 stocks that are held in our clients’ accounts. Portfolios might hold some or all of these stocks, depending on investment guidelines unique to each client, the timing of purchases and sales, and start dates of accounts. The performance of this group of stocks is a good proxy for our equity performance but might vary widely among accounts. Of course, past performance is not necessarily indicative of future results.

We hereby offer to deliver to you without charge a copy of our current Form ADV Part 2, in accordance with the U.S. Securities and Exchange Commission’s “Brochure Rule.” Please contact us if you would like us to send you a copy.