The ability to suffer

Do you know the Nespresso success story in detail? Of course, you know about the coffee capsules - even if you prepare your coffee in a different way at home or in the office. After all, as George Clooney says in the commercials: "Nespresso, what else? ".

Yet, the "what else?" was not so clear in the past. The Nespresso brand did not generate a profit for Nestlé for a whole 25 years. An enormously long dry spell that certainly drove irritable sweat into the face of managers and made shareholders cry before they were finally rewarded with an incomparable market position and the corresponding profits.

In 2021, coffee capsules generated sales of CHF 6.4 billion. Of this, 23% remained as underlying operating profit (source: Nestlé Annual Report 2021).

The family holds together

Longtime U.S. investor Tom Russo talks about the "capacity to suffer" as an important criterion for financial success. He has held Nestlé shares for decades and singles out Nespresso as a shining example of the capacity to suffer.

Alternatively, think of Amazon.com, the founder and longtime CEO until 2021, Jeff Bezos, invested billions in expanding the company. He eluded the short-term race to meet and, better yet, exceed quarterly earnings expectations.

Often families have a pronounced capacity for suffering. Because they usually think over decades and sometimes even generations.

Will and ability

At Gutmann, it is not the quarter that counts, but competitiveness over the long term is critical. We are not a systemically important institution (SIFI) and must stand up to the critical eye of our customers. This implies that we continuously work on our services, investing in our business model and improve ourselves.

This effort requires two parts, the will and the ability:
- Corporate management only has the will if the shareholder - instead of squinting at short-term quarterly results - takes the long view. In addition to families, it is sometimes the individuals who hold a decisive ownership share - just think of Warren Buffett at Berkshire Hathaway, in which he holds 37%.

- In turn, the ability only exists if the company's financial resources are sufficient. As in the case of Nestlé and Amazon, for example, where success has been worked on for decades and time and money have been invested accordingly. In this way, past and present success feeds future success.

More treats than tricks in October

A few weeks ago, in the newsletter Equities As Inflation Protection, I spoke of the sacrifices that also have to be made on the stock market in order to achieve the goals that have been set. Those who did not give up in disillusionment in mid-October were rewarded by the stock market upswing in recent weeks. After the inflation figures in the U.S. were less than expected, stock markets around the globe jumped.

As my colleague Pavel explained last week, it is important that you hold your investments even in difficult times and thus, do not miss these positive developments. After all, good returns come from long-term participation in successful companies and not from frantic buying and selling of individual shares.

Stay involved and profit

Would you like to know more about how we implement this strategy in the Gutmann World Equity Portfolio? Talk to your Gutmann advisors in detail. Gladly by phone or online, but preferably in person over a nice cup of coffee... what else?