I'm Not Competing In This Race!

The new year has begun, and the clock has been set to zero. The race for the best performance of the calendar year is on again. Who will win in 2024?

Stop, stop, stop! Not one step further on this wrong path. I won't even enter the competition. If you put money to work today and think shorter than 5 years, you are not investing. Doing that is speculating. Don't get me wrong, I have nothing against speculation. It is an important part of every market, because without speculation there would be no liquidity. Without it, we long-term investors would pay a higher price for every transaction. 

However, thinking long-term does not mean that every share must be held for more than 5 years. It is important to react to rapid market developments, which may well result in a shorter holding period. However, years of experience on the stock market show that an average holding period of less than one year across the portfolio is not investing, sorry.

Act courageously

In our weekly Chief Investment Office meetings, I repeatedly emphasize that we do not position ourselves to manage performance over the coming months. Firstly, this is not possible and secondly, you get caught in a short-term hamster wheel that costs performance. We need to focus firmly on the next 5 years. What do we need to do if we want to maximize returns over this period and at the same time not miss out on current opportunities? 

The long horizon gives us the necessary courage to act today. In the knowledge that the coming months may be bumpy, and the decision taken may lead to criticism. 

In our core equity strategy, we live and breathe long-term ownership. The quarterly adjustment of positions may seem like short-term activity. But it is not, it is pure discipline. In fact, we hold our stocks for more than 5 years on average. 13 stocks have currently been held for more than 10 years. Over long periods of time, only the quality of the business model and success on the free market count. 

How far ahead does ChatGPT think?

Chasing short-term performance comes at a high price. The shorter the time horizon, the more you face an unbeatable opponent: the algorithm. Artificial intelligence was already superior long before there were LLMs (Large Language Models - i.e. ChatGPT and the like). Or do you think the superiority of computers only exists in the board games of chess and Go? 

So far, I haven't come across a computer model that thinks about the next 5 years. And even if the time comes one day, people will remain involved and people are impatient. We prefer to be patient, because as the old master of investing, Warren Buffett, said: 

"The stock market is a device for transferring money from the impatient to the patient."