Wide Moat Investing in a Leaky Boat market
that “I missed Nigeria (A mistake I hope to fix in coming weeks and months).” I’ve not been smart enough and yet to correct that blunder.
Buffett, “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks”
In this case the ‘chronically leaking boat’ for me is absence of worthy value stocks or growth stocks at the right price post an aggressive bull run resulting in a general over valued market.
Was reading a 1994 letter by Buffett addressed to Walter Schloss, just today, and another one in which he mentions that stocks can be at times worth NOT investing in at 40x PE under certain circumstances and one could wait on the sidelines (fixed income). He practised staying out of market for up to 4-6 years. These days, you can have consultants in tuxedo proudly claiming, how important it is to stay invested (as if you are a captain at the wheel and need to inspire the crew by example, or as an investor you need to lock in the capital in expensive equities to prove your loyalty to the country), you have to stay invested through thick and thin.
Investing in other depressed or reasonable markets is another perfect alternative to fixed income instruments. Despite tripling, 7UP Bottling Nigeria is available at 13 times annual earnings. Some more research is needed before committing to the idea, maybe the price would be up another 50% by the time I dilly dally.
Reversion to mean is a powerful model.
Lowest cost producer of a commodity is a natural MOAT. One can easily buy top two of the leading Platinum producing companies, both of which are down 70% this year on back of strikes in Zimbabwe, aging mines and tumbling platinum prices. Two biggest producers globally are Anglo Platinum and Impala Platinum, both down 60-70% this year. Both are listed on one or more of OTC market, South African Exchange and Australian Exchange.
Some more unknowns (that have nothing to do with quality of company but Government policies and regulations) prevent me to bet on platinum just yet.
The hunt is on before being submerged in a leaky boat (aka correction of 15-20%, a euphemism for loosing a lot of money very swiftly in an over valued market).