Letter to Our Partners - Q3 2024
Steady as she goes - sticking with our incredible money makers
Hi fellow Tortoise!
You may wonder: what has Antonio Vivaldi got to do with our portfolio?
First off, we love his set “The Four Seasons”, it’s energizing. For those keen to enjoy Vivaldi’s masterpiece, we’d warmly recommend this concerto by Anne-Sophie Mutter.
Winter is coming, and Vivaldi’s piece perfectly illustrates the mood of investors. It’s separated into three movements.
First, allegro non molto, evoking the harshness of winter. Fast, sharp rhythms and dissonant harmonies represent biting winds, shivering cold, and the general discomfort of the season. Then followed by largo, which is calm and peaceful, symbolizing a cozy moment by the warmth of a fire while the cold rages outside. The solo violin sings a soft and smooth melody, accompanied by plucked strings that evoke a gentle feeling of warmth and safety. Finally, allegro emphasizes the return of the winter’s intensity. The music depicts the cracking of ice and the slipping and sliding of people on frozen ground, ending with a sense of braving and surviving the season's harsh challenges.
Investors today are navigating an environment filled with news-driven volatility, whether it's tied to developments in China, central bank policies, or oil prices. Just when the market seems to settle, sudden bouts of panic can drag down the share prices of strong companies whose fundamentals remain largely unaffected by short-term noise, such as FED decisions. Eventually, calm returns, leaving us to ask: what has really changed in the past few weeks? The answer is often: very little.
Fortunately, the patient investor - the "Tortoise" approach - can stay focused on their businesses, allowing for the benefits of long-term compounding by tuning out short- to medium-term fluctuations.
A fully invested portfolio with our selected companies and corresponding allocation mix returned 18.29% (EUR) over the first nine months of 2024. Our year-to-date performance reflects the results of our public stock investments, net of transaction costs and related charges, with reinvested dividends included. However, equity investments represent just a portion of our overall wealth, and it’s ultimately up to you to decide where to allocate new capital and how much emphasis to place on the stock market.
We own exceptional companies, led by top-notch people, that are destined for a great future. Our investment philosophy remains unchanged: favor companies with solid balance sheets and dominant business models, along with buying these companies at reasonable valuations. It’s the message we’ve been emphasizing in our previous letters. If we can reiterate that same phrase for years to come, it means the portfolio likely won’t have changed much.
It’s like watching paint dry – don’t change a winning team, and the Q2 conference calls confirmed why we stick to the companies we own today. Barring some glitches/buying opportunities or excessive run-ups in valuations, we intend to keep portfolio turnover low as we pretty much got our initial weighting in most of our holdings. The conservatively calculated IRR mix still looks decent, but it does reveal that today’s market environment doesn’t offer screaming buying opportunities.
As always, we’ll keep you updated on our portfolio/investable universe, continue to publish our deep dives, and look forward to highly interactive discussions on all kinds of investing topics. It's you who made this all possible: sharing our research, engaging with our fellow annual members on the private Discord, and getting to learn new people from all over.
In Q4, we’re planning to write our deep dive on Constellation Software, set to be released at the end of November.
We’ll be less active in the latter part of December to celebrate the holidays with our family, neighbors and friends.
Thank you for your unwavering support, and let’s keep growing The Compounding Tortoise family for the remainder of 2024 and well beyond!
It’s been an incredibly insightful journey so far, and we’re hungry for more.
Yours sincerely,
The Compounding Tortoise, aka the CT
Download the letter through the below attachment.