Q1 2024 client letter

David MoonUncategorized

April 2024 Dear clients and fellow shareholders: Over a period as short as a few months – or even a year – stock prices can be influenced by almost anything, including factors that are completely unrelated to the actual values of the underlying businesses. The 5-to-10% rise in the U.S. stock market during the first quarter was a pleasant reminder of that fact. (Our stock portfolio increased approximately 13% during the first quarter. Your actual equity portfolio returns in each year likely differed somewhat from our model, due to your specific asset allocation, possible legacy positions in your account and/or … Read More

Q4 2023 letter

David MoonUncategorized

January 2024 Dear clients and fellow shareholders: If there was anything that economists were clear about a year ago, it was that the U.S. was in for a challenging 2023. More than two-thirds of the economists at the 23 large financial institutions that do business directly with the Federal Reserve predicted an impending recession. The reasons were evident—the housing market was declining, banks were tightening lending standards, interest rates had reached their highest levels since 2008, inflation stood at 7%, real wage growth was negative, and the Conference Board’s Leading Economic Index had fallen for nine consecutive months. Instead of … Read More

2023 Q2 letter

David MoonUncategorized

July 2023 Dear clients and fellow shareholders: The 15% S&P 500 increase during the first half of 2023 caught most pundits off guard – a fact that likely says much more about pundits than the stock market itself. (In December, the median forecast of 41 strategists polled by Reuters was a 6% return for the S&P 500 for the year.) It serves as a reminder of the substantial risk long-term investors assume when they try to predict short-term movements in stock prices – regardless of whether their forecasts are based on politics, the economy, underlying business fundamentals, the Federal Reserve … Read More

Retail theft is a growing and expensive problem

David MoonBlog, Uncategorized

The economic value of social order and peace is significant, and it seems we are seeing the reverse of that some areas of the U.S. In a recent press release, retail giant Target said that merchandise theft will likely rob shareholders of $500 million of earnings this year – bringing the two-year theft total to $2 billion. Walmart lost $3 billion to thieves in 2022. Total U.S. retail theft last year is estimated at more than $100 billion. This is not an old problem that has suddenly become a convenient excuse for big businesses to demonstrate some long-held animus toward … Read More

2022 Q4 letter

David MoonUncategorized

January 2023 Dear clients and fellow shareholders: The S&P 500’s almost 20% decline last year was the stock market’s third worst year since 1937 and the largest annual drop since the Great Recession decline in 2008 (-38.5%.) While we are never pleased with losses, our focus on valuation helped us sidestep much of the market’s 2022 decline. Our stock portfolio declined approximately 7% last year, buoyed by our positions in healthcare (McKesson, Cigna, AbbVie, DaVita and CVS) and homebuilder Green Brick Partners. (Your actual equity portfolio return may differ because of legacy positions or cash flows in/out of your portfolio.) … Read More

2022 Q3 letter

David MoonUncategorized

October 2022 Dear clients and fellow shareholders: Following the worst January-September stock performance in 20 years, worldwide equity indices have clearly entered into bear market territory. The US benchmark S&P 500 is down 25 percent year-to-date, with the Nasdaq Composite down a whopping 32 percent.  (Our stock portfolio has declined approximately 15 percent this year.) The biggest shock to many investors in the third quarter wasn’t the miserable return of the stock market; it was the revelation that the supposed risk mitigating portion of their portfolio – the “safe bonds” – turned out to be not quite as safe as … Read More

Q2 2022 letter

David MoonUncategorized

July 2022 Dear clients and fellow shareholders: Sir John Templeton once famously said that the most dangerous words in investing are “this time it’s different.” In the past 100 years, U.S. stocks have experienced 22 bear markets, the most recent of which began two weeks ago. The market eventually recovered from all 21 previous bear markets – and we expect this one to be no different. (We sent you an email on June 14 with historical bear market statistics and a white paper about bear market severity and duration. If you missed the email and would like us to resend … Read More

Q1 2022 letter

David MoonUncategorized

April 2022 Dear clients and fellow shareholders: Stock prices generally continued their decline in the first quarter, with the tech-heavy Nasdaq Composite posting the largest loss among the three major U.S. indices.  Our stock portfolio held up well, declining approximately one-half percent. Generally absent from the constant commentary about rising consumer prices is the effect inflation has on the actual value of financial assets, particularly bonds. Conventional wisdom is that including bonds in a portfolio provides a volatility-dampening balance to the unpredictability and risk of owning stocks. That conventional wisdom is naïve. Since 1982, interest rates have been in an … Read More

2021 Q4 client and investor letter

David MoonUncategorized

January 2022 Dear clients and fellow shareholders: By almost every broad measure, 2021 was a great year for investors. All major U.S. stock indices increased more than 20 percent, finishing the year at all-time highs. Our stock portfolio performed even better (up approximately 30 percent, excluding cash and bonds), despite not owning the ridiculously priced tech stocks that always seem to grab headlines. We enjoy those types of returns at least as much as anyone else, but not to the point of ignoring the components that generated those returns. Not all price increases are created equal – and some are … Read More

July 2021 investor letter

David MoonUncategorized

July 2021 Dear clients and fellow shareholders: When the overall stock market increases 15% in a 6-month period (a 30%+ annualized return), it means 1 of 3 things is happening. Investors are accelerating future gains into the current period, they are correcting for prior periods when stock returns trailed increases in corporate earnings, or a combination of the two. This year’s exceptional returns-to-date fall into the third category.  That is, investors are broadly building almost perfect expectations into the pricing of the large S&P 500 stocks, while correcting some previous price/value disequilibrium in some specific sectors.  We won’t complain too … Read More