Our Fund was launched in 1963 and there aren’t many companies who are “Senior” to us. Dr Martens is. The company launched its first boot in 1960 and remains an iconic brand even today. 

Dr Martens is a British company that designs, develops, and sells footwear. The Company operates in America, Europe, and Asia-Pacific with product categories that include Originals, Fusion, kids, casual, and accessories. Though it operates in over 60 countries globally, its new “digital first” strategy is gaining traction while it takes back operations from franchisees. 

The company’s IPO in January 2021 was a massive success with the backing of a who’s who in the banking world: Morgan Stanley, Goldman Sachs, Barclays, BofA Securities, HSBC, and RBC Capital Markets. It was a well-marketed IPO and demand at 370p per share was not a huge surprise. However, the “IPO” was exactly that – It (was) Probably Overpriced. On listing the shares even crossed £5/- and frankly, that was not the time to pull the trigger. 

We kept track* of developments from a distance. Fortunately, the market gave us an opportunity to buy those very shares at half the price and we did.

With Kenny Wilson as the CEO and Jon Mortimore as CFO, we believe this is one of the best CEO-CFO combinations in the London market today. We have no doubt this 62-year-old company is very much young at heart and has a long way to go.

*PS: There can be periods, sometimes months, when we do not buy (or sell) a single company. That does not mean we are asleep at the wheel. Rather, we are continuously reading, analysing, and meeting management teams, building our knowledge base on “target” companies.

We are “active” investors but that does not mean we frenetically trade in-and-out of companies. As Charlie Munger says, “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait”. Our advantage is our long attention span in a world suffering from overstimulation and the wish for instant gratification. Constant trading only provides the illusion of hard work rather than real returns.  We are patient asset allocators, carefully scouting the field, waiting for opportunities that deliver results, not chasing illusions.

The post Dr Martens appeared first on spherefunding Investment Management.

In its recent annual report update as of April 2022, food manufacturer Premier Foods reported continued strong operational performance and increased its profit guidance for the full year. Revenues decreased by 3.5% but the annualised growth stands at 4% over the years as the company continues to win market share with its iconic brands (Mr Kipling, Bisto and Homepride to name a few).

On 25 July 2022, the company acquired The Spice Tailor, a premium authentic Indian and South East Asian recipe kit maker for £43m. The brand will be complementary to the Group’s Sharwood’s and Lloyd Grossman brands and will benefit from Premier’s wide distribution network.

CEO Alex Whitehouse has done a fantastic job since taking the helm and if the market fails to value the company properly, it may well fall into the hands of private equity.

The post Premier Foods appeared first on spherefunding Investment Management.

CEO Carlo Centonze is the driving force behind HeiQ, a leader in textile innovation. Conceived during a hike in the Swiss Alps in 2005, today the business has established 10 patent families and over 600 brand partnerships worldwide. Recent results confirmed a consistent performance, with sales in the year to 31 December 2021 up 15%, to $57m. HeiQ has also undertaken some sensible acquisitions; sustainable products specialist RAS AG and probiotics firm Chrisal.

One common theme that readers will observe in our holdings is our focus on three things: management, management, and management. In each case, these leaders run their businesses with a true ownership mindset and they love what they do. In our opinion, they are not principally driven by financial gain. Instead, they care for company culture and play to win while delivering value to customers and all stakeholders.

We like to focus on good companies but prefer ones that are undiscovered and under-researched. These companies also have limited broker coverage and we like to buy them before others identify their attractions.

The post HeiQ appeared first on spherefunding Investment Management.

Coca-Cola HBC AG, a Switzerland-based bottler of Coca-Cola products. It has the exclusive rights to manufacture and sell Coca-Cola products in Austria, Cyprus, Greece, Italy, Northern Ireland, the Republic of Ireland and Switzerland. The countries it supplies in developing markets include Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia while under the emerging markets, the countries covered are Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, Macedonia, Moldova, Montenegro, Nigeria, Romania, Russian Federation, Serbia and Ukraine.

Our core strategy is: buying great companies. Buying good companies is great but not good enough. History has taught us that if we want good outcomes (read positive returns) the purchase price must also have a margin of safety.

Unfortunately (and often) great companies trade at high valuations i.e. a £10 currency note trades at £20. The note may be crisp and new but we refuse to pay more based on the “hope” that we will find a greater fool. Hope is not our strategy and never will be.

Putin’s attack on Ukraine would affect Coca Cola sales in the country and the company has also withdrawn from Russia. The market did not like this and when the price was weak we had our chance to buy at an attractive entry point. As long-term investors we are very happy to buy a first-class company at a fair valuation and hold for the long term – fully aware about the short-term negatives (which are widely known and, in the price). As the wise have said: Be greedy when everyone is fearful. We have the mindset do so.

The post Coca-Cola HBC AG appeared first on spherefunding Investment Management.

Endowment Bias 

Endowment bias can be thought of as “falling in love with an investment” in other words getting too emotionally attached. This investment may have performed fantastically well for you in the past and now you find yourself reluctant to sell any of it. Of course, this could be for perfectly rational reasons – the investment could be stock in a company that is a long-term winner in its industry and that is still blessed with tailwinds that support further growth. However, it may be an investment that, although it has performed admirably in the past, maybe past its best and it could be time to reallocate the capital tied up in the investment to more promising opportunities.

Potential solution: To prevent endowment bias from clouding your investment decisions, it can be worth asking yourself “does this investment still offer compelling opportunities for future growth, and, if I didn’t already own it, would I buy it today?” If the investment has grown to a sizeable proportion of your total portfolio, it is also worth asking “how would I cope if this investment were to suffer a large decline in value?”   It is important to note that not all investors will be susceptible to exactly the same biases. We are all perfect (and imperfect) in our own special way! You are the best judge to identify which biases have the better of you. Recognize these biases when you are exhibiting them and deliberately make an attempt so they do not cloud your investment judgment.  

The post Endowment Bias  appeared first on spherefunding Investment Management.

Loss Aversion 

Loss aversion may be the most common investment bias of all, particularly among newer investors (though even highly experienced investors can fall foul of this bias). Loss aversion arises as a result of the human tendency to feel the pain of a loss more acutely than the pleasure of an equivalent gain. In practice, this results in investors refusing to sell out of investments that have fallen in value, even if the fundamentals have changed, in the hope that, somehow, the investment will return to its original purchase price and they can sell out at breakeven. Another effect of loss aversion is that, as soon as an investment makes a small gain (say 10%), the investor will sell out to capture this small gain and, thereby, avoid the pain of a potential loss. In a nutshell, then, loss aversion can cause investors to run their losers and cut their winners, a terrible strategy for long-term wealth accumulation.

Potential solution: If an investor struggles with loss aversion, they should define a maximum loss they are prepared to take on the investment and either resolve to sell the investment if it falls to the price representing their maximum loss level or, better still, set a stop loss at this price level to take all the emotion out of the selling decision. Another way to deal with loss aversion is to look critically at investments that have fallen in value and ask yourself “are the reasons for my original investment still valid and if I didn’t already own this investment, would I still be happy to buy it today?”. 

It is important to note that not all investors will be susceptible to exactly the same biases. We are all perfect (and imperfect) in our own special way! You are the best judge to identify which biases have the better of you. Recognize these biases when you are exhibiting them and deliberately make an attempt so they do not cloud your investment judgment.  

The post Loss Aversion  appeared first on spherefunding Investment Management.

Anchoring 

Anchoring occurs when investors become fixated on a particular number, such as the price at which they bought into a particular stock or a price target that they hope the stock will reach. Anchoring can prevent an investor from selling out if the fundamentals change for the worse, holding on with dogged determination to try to get back to the breakeven point or from selling out of a currently profitable investment that probably doesn’t have too much further to go, simply because it hasn’t quite reached a particular target price. Anchoring may impose actual losses upon investors due to holding onto a sub-optimal investment for too long or subject them to opportunity costs, as they either don’t realize cash from existing investments that could be rolled into more promising opportunities or they don’t get into promising opportunities in the first place because the price of these opportunities never quite falls to an unrealistically low level that the investor is anchored to.

Potential solution: To avoid anchoring, investors should regularly review any price targets that they have for their investments or potential investments and ask themselves “is this price target reasonable based on rational analysis of the opportunity or am I irrationally anchoring on a particular price based on past experience or unjustified expectations?”      

It is important to note that not all investors will be susceptible to exactly the same biases. We are all perfect (and imperfect) in our own special way! You are the best judge to identify which biases have the better of you. Recognize these biases when you are exhibiting them and deliberately make an attempt so they do not cloud your investment judgment.  

The post Anchoring appeared first on spherefunding Investment Management.

Representativeness Bias 

Representativeness bias is exhibited when investors attach too great a weight to particular data points. For example, investors may assume that current trends in an industry that is inherently cyclical will remain in place indefinitely just because they have been in place in recent years or investors may assume that the results of a study involving a small sample will be representative of a much larger population.

Potential solution: To avoid falling victim to representativeness bias, investors should try to be mindful of probabilities and historical norms before extrapolating current assumed trends far out into the future.  

It is important to note that not all investors will be susceptible to exactly the same biases. We are all perfect (and imperfect) in our own special way! You are the best judge to identify which biases have the better of you. Recognize these biases when you are exhibiting them and deliberately make an attempt so they do not cloud your investment judgment.  

The post Representativeness Bias  appeared first on spherefunding Investment Management.

As humans, each of us has subconscious biases. These biases create blind spots and errors, costing us real cash. Perhaps we cannot completely eliminate our biases but we can work towards recognizing, acknowledging, learning, and ultimately reducing them. If done successfully, we will improve our decision-making and financial results.

Confirmation Bias 

Confirmation bias is the tendency for investors to actively seek out information that supports their preconceived views while totally ignoring any (and even all) contradictory information. For example, an investor may have purchased shares in a company in anticipation of the launch of an exciting new product and will avidly read any articles they can find on the benefits of this new product. However, they will actively ignore any articles on topics such as the strength of competitors’ products or potential delays or technical difficulties associated with the product launch. This “blinkers on” approach can lead to the incorrect assessment of downside risk and ultimately loss of capital.

Potential solution: Deliberately seek out information that challenges your original investment and/or discuss your views with trusted friends who have views that do not exactly agree with yours. Your open-mindedness and ability to assimilate new information objectively and dispassionately should do wonders to your bank balance.  

It is important to note that not all investors will be susceptible to exactly the same biases. We are all perfect (and imperfect) in our own special way! You are the best judge to identify which biases have the better of you. Recognize these biases when you are exhibiting them and deliberately make an attempt so they do not cloud your investment judgment.  

The post Confirmation Bias  appeared first on spherefunding Investment Management.

Avoid complications

• Borrowing to invest is always a bad idea and hugely risky.
• Using derivatives or CFDs may seem easy, but it isn’t. The perception is such geared investments entail paying only a small amount compared to the whole investment amount and betting on whether the share prices will increase or decrease. But risks are often ignored or even worse, not well understood. If the price of the share increases, you receive profits, or when the price of the share falls, you lose all your money, or sometimes if the loss is big enough, you are liable to pay more money.
• Put simply, invest in the stock market your savings and surpluses – do not borrow and put yourself under unnecessary pressure.

Take advice

Be willing to pay for good advice it always pays back many times over.

There are times to save money and there are times to spend it. If your loved one needed brain surgery would you look up Youtube videos before putting the loved one under the knife?

You wouldn’t, at least we hope so.

Similarly, do not save money when it comes to seeking good advice. Try to seek advice from an experienced qualified Financial Advisor not from a YouTube video man, who barely has his first moustache, teaching you “how to be a millionaire over the weekend.” Do not get fooled.

The first step to being wise is to stop being foolish.

The post Learning Investing appeared first on spherefunding Investment Management.