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Christopher Davis: Letter to Shareholders Fall 2024

In his recent letter to shareholders, Christopher Davis highlights that the era of near-zero interest rates, which began after the 2008 financial crisis, ended in March 2022 when the Federal Reserve started raising rates. This shift marks a return to a more normal economic environment, though it may bring volatility and disruptions.

Christopher expresses optimism about long-term progress and innovation, despite current challenges and pessimism and has positioned the portfolio around four main themes:

  • Financials: Focusing on banks with misunderstood durability and strength.
  • Technology: Investing in resilient growth at reasonable prices, avoiding overvalued market darlings.
  • Healthcare: Targeting companies that create value by moderating healthcare costs.
  • Industrials: Seeking businesses with resilient, non-linear growth and inflation protection.

Here are the key takeaways:

  • The end of the “free-money era” is leading to market normalization, which may benefit value-oriented investors.
  • The fund’s strategy focuses on companies with cash generation, conservative capital structures, durable business models, low valuations, and proven management.
  • While acknowledging current challenges, Christopher maintains a long-term optimistic outlook on human progress and innovation. He sees the advent of generative AI is seen as transformational, but approaches it cautiously, avoiding hype and focusing on companies that can effectively use the technology to build value.

From 2008-2022, artificially suppressed interest rates created a period of unprecedented economic and market distortion. Throughout that period, fundamental investment analysis—which rests on discounted present value, cost of capital and risk management—became largely irrelevant. Valuation discipline fell out of favor and the market increasingly rewarded momentum and speculation.

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Disclaimer of liability

The above has been prepared by Børsgade ApS for information purposes and cannot be regarded as a solicitation or recommendation to buy or sell any security. Nor can the information etc. be regarded as recommendations or advice of a legal, accounting or tax nature. Børsgade cannot be held liable for losses caused by customers’/users’ actions – or lack thereof – based on the information in the above. We have made every effort to ensure that the information in the above is complete and accurate, but cannot guarantee this and accept no liability for errors or omissions.

Readers are advised that investing may involve a risk of loss that cannot be determined in advance, and that past performance and price development cannot be used as a reliable indicator of future performance and price development. For further information please contact info@borsgade.dk

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