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François Rochon: 2024 Annual Letter To Shareholders

In his recent 2024 letter to shareholders, François Rochon provides a comprehensive overview of the firm’s investment philosophy, performance, and market outlook.

Here are the key takeaways:

  • Intrinsic Value Growth Drives Returns: Giverny focuses on companies that grow their intrinsic value at above-average rates. In 2024, their portfolio companies grew intrinsic value by approximately 12.7% (including dividends). Since 1996, their companies have grown intrinsic value by 3266%, closely matching the stock market performance of 3344% – demonstrating that over the long term, stock prices reflect underlying business value.
  • Quality-Focused Investment Philosophy: The firm emphasizes investing in high-quality businesses with sustainable competitive advantages, strong returns on equity, low debt, and conservative accounting. They believe this approach reduces portfolio risk while delivering superior returns, challenging the notion that higher returns necessarily require higher risk.
  • Risk Management Framework: Giverny identifies four key dimensions of portfolio risk: diversification (maintaining about 20 securities), business quality (the most important factor), valuation discipline, and investor behavior (maintaining a long-term perspective rather than frequent trading).
  • Concentration in Mega-Caps: The letter notes that 2024 saw continued concentration in the S&P 500, with the “Magnificent 7” stocks returning 48% and now representing more than a third of the index. These companies trade at premium valuations (33x earnings for the top 4 versus 19x for the rest of the index), potentially limiting future returns

At Giverny Capital, we do not evaluate the quality of an investment by the short-term fluctuations in its stock price. Our wiring is such that we consider ourselves owners of the companies in which we invest. Consequently, we study the growth in earnings of our companies and their long-term outlook.

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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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