By
Borsgade
François Rochon and the Giverny Capital team just released their 2023 annual letter to shareholders. This year is special because it’s the 30th anniversary.
They cover several subjects covering Charlie Munger, flavor of the day, owner earnings and how to use them as well as a 2024 outlook.
What I would call an “index waltz” can be summarized as follows: A few very large-cap stocks are doing very well and propelling the S&P 500 to strong returns. Many money managers who don’t own these stocks (or are underweight them) are underperforming the index and a number of their clients are jumping ship to invest in index funds. Some of those managers, motivated not to lose their jobs, are throwing in the towel and buying up the index’s largest stocks in increasing numbers to curb their underperformance.
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How does this waltz stop? In the same way that the law of gravity governs all particle matter in our universe, the law of intrinsic value always ends up winning out in the stock market: it eventually brings stocks that trade above their underlying values back to Earth.
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