Zen investor
One of the privileges of writing here at Børsgade is that you get to follow the doings of so many talented investors. One of the portfolios that really stands out is Guy Spier’s from Aquamarine Capital. Not because he makes big spectacular or controversial deals. Quite the opposite, in fact.
The most remarkable thing about Guy Spier’s portfolio – both in Q2 and previous quarters – is how few trades he actually makes. In fact, Spier has made a total of four deals in 2021 and 2022 (one of them in Q2 this year – we’ll come back to that one). That’s all there is to it. Here is a man who truly understands that it’s not the number of trades that brings success to a long-term investor, but the quality of the decisions made.
The very low activity (or ‘turnover’ if you will) is a combination of several things. Spiers sees himself as a co-owner of the companies he owns, which also means he takes a very long-term view. He typically holds his positions for 5, 10 or even more years. At the same time, Spier is very concentrated in his portfolio: In Q2 2022, he has a total of 12 positions. This is significantly fewer than the other investors we follow here at Børsgade.
However, it should be noted that only the portion of Spier’s share portfolio that is listed in the US is disclosed (foreign-listed companies are not required to be disclosed to the US Securities and Exchange Commission via 13F filings). In interviews, Spier has said that he has a few investments in India, among other places. The portfolio is thus larger than the 12 positions, but hardly more than 15 or maybe 18 positions in total.
Sit on your ass
Many other successful investors throughout history have had different versions of this approach. Guy Spier’s old friend, value investor Mohnish Pabrai, said in a
interview
back in 2021 with the Babson College fund about investing:
“If you love watching paint dry, then this is the business for you.”
– Mohnish Pabrai
Warren Buffett’s analogy for this type of investing is his ‘punch card’ approach. Buffett’s concept is that you as an investor should think of investment decisions as an old-fashioned punch card with 20 holes. It’s the total number of trades you can make in your life. With that starting point, we’ll be far more likely to study and understand the companies we invest in.
Buffett has talked about this back many times. Here’s an example from a presentation years ago:
However, Buffett’s longtime business partner, Charlie Munger, put it best:
“Sit on your ass. You’re paying less to brokers, you’re listening to less nonsense, and if it works, the tax system gives you an extra one, two, or three percentage points per annum.”
– Charlie Munger
This is especially the case in Denmark if you are investing with unrestricted funds. Here, the return is ‘realization taxed’. In simple terms, you only pay tax when you sell your shares. If you make sensible long-term purchases, you can defer tax payments and earn interest on the full amount for the lifetime of the investment (unlike ‘stock taxation’ where you pay tax/deductions on your annual return every year, regardless of whether you have sold your investment or not). Skat elaborates on the two principles and the differences between
their website
.
The above is a good reminder that success in the investment world rarely means a lot of activity or attempts at market timing. Quite the contrary. So when there is a lot of noise in the media – both when the markets are down as they are at the moment, or when everything is going well and there are new all-time highs every day – remember that the right decision in the vast majority of cases is to do… nothing.
Spiers' only trade in 2022
Well, something has to be done once in a while. Even for Guy Spier.
If you’ve been following the financial news in recent months, you’ve probably noticed that Tesla founder Elon Musk made a formal takeover bid on Twitter back in April. And then he regretted it. According to Musk himself, because he can’t get a proper clarification on the extent of bots (i.e. fake accounts) on Twitter. Twitter itself believes that they have already accounted for the extent of the bots and that Musk wants to withdraw from the deal because the price has dropped significantly since Musk bid $53.20 per share to around $41 in early September.
While the two parties are now preparing for the trial in Delaware, where Twitter will try to force the deal, Guy Spier has meanwhile sold his position in Twitter. As always when an investor sells a position in a company, there can be a myriad of reasons, many of which have nothing to do with the company. But because there have been so many changes in the investment case on Twitter (and Spier hasn’t made any other deals this year), there’s some likelihood that the sale has something to do with the current situation.
Spier bought Twitter in Q2 2020, when the price was between $26 and $33. Depending on when in the two quarters he bought and sold, this means that he will have made a gain of around 30-60% in the two years.
With the current share price (around $41), there is a potential upside of 30% if the deal goes through. The challenge is that it’s difficult to know when the dispute is finally resolved, the extent to which the litigation and extensive press coverage takes focus away from management, and the whole process can cause an employee exodus and lower job satisfaction at Twitter.
At the end of the day, investing in Twitter has gone from being a long-term case on the success of a social platform to more of an arbitrage trade based on a legal assessment of the lawsuit. Guy Spier didn’t want to take that bet.
Full transparency: At the time the post was published, the author or a related party has invested in Twitter. The author has no positions in other companies mentioned in the article.
The author or his/her related parties have not received any payment from companies mentioned in this article, nor do they have an employment relationship with the companies mentioned.
