Bronte Capital monthly letters

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#1
This is end December and I assume the bruises are going to get worst in Jan2021.

They say that the end of the bull market comes when the last short seller gives up. Given the amount of money and balls, many haven't.

And also I am definitely going to re-read Go-Go Years by John Brooks again (Aiks, I am a bit late as I am #6 on the waiting list in NLB overdrive app)

Amalthea Fund – December 2020

You, dear clients, however have a choice to make – and we will understand if you make it. Our recent results are not good; but we believe our future will be better, for this period too will end.

However, perhaps you possibly know a young manager who has earned well over 100 percent this year. You might want to take your money there. It pains us to say this – but given our results we will understand if you do.

http://files.brontecapital.com/amalthea/...202012.pdf
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#1
This is end December and I assume the bruises are going to get worst in Jan2021.

They say that the end of the bull market comes when the last short seller gives up. Given the amount of money and balls, many haven't.

And also I am definitely going to re-read Go-Go Years by John Brooks again (Aiks, I am a bit late as I am #6 on the waiting list in NLB overdrive app)

Amalthea Fund – December 2020

You, dear clients, however have a choice to make – and we will understand if you make it. Our recent results are not good; but we believe our future will be better, for this period too will end.

However, perhaps you possibly know a young manager who has earned well over 100 percent this year. You might want to take your money there. It pains us to say this – but given our results we will understand if you do.

http://files.brontecapital.com/amalthea/...202012.pdf
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#2
It is like re reading letter from late 1990s or 2000.

Post 2000, there was a whole generation shift in the mindset of many and it took almost 20 yrs later before this new generation able to fuel the current bubble and I think current generation is better than the last perhaps.
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#2
It is like re reading letter from late 1990s or 2000.

Post 2000, there was a whole generation shift in the mindset of many and it took almost 20 yrs later before this new generation able to fuel the current bubble and I think current generation is better than the last perhaps.
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#3
I'm not sure if I would classify Shopify, Tesla, and The Trade Desk as garbage stocks lol. I happen to own all 3 for multiple years; and they have been a rather consistent growth engine, run by competent management, each leading in their own secular growth industries.

I do agree though, that some valuations may be over-extended in the short term, and have "taken profits" in some of them (still holding a position in all three).

End of the day, I think it's better to be a long-term business owner and sit on your ass, instead of trying to short (ie a form of market timing strategy), long-term performers like Amazon/Tesla/Apple etc.

Only famous short-seller I know that got rich, long-term, from shorting is George Soros (https://www.investopedia.com/ask/answers...ngland.asp). 

Most consistently successful investors, often take a position early in great companies, and let it compound over time (aside from Founders of said companies; Buffett (Geico), Munger (Costco), Lynch (Dunkin Donuts) etc.).
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#3
I'm not sure if I would classify Shopify, Tesla, and The Trade Desk as garbage stocks lol. I happen to own all 3 for multiple years; and they have been a rather consistent growth engine, run by competent management, each leading in their own secular growth industries.

I do agree though, that some valuations may be over-extended in the short term, and have "taken profits" in some of them (still holding a position in all three).

End of the day, I think it's better to be a long-term business owner and sit on your ass, instead of trying to short (ie a form of market timing strategy), long-term performers like Amazon/Tesla/Apple etc.

Only famous short-seller I know that got rich, long-term, from shorting is George Soros (https://www.investopedia.com/ask/answers...ngland.asp). 

Most consistently successful investors, often take a position early in great companies, and let it compound over time (aside from Founders of said companies; Buffett (Geico), Munger (Costco), Lynch (Dunkin Donuts) etc.).
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#4
@wildreamz, I don't think the letter referred Shopify, Tesla, and The Trade Desk directly as "garbage stocks". These stocks were used as examples for "twenty times sales is the new ten times sales".

The word "garbage" has been used generically in the letter and if it was specified, only targeted at SPACs.
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#4
@wildreamz, I don't think the letter referred Shopify, Tesla, and The Trade Desk directly as "garbage stocks". These stocks were used as examples for "twenty times sales is the new ten times sales".

The word "garbage" has been used generically in the letter and if it was specified, only targeted at SPACs.
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#5
(01-02-2021, 08:30 PM)weijian Wrote: @wildreamz, I don't think the letter referred Shopify, Tesla, and The Trade Desk directly as "garbage stocks". These stocks were used as examples for "twenty times sales is the new ten times sales".

The word "garbage" has been used generically in the letter and if it was specified, only targeted at SPACs.

Noted. They were often mentioned as a group, in the same sentence ("Rampant speculation in growth-oriented and garbage stocks.."). It's very confusing. They are fundamentally very different short prospects, and should be treated as such.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#5
(01-02-2021, 08:30 PM)weijian Wrote: @wildreamz, I don't think the letter referred Shopify, Tesla, and The Trade Desk directly as "garbage stocks". These stocks were used as examples for "twenty times sales is the new ten times sales".

The word "garbage" has been used generically in the letter and if it was specified, only targeted at SPACs.

Noted. They were often mentioned as a group, in the same sentence ("Rampant speculation in growth-oriented and garbage stocks.."). It's very confusing. They are fundamentally very different short prospects, and should be treated as such.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#6
(01-02-2021, 10:16 PM)Wildreamz Wrote:
(01-02-2021, 08:30 PM)weijian Wrote: @wildreamz, I don't think the letter referred Shopify, Tesla, and The Trade Desk directly as "garbage stocks". These stocks were used as examples for "twenty times sales is the new ten times sales".

The word "garbage" has been used generically in the letter and if it was specified, only targeted at SPACs.

Noted. They were often mentioned as a group, in the same sentence ("Rampant speculation in growth-oriented and garbage stocks.."). It's very confusing. They are fundamentally very different short prospects, and should be treated as such.

But even good companies take a long while to recover from excessive valuations.
There was that example of how long it took MSFT to recover from dotcom highs.

https://finance.yahoo.com/news/heres-muc...14082.html

To be fair I don't think it applies in your case since you have taken some profits but it could be a problem for investors who just got in.

Also on short-sellers, I don't think it is accurate to describe them generally as market timers, although some of them undoubtedly are.

There are some short-sellers who have successfully uncovered frauds.
Jim Chanos and Enron being a famous example.
Others include John Hempton and Fahmi Quadir with Valeant and Wirecard.

https://www.globalcapital.com/article/b1...et-capital

Thanks to Weijian for providing the link to the fund letter
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#6
(01-02-2021, 10:16 PM)Wildreamz Wrote:
(01-02-2021, 08:30 PM)weijian Wrote: @wildreamz, I don't think the letter referred Shopify, Tesla, and The Trade Desk directly as "garbage stocks". These stocks were used as examples for "twenty times sales is the new ten times sales".

The word "garbage" has been used generically in the letter and if it was specified, only targeted at SPACs.

Noted. They were often mentioned as a group, in the same sentence ("Rampant speculation in growth-oriented and garbage stocks.."). It's very confusing. They are fundamentally very different short prospects, and should be treated as such.

But even good companies take a long while to recover from excessive valuations.
There was that example of how long it took MSFT to recover from dotcom highs.

https://finance.yahoo.com/news/heres-muc...14082.html

To be fair I don't think it applies in your case since you have taken some profits but it could be a problem for investors who just got in.

Also on short-sellers, I don't think it is accurate to describe them generally as market timers, although some of them undoubtedly are.

There are some short-sellers who have successfully uncovered frauds.
Jim Chanos and Enron being a famous example.
Others include John Hempton and Fahmi Quadir with Valeant and Wirecard.

https://www.globalcapital.com/article/b1...et-capital

Thanks to Weijian for providing the link to the fund letter
Reply
#7
People often point to Microsoft, Sun Microsystems to demonstrate a bearish viewpoint of overvaluing growth; and people also point to Amazon to demonstrate a bullish viewpoint of undervaluing growth. In general, these are three very specific companies, with very specific circumstances (e.g. extremely disciplined management vs extreme mismanagements, extremely different growth rates etc.; before and after the Dot-Com bubble burst).

Every new high-growth, high-valued company probably fall somewhere in-between the two extremes, unique in its circumstances, and needs to be evaluated from scratch.

Due to the mechanics of shorting (interest rates to borrow shares, need to cover if the stock goes higher before it drops etc.); I'd say shorting, in general, is inherently a market timing strategy. Yes, there are isolated successful examples, but rarely consistent over decades. Jim Chanos' short fund loses -0.7% annually from founding to 2017 (https://www.bloomberg.com/opinion/articl...h-business).
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#7
People often point to Microsoft, Sun Microsystems to demonstrate a bearish viewpoint of overvaluing growth; and people also point to Amazon to demonstrate a bullish viewpoint of undervaluing growth. In general, these are three very specific companies, with very specific circumstances (e.g. extremely disciplined management vs extreme mismanagements, extremely different growth rates etc.; before and after the Dot-Com bubble burst).

Every new high-growth, high-valued company probably fall somewhere in-between the two extremes, unique in its circumstances, and needs to be evaluated from scratch.

Due to the mechanics of shorting (interest rates to borrow shares, need to cover if the stock goes higher before it drops etc.); I'd say shorting, in general, is inherently a market timing strategy. Yes, there are isolated successful examples, but rarely consistent over decades. Jim Chanos' short fund loses -0.7% annually from founding to 2017 (https://www.bloomberg.com/opinion/articl...h-business).
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#8
(03-02-2021, 12:37 AM)Wildreamz Wrote: People often point to Microsoft, Sun Microsystems to demonstrate a bearish viewpoint of overvaluing growth; and people also point to Amazon to demonstrate a bullish viewpoint of undervaluing growth. In general, these are three very specific companies, with very specific circumstances (e.g. extremely disciplined management vs extreme mismanagements, extremely different growth rates etc.; before and after the Dot-Com bubble burst).

Every new high-growth, high-valued company probably fall somewhere in-between the two extremes, unique in its circumstances, and needs to be evaluated from scratch.

Touché
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#8
(03-02-2021, 12:37 AM)Wildreamz Wrote: People often point to Microsoft, Sun Microsystems to demonstrate a bearish viewpoint of overvaluing growth; and people also point to Amazon to demonstrate a bullish viewpoint of undervaluing growth. In general, these are three very specific companies, with very specific circumstances (e.g. extremely disciplined management vs extreme mismanagements, extremely different growth rates etc.; before and after the Dot-Com bubble burst).

Every new high-growth, high-valued company probably fall somewhere in-between the two extremes, unique in its circumstances, and needs to be evaluated from scratch.

Touché
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