Factsheet Commentary : January 2021

Back in the UK, however, we still see value and it appears that overseas buyers agree with us. SWM recently announced a takeover of Scapa Group, while EA’s takeover of Codemasters seems almost certain to go ahead. As investors in Codemasters, we are disappointed to see another British success taken away from us. 

At this point, though, we should caution that not all parts of the UK market are created equal. As per recent updates, Ryanair is losing £100 million per month, while easyJet’s recent cost cutting has reduced its fully grounded cash burn to “only” £40 million per week! We do not own a single share in either.

While we sometimes do take positions that others may view as contrarian, we are not prepared to run into burning buildings. Our current portfolio contains: no airlines, no hotels, or any company saddled with high fixed costs and large scale business disruption.

Managing other people’s hard earned money (along with our own) involves making decisions – often without knowing all of the facts and under conditions of uncertainty. In his Decision/Outcome matrix, Michael Mauboussin points out that deserved success is when a good decision meets a good outcome, while a poor decision with a bad outcome concludes in poetic justice. However, especially in the short term, speculative and thoughtless decisions can also lead to good results. Those with humility call it luck, while the ignorant may call it skill. While Napoleon is reputed to have expressed a preference for lucky generals over able generals, the truth is that luck alone cannot substitute for skill over the long term.

We want to deserve before we desire and expect good outcomes to follow a good process. Although the market remains highly fickle and volatile, our focus remains on the basics, our process and the fundamentals of our companies – the controllable. We are forever paranoid, constantly striving to get better and make the best decisions for the long term wealth of our investors.

Sterling Investments Management Ltd
Lynwood House 2-4 Crofton Road,
Orpington, England, BR6 8QE
info@sterlingim.co.uk

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