Letter From the CEO
Letter From the CEO
“An investment operation is one which, on thorough analysis,
promises safety of principal and a satisfactory return.
Operations not meeting these requirements are speculative.”
“An investment operation is one which, on thorough analysis, promises safety of principal and a satisfactory return.
Operations not meeting these requirements are speculative.”
The above quote originates from Security Analysis, published in 1934. The book was written by Benjamin Graham and David Dodd, in the wake of the Great Depression. The quote captures the essence of investing and how it differs from speculation. Often, the concepts are equated, and over time the importance of investments is overshadowed by trends and shortcuts to material wealth. For Garn, however, the quote, and its spirit, is the foundation on which our business is built.
Investing means acquiring an asset at a price lower than its intrinsic value. Simply put – a 10 € note is purchased for 5 €. In order to achieve this, the investor must have an insight not held by the price-setting market, i.e. an information advantage. The advantage provides insight into how the asset, with its cash flows, will behave over time. Thus, the investor can make a correct valuation. The investor can then use the difference between market price and intrinsic value to his advantage. The methodology requires focus, temperament, and a long-term perspective.
Despite the rationality of the methodology, its use has, in our opinion, declined over the years. In the 1970s, a stock was held for about five years before selling. In 2022, the average holding period was 10 months (NYSE, 2023). The trend has been driven by, among other things, electronic securities trading, as well as the ecosystem of commentators encouraging more transactions. Given this trend, we see significant opportunities to capitalise on the market's opportunistic misjudgements – to invest in quality companies at a favourable price.
The above quote originates from Security Analysis, published in 1934. The book was written by Benjamin Graham and David Dodd, in the wake of the Great Depression. The quote captures the essence of investing and how it differs from speculation. Often, the concepts are equated, and over time the importance of investments is overshadowed by trends and shortcuts to material wealth. For Garn, however, the quote, and its spirit, is the foundation on which our business is built.
Investing means acquiring an asset at a price lower than its intrinsic value. Simply put – a 10 € note is purchased for 5 €. In order to achieve this, the investor must have an insight not held by the price-setting market, i.e. an information advantage. The advantage provides insight into how the asset, with its cash flows, will behave over time. Thus, the investor can make a correct valuation. The investor can then use the difference between market price and intrinsic value to his advantage. The methodology requires focus, temperament, and a long-term perspective.
Despite the rationality of the methodology, its use has, in our opinion, declined over the years. In the 1970s, a stock was held for about five years before selling. In 2022, the average holding period was 10 months. The trend has been driven by, among other things, electronic securities trading, as well as the ecosystem of commentators encouraging more transactions. Given this trend, we see significant opportunities to capitalise on the market's opportunistic misjudgements – to invest in quality companies at a favourable price.
“Our methodology and strategy originate from Garn's purpose – building value with insight.
To build lasting value, regardless of the market cycle.
This is the essence of investing.”
“Our methodology and strategy originate from Garn's purpose – building value with insight.
To build lasting value, regardless of the market cycle.
This is the essence of investing.”
Garn's method is built to find investment universes (segments and companies) where we possess an information advantage. This enables us to invest in high-quality companies that are mispriced by the market. Our method and long-term approach allow us to outride market fluctuations and capitalise on them. Just as a homeowner does not ask for a daily reference value, we aim to invest to benefit from the long-term value, which the companies intend to produce, not short-term price movements.
By combining operational and financial insights, Garn faces intriguing opportunities. Our operative experience provides an understanding of the day-to-day operations and the potential upside of the investment. Garn's financial insights contribute to an accurate company valuation, thus ensuring an adequate margin of safety to limit the downside. Several actors retain one of the insights, but few possess both.
Our methodology and strategy originate from Garn's purpose – building value with insight. To build lasting value, regardless of the market cycle. This is the essence of investing. With this foundation, we are approaching opportunities with the highest integrity and endeavour.
I welcome you to follow our journey.
Garn's method is built to find investment universes (segments and companies) where we possess an information advantage. This enables us to invest in high-quality companies that are mispriced by the market. Our method and long-term approach allow us to outride market fluctuations and capitalise on them. Just as a homeowner does not ask for a daily reference value, we aim to invest to benefit from the long-term value, which the companies intend to produce, not short-term price movements.
By combining operational and financial insights, Garn faces intriguing opportunities. Our operative experience provides an understanding of the day-to-day operations and the potential upside of the investment. Garn's financial insights contribute to an accurate company valuation, thus ensuring an adequate margin of safety to limit the downside. Several actors retain one of the insights, but few possess both.
Our methodology and strategy originate from Garn's purpose – building value with insight. To build lasting value, regardless of the market cycle. This is the essence of investing. With this foundation, we are approaching opportunities with the highest integrity and endeavour.
I welcome you to follow our journey.
Eric Thysell
CEO
Eric Thysell
CEO