Right Place Wrong Time

Being in the wrong place at the right time is usually just an inconvenience or in market parlance a missed opportunity. In the wrong place at the wrong time, you're likely a victim of poor circumstances. For an investor, a poor selection coupled with an unforeseen shock. The opposite—right place at the right time—implies luck. Right place at the wrong time, according to a certain someone’s significant other, means she’s always waiting for someone who’s invariably late. More than a mere inconvenience. While some of our equity selections have recently been operating on their own schedules, and our timing appears off, we still feel we’re in the right places. The adage ‘better late than never’ comes to mind.

Fund manager Bruce Berkowitz once quipped that he suffered from premature accumulation. We have felt similarly over the last few months because many of our positions have either lagged or declined outright despite fundamentals that we believe remain intact. Of course, when our positions are zigging while the markets are zagging, we reexamine our assumptions to ensure we are correctly positioned. We believe that only one of our securities suffered permanent impairment relative to our initial appraisal and we realized a loss because we saw better opportunities for the proceeds. We remain confident in our assessments of our other holdings. They trade well below our estimated FMVs (Fair Market Values) implying substantial upside potential. Though we don’t know when the market will come to its senses and see what we see.

Regarding the market in general, we feel like the little boy that cried correction. Though he kept calling for it, and was eventually correct, his too frequent calls were ignored. The S&P 500 is at a ceiling in our TRACTM work. From this level, it’s either moving on to the next ceiling, about 30% higher, or returning to its recent floor, over 20% lower. Neither event must take place all at once. However, with the market’s FMV currently lower, the likelihood of a material rise from today’s levels is low. We expect sideways or downward price action for an extended period until underlying values catch up. And, with the absence of the typical wall of worry, any exogenous shock could lead to a rapid decline.