Articles

Third Quarter 2022 Update

Dear Partners, Our performance in the third quarter of 2022 was disappointing. Our GCI Select Equity composite ended the quarter down 32.66% YTD gross of fees, trailing the broader market. This is a significant drawdown in isolation, but also not entirely unsurprising to have some weakness after almost a decade of very strong returns. Individual account...

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The Upside of Down Markets

Stocks fell sharply this past Tuesday with the S&P 500 ending the day down 4.32%. But even with that significant fall, the S&P 500 was still slightly up over the previous week. It is safe to say that markets have been volatile in a whipsaw fashion during 2022. As of writing, the S&P 500 is...

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Ocado: Stock update

Ocado Group PLC (OCDDY) is our worst performing (in price terms) position so far this year. However, even while Ocado’s stock has fallen, our conviction that the underlying business continues to create real shareholder value has only increased. As a result,  we recently increased our position at these lower price levels. As a brief reminder,...

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Second Quarter 2022 Update

Dear Partners, Our performance in the first half of 2022 was disappointing in many respects. The S&P 500 had its worst start to the year in over 50 years. Bonds fared no better, with the 10-year treasury reaching its highest yield since 2011. To put this into context, below is a chart of intra-year peak to...

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What to look for in a fund

In our previous article, we made the case for why active management still makes sense in a passive-orientated world. After all, if you want better than average returns, then you must be different from the average, which means taking an active approach. But how do you know which active fund to pick? How can you...

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What drives stock prices?

What drives stock prices? At times like this, this question is crucial for investors to understand. The answer is that when you really get down to it, stock prices are really determined by only two things: Fundamentals of a business – Earnings per share, cash flow, return on invested capital, etc. Sentiment – How much the...

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The Importance of Pricing Power in Inflationary Environments

There are two important considerations for today’s market environment. One (which we wrote about in our last post) is having the economic strength to take advantage of market volatility rather than being beholden to the capital markets. The second consideration has to do with inflation and pricing power. The best hedge against rising inflation isn’t...

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First Quarter 2022 Update

Dear Partners, Our GCI Select Equity composite ended the quarter -10.69% gross of fees. For context, the S&P 500 ended the quarter -4.60: Individual account performance may differ based on asset mix and timing of investments. Underperforming the market is never welcome, but over such a short period of time is of little consequence. We at GCI...

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Market Update: Ukraine War Volatility

The war in Ukraine is creating serious human hardship and suffering not only in the region but around the world. And despite where your politics may land, we can probably all agree that a stock market sell-off is much less of a worry than what many people in Ukraine are currently dealing with. Without diminishing...

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Where is the bottom? When should I buy?

We hear many investors and commentators asking; is now a good time to invest? The market is falling, should we sell today and buy back when it’s fallen more? Put simply; no- one can answer those questions- don’t trust anyone who even tries to. There are simply too many external variables to even begin...

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Fourth Quarter and Full Year 2021 Update

Dear Partners, We are pleased to report another positive year of absolute performance with our strategy (see product page) up 28.60% gross of fees. Individual separate account performance may differ based on asset mix and timing of investment- the above numbers are for the strategy composite as a whole. You will have likely noticed that we...

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Third Quarter 2021 Update

GCI Select Equity Q3 2021 Dear Clients, We are pleased to report that our GCI Select Equity strategy ended the third quarter of 2021 up 16.7% year-to-date (gross of fees). As you know, we spend little time discussing short term performance as it is not helpful in measuring a long-term strategy such as our own. So, while...

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Accounting vs Economic Reality Part 1: Stock Based Compensation

This will be the first in a series of articles covering a fundamentally important concept in equity investing: that there is a difference between reported accounting numbers and actual economic reality. GAAP (Generally Accepted Accounting Principles) is the accounting you will find if you open most publicly reported financial statements. These are the numbers commonly...

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Chinese VIE Structure: Recent Developments

We wrote back in November about the risks posed to Western investors by the Chinese VIE (Variable Interest Entity) structure. Following recent announcements by the Chinese regulator, we believe those risks have just increased, so we thought it best to revisit the issue and provide an update. For those unfamiliar with the VIE structure, please...

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Second Quarter 2021 Update

GCI Select Equity Q2 2021 We are pleased to report another positive quarter in both absolute and relative terms. Our GCI Select Equity strategy ended the first half of 2021 up 18.1% gross of fees. For comparison, the S&P 500 ended up 15.3%: Despite these continued positive results, you will likely have noticed that in a...

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Ocado (OCDDY): Automating the Really Difficult Stuff

We at Globescan mainly invest in US-based companies for fairly straightforward reasons: the regulatory environment is strong, the business environment friendly, there is a culture of entrepreneurship, and some of the most exciting companies in the world are US domiciled. That being said, there are occasions when we find companies overseas that offer something...

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Our Thoughts on Inflation

Over the past few weeks, you will likely have noticed increased mentions of inflation in the news. The March print for CPI (average price of consumer goods and services) came in rather high: +4.2% year-over-year. This is after many, many years of persistently low inflation. How concerning is this? Despite the markets knee jerk...

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GFL Environmental: From Trash to Treasure

During the first quarter 2021, we initiated a new position in GFL Environmental – a waste disposal company based in Canada. The Industry The waste industry has historically been characterized by high barriers to entry (land use regulations on landfills as well as scale economics due to route density), stable non-cyclical demand, exceptional pricing power, and...

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First Quarter 2021 Update

Dear Clients, We are pleased to report another positive quarter in both absolute and relative terms. Our GCI Select Equity strategy ended the first quarter of 2021 up 8.01% gross of fees. For comparison, the S&P 500 ended the quarter up 6.17%. Over a trailing three-year period, our strategy has now compounded client capital at a...

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Benchmarking Issues Part 2

Our last article, Indexing, Benchmarking, and the Problems Therein, generated a lot of positive feedback so we have taken the time to deepen the discussion further. As a quick refresher – Benchmarks and the Indices they are derived from are typically used by firms such as ours to provide some element of performance comparison and...

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Indexing, Benchmarking, and the Problems Therein

We are often asked about our performance relative to an appropriate “benchmark”. For this reason, we often cite our over/under-performance relative to the S&P 500 (the most widely used benchmark, despite significant drawbacks). But please note, we are indifferent to any benchmark, and by no means manage our portfolio with the S&P 500 in...

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Fourth Quarter and Full Year 2020 Update

Dear Clients, We are pleased to report that 2020 was another positive year for performance in both absolute and relative terms. As you know, Globescan Capital was founded on the principle that investing in high-quality companies at attractive prices is the most consistent way to achieve long-run, risk-adjusted returns. As such we do not overly concern...

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Responsible Investing, ESG, and SRI

Over the past decade, a new sub-industry has developed within the investment community. It operates under a number of names, the broadest of which is Responsible Investing, which incorporates concepts such as ESG (Environmental, Social, and Governance), and SRI (Socially Responsible Investing). At its core, Responsible Investing requires that investors acknowledge a number of issues...

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Process Case Study: Crown Castle (CCI)

Step 1. Identifying a Long-term Inexorable Trend  Wherever possible, we prefer investments that benefit from an inexorable trend – the sort of long-term trend that cannot be disrupted by geopolitics, elections, pandemics, wars, etc., the sort of trend that we can be confident will continue for decades into the future, and the sort of trend...

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Third Quarter 2020 Update

The S&P 500 continued its rally in the third quarter, adding another 9% in total returns, making the last six months the best period of performance the market has seen in over twenty years. And we are pleased to report that our GCI Select Equity strategy comfortably outperformed the broader market over this period. Of...

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Factor Investing: Popular but Flawed

Over the last decade we have witnessed the rise (and fall) of many different investment concepts, as investment firms and academics search for a magic formula that can generate consistent returns, whilst crucially avoiding the hard work that is in reality required to generate those returns. Sadly most realize quickly that there is no...

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GCI: Growth or Value Investors?

A common question we receive is: “Are you at GCI growth investors or value investors?” Prospective clients might look at our portfolio and see holdings such as Microsoft and Mastercard, which have historically traded at price-to-earnings multiples in excess of 35x, alongside holdings such as First American Financial and UPS, which have historically traded at...

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Second Quarter 2020 Update

Dear Clients, Globescan Capital was founded on the principle that investing in high-quality companies at attractive prices is the most consistent way to achieve long-run, risk-adjusted returns. As such, as many of you already know, we do not overly concern ourselves with short term market swings driven by ever-changing sentiment shifts or short-term news flow. Instead,...

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Thoughts on Risk: How to Invest with Uncertainty

So far, the year 2020 has been characterized by volatile swings in share prices as the market comes to terms with the uncertainty surrounding Covid-19, social unrest, and the continuing US/ China trade war. Since its peak in mid-February, the S&P 500 has crashed by 35% and subsequently rallied by almost 50%. Throughout these huge...

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Equinix Inc. (EQIX): Connecting the World

The internet is fundamentally a network of networks. For example, this website that you are reading is stored on a server somewhere which is connected to a network that is likely different from the network you are using to read it. At some point, these different networks (Charter, Comcast, AT&T, etc) need to communicate...

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First Quarter 2020 Update

Dear Clients, Globescan Capital was founded on the principle that investing in high-quality companies at attractive prices is the best and most consistent strategy to achieve long-run risk adjusted performance. This remains as true today as it has ever been. Regardless of any recent market movements, we maintain the same disciplined adherence to that principle. In...

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Market Update: The World is Ending (Again…)

For those of you who aren’t keeping score, the most recent daily returns of the stock market have been: -9%, 5%, -5%, -10%, 9%, and -12%. That -12%, which occurred yesterday, also happened to be the single worst day in US stock market history since October 19, 1987 (a title previously held by last...

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Market Update: A Crude Day for Oil Prices

You’ll excuse us if these market updates are getting a bit out of hand (we naturally prefer to write about things that play out over years, not months) but these past few weeks have given us a front-row seat to the market’s panic-driven, short-term irrationality – a trait that investors (especially passive investors) might...

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Market Update: Coronavirus Edition

So far this year we have seen a 10% sell-off in equity markets. We should open by saying this is no cause for concern. You will recall that we noted in our last few letters that statistically speaking, we have been due for a 14% peak to trough sell-off for a while now. Many...

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Efficient Market Hypothesis: Tesla Edition

This short piece is a continuation of our previous article challenging the obvious and critical flaws of the ‘efficient market hypothesis’- a theory which states that stock prices reflect all known information, and so always trade at their fair value. If true, that would make it impossible for active managers, such as us, to...

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Investing Superpower: Long-Term Thinking

In our most recent quarterly update, we talked about the importance of long-term thinking in a world that is increasingly dominated by short-term news flow. Not to belabor the point, but this concept is so fundamentally important to what we do here at Globescan that we felt it deserved its own article. When we really...

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Fourth Quarter and Full Year 2019 Update

Dear Clients, We are happy to report that 2019 was a very positive year in both absolute and relative performance terms. As you know, Globescan Capital was founded on the principle that investing in high-quality companies at attractive prices is the best and most consistent strategy to achieve long-run risk-adjusted performance. This remains as true today...

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GCI: Year-End Portfolio Review 2019

As you know, we run an active, concentrated portfolio. We believe that the best way to maximize long-term wealth is by owning high-quality companies that we can purchase at a discount to their intrinsic value. We also believe that it is less risky for an investor to own 25 stocks which they know inside...

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The Perils of Tax Loss Harvesting

As we approach the end of the year, we would like to take the time to discuss a question we often get from clients: "why isn’t there ‘tax- loss harvesting’ in my portfolio?" For the unfamiliar, tax- loss harvesting is the practice of selling investments to deliberately realize a loss in order to offset...

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Third Quarter 2019 Update

Dear Clients, Once again, we are pleased to report that this quarter has been positive for us in both absolute performance terms, as well as in relative performance terms (our portfolio vs the market overall). So far during 2019 we have been fortunate to have witnessed unusually positive overall market returns (combined with our healthy...

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Valuation Multiples: Convenient but Dangerous

There are all sorts of price multiples, ratios and metrics that investors have come to rely on as shortcuts in determining whether a stock is undervalued or overvalued. Many private investors and even large investment houses rely on these shortcuts in order to make investment decisions.   However, such a strategy is naive- these metrics can...

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Investing vs Speculating: A Bitcoin Story

In our most recent quarterly letter, we talked about uncertainty in the markets and how we choose when and where to take risks. We described our preference for investments where we don’t have to make a lot of accurate predictions in order to have a good outcome. In the past, you could have just...

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Second Quarter 2019 Update

Dear Clients,   Q2 2019 has been very positive for us in both absolute and relative terms, with all our models performing ahead of their respective benchmarks.   We often comment on the unpredictability of markets in the short term, and these past few months have been no exception, reminding us of how easily and quickly the...

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Booking Holdings Inc. (BKNG): A Tollbooth on Global Travel Growth

Business Description Booking Holdings Inc. (BKNG) is the largest online travel booking platform in the world. The company facilitates transactions between travelers and everything they might need such as: hotels, vacation rentals, airlines, rental car services, restaurants, etc. They own brands such as Booking, Priceline, Agoda, Kayak, Rentalcars, Open Table; as well as significant investments...

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United Parcel Service, Inc. (UPS): An Exceptional Business for an Unexceptional Price

Business Description United Parcel Service, Inc. (UPS) was founded in 1907 and has grown to be the world’s largest package delivery company, the leader in ‘less than truckload’ shipments and a global supplier of supply chain management solutions. The company facilitates deliveries to over 9 million receivers, across over 220 countries, each and every day....

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Behavioral Biases: Part Two

In our last post, Behavioral Biases: A 2 part Series, we discussed some of the behavioral biases which investors often fall victim to, focusing firstly on the emotional biases. In this post, we will continue that discussion, now focusing on the cognitive biases.   Unlike emotional biases, which stem from impulse, intuition, and feelings (things most...

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First Quarter 2019 Update

As you know, our philosophy and approach to investing is to focus on the long- term cash flow growth of the companies we invest in, rather than focusing on short term market movements. As such, quarterly updates such as this are of far more value to you if we focus more on how we...

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Behavioral Biases: A 2 Part Series

In our last post in our investor education series, Active vs Passive: Why the Efficient Market Hypothesis is Wrong, we introduced the concept of rational actors, people that analyze every piece of available information and arrive at an optimal solution to maximize their expected utility, and irrational actors; people that use mental shortcuts and...

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Fourth Quarter & Full Year 2018 Update

Globescan Capital was founded on the principle that investing in high quality companies at attractive prices is the best and most consistent strategy to achieve long-run risk adjusted performance. This remains as true today as it has ever been. Regardless of the recent market movements we maintain the same disciplined adherence to that principle.   What...

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Third Quarter 2018 Update

Globescan Capital was founded on the principle that investing in high quality companies at attractive prices is the best and most consistent strategy for achieving favorable long-run risk adjusted performance. This remains as true today as it has ever been. Regardless of political changes, market movements and other investment fads, we have maintained and...

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Market Timing: A Losing Strategy

We would like to spend the entirety of this first post discussing a reoccurring question we receive: “Why can’t you just ride the market to its peak and then exit right before the inevitable correction?”   We understand where this question is coming from. Market timing is an intriguing concept on the surface – if we...

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Trade-off: Risk and Return

Investors typically focus on returns. ‘How much money am I making’ ‘How much money did I lose’ ‘Am I getting better returns than the S&P/ my neighbor/ the guy on TV’.   All of those are relevant questions, but without a consideration of the risk involved, the answers themselves are meaningless.   To incorporate the concept of risk...

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Second Quarter 2018 Update

Globescan Capital was founded on the principle that investing in high quality companies at attractive prices is the best and most consistent strategy to achieve long-run risk adjusted performance. This remains as true today as it has ever been. Regardless of political changes, market movements and other investment fads, we have maintained and will...

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