GCI Investors Merger Announcement
Dear GCI Clients, We are excited to share that GCI Investors will be merging with Brasada Capital Management, based in Houston. This merger marks a significant milestone, as we can now bring enhanced services and resources such as full financial planning and customized bond portfolios to you, all at no additional cost. We look forward...
Market Update: Recent Pullback
The market experienced a sharp sell-off over the past two months as yields on the 10-year treasury continued to rise towards 5% and the possibility of an expanding geopolitical conflict in the Middle East began to be priced in. Note that when we refer to the market, we are typically referring to the S&P 500...
U-Haul: An Underfollowed Compounder
U-Haul (UHAL) is one of those rare class-defining brands, like a Google, Kleenex, Band-aid, etc., where even the competition is often referred to as “renting a U-Haul.” This brand recognition stems from the fact that UHAL basically built the do-it-yourself (DIY) moving market from scratch back in 1945 and subsequently over decades of aggressively signing...
Third Quarter 2023 Update
Dear Partners, The third quarter of 2023 saw a return of volatility in equity markets as the 10-year treasury yield spiked to levels not seen in more than 15 years. Against this backdrop, our GCI Select Equity strategy gave back some performance, however, our year-to-date numbers continue to be strong on an absolute basis while...
Second Quarter 2023 Update
Dear Partners, After significant volatility to begin the year, the second quarter of 2023 saw a much steadier move higher in equity markets. Against this backdrop, our GCI Select Equity strategy produced solid absolute returns and modest relative performance. Individual account performance may differ based on asset mix, fees, and timing of investments. The move higher in...
First Quarter 2023 Update
Dear Partners, Markets continued to experience significant volatility in the first quarter of 2023. Inflation worries, recession risks, and the first bank failure in over 15 years all contributed to more underlying equity weakness than apparent in the headline numbers. Indices were largely held up in the quarter by significant outperformance in Mega-cap Technology –...
Market Update: Silicon Valley Bank Crisis and Charles Schwab
I am sure you have seen the news regarding the failure of Silicon Valley Bank (SVB). SVB has been the victim of an old-fashioned bank run (driven in part by the impact of rapidly rising interest rates, and in part by a non-sticky deposit base tied to the Silicon Valley boom and bust cycle)....
Fourth Quarter and Full Year 2022 Update
Dear Partners, This past year has been one of the worst for asset markets in over a decade and our core GCI Select Equity strategy was no exception – posting disappointing results. As you know, GCI was founded on the principle that investing in high-quality companies at attractive prices is the most durable and consistent way...
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...
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...
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,...
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...
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...
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...
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...
Implications of Falling Stock Prices: Stock Based Compensation
Back in August, we wrote about how standard accounting treatment of stock-based compensation can mislead investors about the true economics of a business. As a brief recap– companies often issue stock to employees as part of their compensation. This has become quite popular in tech- land over the past 5 years as two things have...
Why Use Active Management, Doesn’t it Consistently Underperform?
We believe that a low-cost, passive investing strategy such as an S&P 500 index fund has a place in our industry – after all, for most retail investors who cannot invest the time, nor have the expertise, or the experience, then investing in a highly diversified ‘market’ portfolio is probably the best course of...
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...
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...
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...
Market Update: How To Interpret Recent Volatility
On March 17, 2020, we published an article titled Market Update: The World is Ending (Again…) in which we discussed the large (at the time) sell off in the market related to the onset of the Covid-19 pandemic. While the title of the article was purposely hyperbolic, the message we conveyed was simple and...
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...
Accounting vs Economic Reality Part 3: One Size Doesn’t Fit All
This is our third entry in a multi-part series on some of the common failings of generally accepted accounting principles (GAAP). As a brief reminder, GAAP accounting is what you will find when you open most US publicly reported financial statements. These are the numbers commonly used to assess the financial health of a given...
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...
Accounting vs Economic Reality Part 2: Intangibles
This is our second entry in a multi-part series on some of the common failings of GAAP (generally accepted accounting principles) when it comes to truly understanding the economics of a business. GAAP accounting is the accounting you will find if you open most US publicly reported financial statements. These are the numbers commonly used...
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...
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...
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...
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...
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...
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...
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...
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...
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...
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...
New Listing Frenzy: IPO’s, Direct Listings and SPAC’s
Aside from the pandemic and election related news this year, you are probably also aware of a significant wave of private companies going public in the market to great fanfare and even greater one day share price appreciation. Some notable examples this year have been: Snowflake, Unity Software, DoorDash, Airbnb… just to name a few....
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...
Chinese VIE Structure: Wall Street Continues to Ignore the Risks
Buried in the news coverage of the election last week was a story that China suspended the $34 billion IPO of Ant Group, the largest online payments platform in China which grew up inside Alibaba, just two days before its planned listing. If there wasn’t a huge amount of election noise going on right now,...
Diversification: Conventional Wisdom is Misleading
You might be familiar with the expression “don’t put all your eggs in one basket”. We prefer the expression popularized by Warren Buffett: “Put all your eggs in one basket, and then watch that basket very closely.” We firmly believe that despite what you may have been told, simply holding many different equities is not...
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...
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...
Wall Street Research: Much Ado About Nothing
One area we have not yet touched on in our writing is that of the Investment Research produced by large Wall Street firms, also known as “Sell-Side” research. You might be wondering how much of this Wall Street research we use here at Globescan? The answer is close to none. The reason is that...
Investing vs Speculating: A Gold Story
Gold is in the news again, having soared 34% to record highs in 2020. Is Globescan Capital buying Gold at these levels? No. Not now, likely not ever. Why not? For the simple reason that we (nor anybody else) really knows what the intrinsic value of Gold actually is. Give us a real asset like...
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...
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...
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,...
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...
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...
The Economy has Largely Stopped: Why is the S&P 500 Only Down 10%?
About a month ago, it became apparent that in order to slow the spread of Covid-19 – buying the necessary time to scale testing and treatment capabilities – the entire global economy would need to be put on pause. The unintended consequences of such a dramatic policy were unknowable, but it was pretty clear...
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...
Market Update: Why Active Management Excels in Times of Crisis
Since our last update a week ago, which may seem like an eternity now, the market has dropped another 6% - putting the YTD performance of the S&P 500 down roughly 30% (though it’s up substantially at the time of writing today). To put this all into context, the collapse in equity markets now...
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...
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...
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...
First American Financial (FAF): Insurance Without the Payouts (Mostly)
First American Financial Corporation (FAF) is one of the two dominant players (along with Fidelity National Financial, FNF) in the title insurance industry. FAF isn’t exactly the sexiest company – they don’t show up much in the news – but they are the sort of very profitable, dependable, defensible company, providing a keystone service,...
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...
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...
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...
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...
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...
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...
Price Matters: Why a Great Company Can Be a Bad Investment
Here at Globescan, we are investors not traders- we research businesses in detail, understanding them inside and out, and only when we are comfortable with the economics and prospects of a business will we make an initial investment. We see this investment similarly to that of an owner or partner in the business over...
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...
Mastercard Incorporated (MA): The Rails of the Modern Economy
Mastercard Incorporated (MA) is one of the largest positions in our portfolio – having been initiated more than a decade ago. Over that period, Mastercard has compounded its per share value by more than 30% annually versus roughly 12% for the S&P 500. Just this year alone, Mastercard is up 50%. Although this performance has...
What do you own? III
Stock Profile: International Flavors & Fragrances. Guy Davis, CFA discusses the investment case for IFF.
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...
Pershing Square Holdings (PSH): Getting 1 Dollar for 70 Cents
As you know, we are active, focused investors here at Globescan, meaning we concentrate on investing in specific businesses where we believe there are significant barriers to competition, paired with long runways for growth. As such, it is rare that we will invest in other investment vehicles, such as equity mutual funds or investment...
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...
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...
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....
What do you own?
Stock Profile: American Tower Guy Davis, CFA discusses the investment case for American Tower
Risk & Return: A Fundamental Concept
Guy Davis, CFA discusses the relationship between Risk and Return when it comes to investing.
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...
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...
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...
CarMax (KMX): Great Unit Economics with a Long Runway for Growth
This is the first of what will be many short investment summaries that we will be posting on our site. Our goal here is to give you a very brief snapshot of our investment rationale. These short summaries are condensed versions of much longer internal documents that take months of research and analysis to...
Active vs Passive: Why the Efficient Market Hypothesis is Wrong
There has been an explosion in passive investing strategies over the last ten years. Firms like Blackrock and Vanguard have grown into behemoths, managing trillions of dollars largely on the back of offering very cheap access to markets. For a tiny fee, you can buy a fund that replicates the performance of the S&P...
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...
Thanksgiving 2018: Thoughts on Corporate Debt Levels: Implications, Risks, and Concerns?
Volatility First, a quick comment on volatility. During 2018, markets have been more volatile than we have seen for the past several years. This has understandably made many investors very nervous and given commentators a huge amount to write and talk about. However, we must put 2018 into context- for the last few years we...
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...
Market Noise: The Negative Implications of Short-Termism
Most of us have a basic understanding that the future is uncertain. Maybe the stock market will crash tomorrow or maybe a war will break out somewhere. We know that more things can happen tomorrow than will. However, when we look back at yesterday, all we tend to see is certainty. We see the...
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...
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...
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...