KanawatTH
|
Annualized results to Dec. 31, 2024 |
Flagship |
Mid-Large Cap |
|
Inception date |
Feb. 10, 2015 |
Mar. 16, 2017 |
|
Trailing: One year |
52.7% |
50.4% |
|
Two Years |
31.7% |
31.6% |
|
Three Years |
12.1% |
11.0% |
|
Four Years |
20.3% |
18.7% |
|
Five Years |
17.1% |
16.1% |
|
Six Years |
17.6% |
17.0% |
|
Seven Years |
13.8% |
13.3% |
|
Eight Years |
13.9% |
n/a |
|
Nine Years |
12.7% |
n/a |
|
Since Inception |
10.5% |
12.4% |
|
Calendar year results: |
Flagship |
Mid-Large Cap |
|
Inception date |
Feb. 10, 2015 |
Mar. 16, 2017 |
|
2024 |
52.7% |
50.4% |
|
2023 |
13.5% |
15.2% |
|
2022 |
-18.8% |
-21.0% |
|
2021 |
49.0% |
45.3% |
|
2020 |
5.1% |
6.2% |
|
2019 |
19.9% |
21.4% |
|
2018 |
-6.7% |
-6.6% |
|
2017 |
14.5% |
3.9% |
|
2016 |
4.2% |
n/a |
|
2015 |
-8.4% |
n/a |
|
1The benchmarks cited by Starvine are standards against which the performance of the strategies can be measured. However, the Starvine strategies approach portfolio construction with a bottom-up approach and thus do not refer to the composition of any index as a reference from which to select securities. Performance of the strategies may differ significantly relative to benchmarks in any time period. The composite figures above are unaudited and include discretionary fee-paying accounts within each respective mandate. Composite results are presented as time weighted rates of return, net of management fees and other expenses. Results will vary with subscription date, most notably for recently formed accounts whose position weightings and cash levels tend to differ initially from the investment strategies. Clients will therefore each have their own net-of-all fees performance results from investing in Starvine. References made to indices may provide clients with a benchmark to compare results. However, the Starvine strategies are operated with a bottom-up selection framework and thus no effort is committed to tracking any index. Lastly, the composite results displayed above should not be interpreted as a reference for future returns. |
Dear Partner,
During 2024, fully-invested accounts in the Starvine Flagship Strategy increased 50.5% to 54.7%, while fully-invested accounts in the Mid-Large Cap Strategy increased 50.1% to 51.0%. During the period, the S&P TSX Total Return Index1 increased 21.9% and the S&P 500 Total Return Index (SP500TR) increased 35.7% in Canadian dollars (25% in USD).
2024 marked the strongest year on record for the Starvine strategies. However, with the U.S. dollar (USDOLLAR,DXY) appreciating significantly against the Canadian dollar, adjusting for this currency effect would place 2021-when the exchange rate remained flat-as the best year to date. I estimate that currency gains contributed approximately 9% to the Flagship strategy and 8% to the Mid-Large Cap strategy in 2024.
Even without the currency boost, it was an exceptional year, driven by the strong performance of most positions. Large-cap holdings rebounded sharply, particularly alternative asset managers. After facing pressure in 2022 due to rising interest rates, these companies continued to grow their businesses despite market skepticism. This persistence led to a “slingshot effect” in 2024, as their share prices surged to reflect both a reversion to the mean and recognition of increased intrinsic value.
While I can’t predict where the exchange rate will head over the next six to twelve months-or even further out-I see compelling reasons to maintain strong exposure to U.S. markets. Naturally, there’s always the risk that a mean reversion scenario could offset these benefits. But even with the U.S. dollar near a decade high, the breadth and depth of U.S. equity markets remain unmatched.
In contrast, the Canadian market is relatively narrow, offering far less variety for bottom-up stock pickers. Consider this analogy: if a company could recruit from just one college versus ten, which would it choose? The answer is obvious. However, if accessing that broader talent pool meant incurring foreign exchange risk, the decision becomes more nuanced, hinging on the quality difference between candidates and the perceived downside of currency fluctuations.
Stocks as Elevators
For over a decade, I’ve pondered an analogy for investing and building wealth. Until recently, I envisioned it as a simple metaphor: a floor in an empty room. The basket of investments you own is the floor, which ideally rises over time, lifting you along with it. Even if the floor is indestructible, there’s always downside risk-but now that risk is limited to falling onto a higher surface.
Now imagine 100 elevators scattered across a field. Your ultimate net worth depends on choosing one elevator and seeing how high it ascends over 30 years. But success isn’t about beating everyone else; it’s about meeting your personal objectives. These elevators vary widely in speed, reliability, and price, with incomplete information about each.
If you want complete safety with little chance of wealth creation, there’s an elevator for you: the GIC (Guaranteed Investment Certificate). It offers almost no downside, predictable outcomes, but minimal upside beyond inflation.
Other elevators present combinations of speed, track record, and cost. The dream scenario is selecting the elevator that rockets to the moon (a rare, high-growth company). The nightmare? The floor collapses (a value trap), taking your financial future with it.
Standing firmly on the elevator floor represents paying fair value-intuitively, gains or losses depend on how far the elevator moves up or down. Paying above fair value is like floating in mid-air over the elevator floor. This can work if the elevator rises faster than expected, preventing a hard fall and continuing its ascent.
Value investors aim to start below the elevator’s floor, hanging from stretched rubber bands. They can win in two ways:
- Being slingshotted up to the floor (mean reversion or multiple expansion), which doesn’t require the elevator to rise at all.
- Staying on as the elevator ascends, driven by earnings growth.
Ways to Win
Pick the right elevator:
- Don’t overpay, or if you do, ensure it rises fast enough to justify the price.
- Better yet, underpay for it, positioning yourself for both a “catch-up” to fair value and future growth.
Stay on for the ride:
- Hold indefinitely if it’s truly “the one,” or long enough to benefit unless a clearly superior option emerges.
Ways to Lose
- Choosing a faulty elevator: One with structural problems or no future growth.
- Overpaying: Starting too high only to get smashed back to the floor because it didn’t rise fast enough.
- Mistiming exits: Stepping off during uncertainty, thinking you can re-enter, only to watch it take off without you.
- Switching poorly: Selling a strong elevator and moving into a faulty one.
In investing, as in life, selecting the right elevator requires a mix of strategy, patience, and courage. Just as we wouldn’t step into a random elevator without checking its condition and destination, we shouldn’t approach investments without thoughtful evaluation and long-term vision. The key to success is understanding your objectives, assessing risk, and making informed choices – all while resisting the urge to jump in and out at every bump or lull. Like the best elevator ride, wealth-building is about choosing wisely, staying the course, and enjoying the rise.
As Starvine approaches its ten-year anniversary, it’s a fitting moment to reflect on the journey so far. When I launched Starvine in 2015, my focus was on special situations – such as spin-offs and companies with unconventional balance sheets – which yielded mixed results.
Over time, I’ve become more selective, a change greatly influenced by the development of my investment checklist, which I dubbed MCARV in 2017. While far from scientific, it’s rooted in common-sense principles that have guided better decision-making. Though the future is inherently unpredictable, certain timeless attributes foster wealth compounding: great management teams, durable moats, opportunities to reinvest earnings, and attractive valuations.
Markets never stand still. Similarly, for money managers – like athletes, musicians, or professionals early in their careers – there’s rarely a definitive endpoint. Success or failure is simply another step forward; each day offers a chance to improve, adapt, and strive for mastery.
Sincerely,
Steven Ko | Portfolio Manager
|
DISCLAIMER Readers are advised that the material herein should be used solely for informational purposes. Starvine Capital Corporation (“SCC”) does not purport to tell or suggest which investment securities members or readers should buy or sell for themselves. Readers should always conduct their own research and due diligence and obtain professional advice before making any investment decision. SCC will not be liable for any loss or damage caused by a reader’s reliance on information obtained in any of our newsletters, presentations, special reports, email correspondence, or on our website. Readers are solely responsible for their own investment decisions. The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase or sale of securities. Our opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in our newsletters, presentations or on our website should be independently verified with the companies mentioned. The editor and publisher are not responsible for errors or omissions. Past performance does not guarantee future results. Investment returns will fluctuate and there is no assurance that a client’s account can maintain a specific net liquidation value. The S&P 500 Total Return Index and the S&P/TSX Composite Total Return Index (“the indexes”) are similar to Starvine’s investment strategy in that all include publicly traded equities of various market capitalizations across several industries, and reflect both movements in the stock prices as well as reinvestment of dividend income. However, there are several differences between Starvine’s investment strategy and the indexes, as Starvine can take concentrated positions in single equities, and may invest in companies that have smaller market capitalizations than those that are included in the indexes. In addition, the indexes do not include any fees or expenses whereas the return data presented is net of all fees and expenses. SCC receives no compensation of any kind from any companies that are mentioned in our newsletters or on our website. Any opinions expressed are subject to change without notice. The Starvine investment strategy and other related parties may hold positions in the securities that are discussed in the newsletters, presentations or on the company website. |
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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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