What Are You Talking About?

Fundamental traders have been getting their teeth kicked in this year. Perusing through some Q3 letters recently, I see plenty of jargon explaining why performance has been so bad.

“We are finding that our core holdings are experiencing greater than expected market headwinds in the face of a more challenging operating environment, inflation-driven costs pressures and rising costs of capital.”

Sigh. What the hell are you talking about?

I know what you’re trying to say, but just say it in plain English. Why do this dance? Why play this game? You want your company culture to be about spin? You aren’t fooling anyone. Your investors can see they have less money in their accounts.

This is just the kind of talk you get when someone wants to hide something. It makes you look like you’re trying to steer the conversation away from what’s happening (the losses) towards the blame of why it’s happening, what will happen next and why the next 18-months will be a banner period for you.

Stories and spin do not fool any astute investors into caring about anything other than the end-result…making money. A typical interaction at my fund:

Are we making money holding the stock? If yes, then keep it. If not, get rid of it. No more talking.

Long-winded mumbo jumbo is a tell. It tells me I cannot trust you. It tells me you don’t respect me. That you’re more concerned with marketing than your product. Marketing benefits you, not me. Your product benefits me, and you.

Today, we are still in the spin part of the cycle. People haven’t had been punched in the mouth in a while. They haven’t had to communicate with investors over a long period. The markets always rebounded. Perhaps not this time around.

I don’t think the losses haven’t been humiliating enough yet. Perhaps if/when they do, we’ll get more straight talk.

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