Dock Street Asset Management

In late October, a west coast hedge fund named Blue Duck Capital wrote an open letter to Amazon CEO Andy Jassy requesting a return of capital to shareholders and criticizing him for poor stock performance over the past five years. Stocks will do their thing over short(ish) periods of time, but there's no question that Amazon's business performance under Jassy has been excellent. We respectfully disagree. Hold onto the money and keep investing!

Now that we know he will be President, what will Trump and the Republican Congress do that will affect our investments? Daniel Ogden shares his thoughts in our recent letter to clients.

What's New (24 years ago) Nearly 25 years ago, Dan wrote a letter to our clients about what was new, and what wasn't. Here are some things that were much discussed in 2000 as problems. They weren't new then, and they still get discussed. Not New: ● High PE ratios ● There’s only one way to make money: Technology ● Day trading ● Expectations of high investment returns Here is what was New (in 2000): ● The Internet ● The Global Economy ● Super high return business models (see below!) ● The New Economy Many of the "Not New" items are with us today, some in a different guise (Robinhood and Crypto have replaced Day trading and Commodity speculation). How have the "New" parts held up? The Internet - The top 5 companies in the world are tech/internet companies. From the letter: "It is likely that the primary use of the Internet has not been invented yet, but when that happens it will create a great investment opportunity." Have we found it yet? Probably not, and evolution will continue spawning many great businesses along the way. The Global Economy - The Cold War ended. The view was that competition between countries is good, it keeps governments well behaved (i.e.trying to attract people and businesses). In this view, a multi-polar world is good for innovation. Super High Return Business - Here is the gem. Large businesses were supposed to grow 5% a year, 10% if they were great. The best businesses of the last 25 years have sustained growth of 15% and higher for far longer than anyone thought was possible. The New Economy - Was the economy entering a new period of growth powered by all of this innovation? Today we carry a super-computer in our pocket, get countless products delivered the same or next day, and have constant access to information and intelligence. These improvements don't always show up in GDP numbers, but they are real. .... The letter is long than I can summarize here, but if you would like a PDF of the full letter, leave a comment and I'll get it to you.

The Bull Market Turns Two Projections are Just Guesses… even the educated ones. The last three years present another example of why focusing on economic projections and then attempting to time the market is a mistake.

In late 2022 the Bear market of that year ran out of gas. The S&P 500 had fallen over 20% and Dock Street stock portfolios had lost more. Investors were gloomy and convinced that a recession would begin in 2023. So what happened? Take a look at Daniel Ogden's latest letter to our clients. (link in comments)

Preventing Permanent Losses -- Controlling risk at Dock Street In?our last note to clients (link in comments),?we warned against attempts to avoid short-term losses from market fluctuations. These temporary losses cannot, and should not, be avoided if above average investment results are the goal. However, avoiding permanent loss of capital is possible and that is the risk that we should worry about. At Dock Street, we reduce the possibility of permanent loss in two ways: - Limiting our investments to financially bullet-proof businesses, and - Making sure that allocation to a large winning investment is kept under control What makes a business bullet-proof? First, no debt. It is practically impossible to go bankrupt without debt. Many debt-laden businesses need leverage to produce a reasonable return for their owners. We limit our search for investments to a small group of companies that are so good that they don’t need debt to produce attractive returns. Second, bullet-proof businesses sell their product or service at prices set by customers. Great businesses are fortunate to offer such high value to their customers, that those buyers are willing to pay prices that result in very high profit margins. We avoid businesses in highly competitive industries where the profit margins are low. Then there’s portfolio allocation. Occasionally a business performs so well that its stock far outpaces the others we own, resulting in a very high weighting in our portfolios. We sell a portion of these winners knowing that at times stocks get ahead of the underlying business. Avoiding investment mistakes is impossible. But the two methodologies described above (particularly the first one) have been largely responsible for the favorable results for Dock Street clients.

Three clients fired us on the same day. It was 2000 and we had just sold Cisco, a networking equipment company, and darling of the internet boom. The day after, three clients called to part ways. As it turns out, we didn't sell enough Cisco. But investors get attached to positions, and our job is to make hard calls. It's not about being right. No investor is right every time. It's about consistency over time. Not long after firing us, One of those clients returned as the tech bust of 2000-2003 got worse. Today that client is our second largest client, they've been with us 20+ years, their adult children invest with us, and they've referred many investors to us. This type of long term partnership is key to investment performance. It allows us and our client to make the right decision more often than not.

The Dock Street team spent a few great days in CT with the Contractor Nation team and so many great clients. It is always an incredible event with amazing people! Congrats to everyone who made it happen and the owners who were surrounded by their incredible teams. #cnlive

What would your stock returns be if you missed the best 10 or 20 days in a 30-year period? The answer: not good. Take a look at Daniel Ogden's latest client letter - The Myth of Avoiding Losses - and see why investors should "avoid 'downside protection' and embrace the next bear market knowing that great opportunities will be hidden inside." #bearmarkets #investmentplanning #themarket #downsideprotection

Check out our Daniel Ogden's recent letter to our clients on understanding the dynamics of a correction. And answering the question - Who's Selling? #investmentplanning #familyinvesting #investments