Market participants are selling growing, high-quality, profitable businesses to chase inferior assets. It’s worth noting that this dynamic is broad-based and industry agnostic. In fact, despite all the attention given to “tech bubbles”, the best performing industry in the Russell 2000 year-to-date has been the Energy sector (ticker: RGUSES) which is +29.8% (as of 3/31/2021) and +110.5% since October 31st, 2020 (and is just one example among many sharing the attributes described above). The table below summarizes the fundamental operating performance of the businesses in the Russell 2000 Energy Index since 2008 (substantial cumulative cash losses, negative return on equity, and significant indebtedness – as a result, a dollar invested here has destroyed shareholder value over the long-term):
By comparison, the businesses in our Long portfolio are growing ~20% per year, generated over $300 billion of cash flow last year, and have nearly half a trillion dollars of cash on their balance sheets (no debts).
Given the long-term investment horizon of our strategy, our unlevered balance sheet, and the dynamics described above, I took the opportunity during the first quarter to allocate more capital to our Long portfolio and initiate new investments at extremely attractive, discounted prices. I remain focused and excited about the long-term profit potential of our Partnership. Thank you for your trust and please feel free to reach out anytime.
Your partner and fiduciary,
Faris Jafar, Chief Executive Officer
Phone: (734) 678-8562