AIM Valuation Commentary
APRIL 2023
“ Mr.Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful.”
Warren Buffett
Shareholder returns are generated by a combination of two parts. Firstly, the underlying companies increasing their cashflows and therefore their “value”. Secondly, investors’ expectations of a company’s future cash flows, which is shown as the “price”.
Emotional responses are powerful, and when investors are fearful the price attributed to a company can fall materially lower than the value of that company. This can look uncomfortable on a share price chart, but it indicates that a company is on sale and presents a buying opportunity with the prospect of above average forward-looking returns. This is the premise of Benjamin Graham’s book “The Intelligent Investor” and is also the reason for the classic Warren Buffett adage “be greedy when others are fearful”.
While the gyrations of the market can be distressing during these troughs, they are a necessary part of the investment process. If one can control one’s emotional reactions through these uncomfortable periods, as a long-term investor one can take advantage of the opportunities that may present themselves.
We remain excited about the potential future returns of the portfolios.
Click below to read the full commentary.
