DEP Valuation Commentary

APRIL 2023

“ In order to finish first, you first have to finish.”

Stirling Moss

The first quarter of 2023 has seen modest, positive progress in our benchmark index which is to be welcomed. However, after their initial confidence at the start of 2023, investors increasingly worried about the exact course of inflation and interest rates given conflicting data and the conflicted objectives of the main ‘players’ in that debate – central banks versus politicians. The core debate is whether interest rates have yet been moved enough to bring inflation under control.

Investors’ confidence was further knocked by the crisis within some quarters of the world banking sector with the fallout from Silicon Valley Bank. Thankfully, other sector participants plus regulators appear to have drawn a line under the matter.

Amongst all this noise, we are reminded that our core task is simply to continue to focus on finding good companies at good prices. It is notable, that despite everything thrown at the companies we own, most have continued to plug away, compounding profits, reinvesting cashflows and growing their businesses. What is interesting at present is just how much many valuations have derated over the past 3 years - many of these companies are now accessible at valuation levels not witnessed for some years. We provide a company-specific example below.

Finally, we wanted to highlight that our Direct Equity Portfolio offering has reached something of a milestone, having been established 10 years ago. This is not only a meaningful achievement for David and me, but also it’s a major achievement in a wider investment industry context, given the high failure rates amongst large cap equity funds over any given decade.

Click below to read the full commentary.