Oakseed's inaugural shareholder letter is nicely written and contains a fair amount of personal history for Mr. Park and Mr. Jackson.
Highlights:
As we began putting pen to paper late last year, we thought long and hard about the kind of firm
and fund we wanted to have, keeping a few key objectives in mind:
1. A “go anywhere” investment mandate.
2. No investment committees, minimal meetings, and low administrative demands.
3. Alignment of interest with our investors.
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A bit more on that last point: we believe having common ownership of the Fund between its managers and other shareholders strongly aligns goals. As co-portfolio managers we are committed to managing our personal capital alongside yours. Our current combined Fund investment stands at approximately $10 million with the objective to become the largest shareholders over time (and we do not allow individual stock purchases for personal accounts at our firm). We look for personal “skin in the game” in our companies’ executive ownership of their stock; how could our own shareholders possibly expect any less from us?
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[T]here are several common threads that run through the Fund highlighting our investment approach. First, in each
instance we believe the company’s returns on equity or returns on invested capital are improving, if they are not already higher than average. . . Second, we believe that the valuation does not reflect our assessment that returns are high or improving. This is most likely due to what we believe are short-term problems, either with the business itself, the industry, or perhaps an overall stock market decline. Our investments are usually “contrarian,” meaning the expectations of other investors are lower than what we think they should be, so we are willing to bet the other way for the potential to earn a higher rate of return. Finally, most of our stocks need time before the rest of the market sees what we see. Although it is easy to understand why instant gratification is more appealing than waiting around, we think it is far easier to buy an undervalued stock if most people are not factoring in events three to five years away that could add a lot of value to the company. Unfortunately, events three to five months away are more often than not already incorporated into today’s stock price and it is very difficult to gain an edge trading that way.
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In a bit of Murphy’s Law, the Fund missed out on January 2, the first trading day of 2013, when most major market indices were up 2% to 3% since all trades are booked the following day and therefore the Fund’s NAV was unchanged. As a result, with the S&P 500 up 2.54% that first day the Fund began the year behind its benchmark the same amount.
For what it's worth,
David
Comments
Regards,
Ted
David