We do not profess to know the answer to this and would quote Howard Marks in saying that all we know about “the bottom” is that it is the day before the recovery begins.
We continue to focus on the underlying businesses in which we invest and April was a pleasing month both on and off field. One of the questions that we ask ourselves before initiating a new position is whether this company looks out for the interest of all stakeholders, across the range of shareholders, customers, employees, suppliers, regulators, society etc. I believe maximising shareholder value in the long-term means at least satisfying a wider definition of stakeholder value in the short term.
It is an incredibly difficult balance at present for each of our portfolio companies to strike, but we see great long-term benefits in many of their reactions thus far. To give a couple of examples, AutoTrader continue to offer free use of their portal to customers whilst the lockdown is ongoing – one of their largest competitors, CarGurus, continues to offer just a 50% discount. Big Yellow Group are currently offering free storage space to the British Red Cross, they are paying for private travel to work for a number of their staff that would usually rely on public transport and are very proactive in negotiating rents to customers in financial distress. Halma have taken pay cuts across all company, sector and group leadership roles – they have furloughed only a small percentage of their employees, which they currently intend to fund without the support of the UK government. Shaftesbury are expecting little or no rent during the current lockdown as they support their tenants, in addition they have set up a Community fund which will be made available to its local community partners and funded by 20% waivers on salaries and fees to Board members. And PayPal have announced that customers can request to defer payment on business loans at no additional cost, as well as waiving a number of fees to both merchants and consumers. We hope that these attempts to satisfy broad stakeholder value in a challenging period are indicative of the long term thinking of the businesses in which we invest.
To be clear, the CSI funds I manage do not invest with sustainability as a primary focus, however we do believe that many of these principles are an important consideration in long-term value creation.
We have not initiated in any new holdings over the period but have continued to add to existing holdings where we see value in what we hope will be good, long-term winners. I would reiterate that whilst we cannot guarantee that the assets in which we invest won’t get cheaper, we still believe many of them are cheap at this juncture. I was reminded this month by a colleague with more grey hairs than they’d care for me to mention that when investing, Perfect can be the enemy of Good.
