Link to letter: Giverny Capital – 2013 Letter to Partners
Since 1993, the cornerstone of our investment philosophy is based on Benjamin Graham’s book “The Intelligent Investor”, first published in 1949. In it, Graham wrote: “In the short term, the stock market reflects the irrationality and unpredictability of human investors. But in the long term, it reflects adequately the intrinsic value of companies”.
Over the last two decades, we have been witnesses to strange market movements and numerous irrational behaviors from investors (the list would be too long to mention here). But in the end, the strangeness cleared up and common sense prevailed. If there is one thing that we have learned since 1993 is that market fads come and go but fundamental principles endure.
Twenty years of the Giverny Portfolio
I started to manage the Giverny portfolio in July 1993. So we celebrate our twenty year anniversary with this letter. Results over those two decades have been more than satisfactory. But most important, I’ve learned some valuable lessons which should be useful in enhancing portfolio values going forward. Last summer, I wrote in my Gazette column an article highlighting the ten most important lessons learned since 1993. You will find the article in Appendix A at the end of this letter.
I would like to emphasize the most important lesson of the last twenty years: It is futile to try to predict the stock market over the short run. All previous lessons are useless if you try to predict the stock market over the short run. I have heard people say hundreds of times that they were waiting to buy great companies because they had negative views on the short-term direction of the stock market. Owning great businesses, managed by great people and acquired at reasonable prices is the winning recipe. The rest is just noise.