Insights

We have invested in grocery stores for many years. We appreciate 'boring' but necessary businesses that generate consistent profits. The author brings the industry alive with exhaustive research and eye-opening examples. It begins with the story of legendary Trader Joe(Coulombe) and his historic impact on the business, particularly his obsession with private label. Readers learn about the difficulties of the truckers that serve the industry, the growing power of massive stores like Kroger overbrands, and how a once-considered delicacy, like shrimp, can become available to the masses. We enjoyed the book and walked away with more conviction in our grocery store investments.

As of mid-2023, the author’s fund has beaten the MSCI World index by ~300 bps per annum over the past 27 years. Seilern invests exclusively in ‘exceptional’ companies – “only the best is good enough,” he writes. There are only ~60 or so global companies that meet his strict quality requirements, which include strong balance sheets, high ROICs, market leadership in growing industries, and a sustainable competitive advantage. His portfolio then includes 25-30 “reasonably priced” quality companies.

As interest rates have staged a historic rise from 5,000-year lows over the past approximately 18 months, investors will be well served reading this book. The author traces the history of interest back to the ancient world and provides timely context as to what higher rates may mean in the future. For instance, noted English philosopher John Locke foreshadowed the past 15 years when he wrote in 1691 that low rates could lead to hoarding, declining money velocity and deflation, wealth distribution from savers to borrowers, and a misallocation of capital. The esteemed editor of The Economist, Walter Bagehot, seemed to sum up the past 15 years when he wrote in 1852 that “John Bull can stand many things, but he cannot stand two per cent.” Will higher rates lead to higher velocity, stronger productivity, and economic growth? Or will it follow the U-shaped curve of interest rates in ancient Babylon, Greece, and Rome that declined as each civilization prospered and then rose sharply during periods of decline and fall?

For those investors considering the energy sector and seeking a deeper understanding of the current status of the climate debate, we recommend several books. Perhaps the most balanced review was Unsettled, written by physicist Dr. Steven Koonin, President Barack Obama’s Undersecretary for Science in the Department of Energy. Dr. Koonin acknowledges that humans exert a growing, but small warming influence on the climate, but most climate models disagree/conflict with each other, and the media does a poor job of presenting the findings. Michael Shellenberger’s Apocalypse Never and Bjorn Lomborg’s False Alarm both push back on climate extremism and argue for a rational and thoughtful approach to the issue. We also enjoyed Meredith Angwin’s Shorting the Grid to learn more about what the transition means for our national grid. For a full-throttled bullish case for fossil fuels, we think most investors will learn something new in Alex Epstein’s The Moral Case for Fossil Fuels and his more recent Fossil Future.

The Pulitzer Prize-winning authors record Robert Oppenheimer’s remarkable life in fascinating detail with many subtle insights applicable to high-achieving investment teams. As the “father of the atomic bomb,” Oppenheimer’s historic success at Los Alamos began with a strong intellectual foundation and thirst for a wide range of knowledge. He was the most celebrated theoretical physicist of his time (and worked with Einstein, Feynman, Bohr, Dyson, etc.), but it was his ability as a charismatic leader to bring out the best in others that led to the Manhattan Project’s (MP) success. Perhaps it was his love for psychology that allowed him to successfully interact with difficult and/or different people such as the MP’s military leader General Leslie Groves. We think the best investment leaders often exhibit many of Oppenheimer’s best traits: raw intelligence, passion, ambition, and humility.

Nobel Prize winner Daniel Kahneman once wrote that overconfidence is “the most significant of the cognitive biases.” Using compelling examples from various fields, the author advises both individuals and organizations to reflect on how to avoid overconfidence and be “less wrong.” From thinking in confidence intervals to considering the average opinion and relying on data, investors and investment firms can likely improve personal and professional performance. Investors should trade less often and sell their losers while organizations should find ways to reward well-intentioned failure. The book may help investors better calibrate their own confidence and help take Voltaire’s words to heart: “Uncertainty is an uncomfortable position, but certainty is an absurd one.”

Co-founder of Monty Python and celebrated actor/writer, John Cleese has written an interesting little book on creativity that can be read in one sitting. A big part of successful investing is the idea generation process and creativity is critical. The book highlights the importance of giving the unconscious mind time to consider complicated problems. Most prefer to make quick decisions and alleviate the anxiety of making important decisions. Mr. Cleese advises finding that childlike state of ‘playing,’ or becoming completely absorbed by an activity, as this often leads to creativity. For those of us lucky enough to be bitten by the stock-picking bug, we think this book will be a worthwhile addition to any investor’s library.

For those investors following Glencore’s attempted hostile takeover of Teck Resources and who want to learn more about the history of the industry, we highly recommend this book. The authors trace these “swashbucklers of global capitalism” back to the beginning and Marc Rich’s start at Philip Brothers in 1954. Fast forward 40 years and Marc Rich + Co. (for a deeper look at Mr. Rich and how he essentially created the spot market for oil in the 1970s, we also enjoyed The King of Oil) becomes Glencore in 1994 and mints at least seven billionaires through its 2011 IPO (less than half of the 14+ billionaires inside privately held Cargill). It is a fascinating look at this small, secretive group of ambitious traders that seek out inefficiencies in the global commodity markets for profit.