Jeppe Kirk Bonde @JeppeKirkBonde: "Dear fellow investors, This quarter is..."

United Arab Emirates

Edited

Dear fellow investors, This quarter is my 50th on eToro. Since 2013 my average annual return has been over 25%. This year to date, my return has been 32% - significantly outperforming the $SPX500 which has only increased by 13% in the same period. In most countries, 𝗽𝘂𝗯𝗹𝗶𝗰𝗹𝘆 𝗹𝗶𝘀𝘁𝗲𝗱 𝗰𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 𝗱𝗲𝗹𝗶𝘃𝗲𝗿 𝘁𝗵𝗲𝗶𝗿 𝗲𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗿𝗲𝗽𝗼𝗿𝘁𝘀 𝗮𝗻𝗱 𝗲𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗰𝗮𝗹𝗹𝘀 𝗼𝗻 𝗮 𝗾𝘂𝗮𝗿𝘁𝗲𝗿𝗹𝘆 𝗯𝗮𝘀𝗶𝘀. The best investments and best change projects require focus for a long time and most often with negative short-term consequences. When management teams know they have to face short-term focused questions and 𝗱𝗲𝗺𝗮𝗻𝗱𝘀 𝗳𝗼𝗿 𝘀𝗵𝗼𝗿𝘁-𝘁𝗲𝗿𝗺 𝗿𝗲𝘀𝘂𝗹𝘁𝘀, they’re more likely to sacrifice the hidden costs and capital expenditures that are required for longer term value creation. An example of a hidden value is ‘customer loyalty’. If a company has provided great service to satisfy a client, that happy client may expect good service in the future and therefore be ready to buy again soon. 𝗗𝗲𝗹𝗶𝘃𝗲𝗿𝗶𝗻𝗴 𝗽𝗼𝗼𝗿 𝘀𝗲𝗿𝘃𝗶𝗰𝗲 𝗮𝘁 𝗮 𝗹𝗼𝘄𝗲𝗿 𝗰𝗼𝘀𝘁 𝗺𝗮𝘆 𝘀𝗵𝗼𝘄 𝘂𝗽 𝗮𝘀 𝗵𝗶𝗴𝗵𝗲𝗿 𝗽𝗿𝗼𝗳𝗶𝘁𝘀 𝘁𝗵𝗶𝘀 𝗾𝘂𝗮𝗿𝘁𝗲𝗿, but if that customer is now angry – and won’t return next year, then a hidden cost has been incurred. The company has paid away some customer loyalty. 𝗦𝗮𝗰𝗿𝗶𝗳𝗶𝗰𝗶𝗻𝗴 𝗿𝗲𝗮𝗹 𝗹𝗼𝗻𝗴-𝘁𝗲𝗿𝗺 𝘃𝗮𝗹𝘂𝗲 𝗰𝗿𝗲𝗮𝘁𝗶𝗼𝗻 𝗽𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹 𝗷𝘂𝘀𝘁 𝘁𝗼 𝗹𝗼𝗼𝗸 𝗯𝗲𝘁𝘁𝗲𝗿 𝗶𝗻 𝘁𝗵𝗲 𝘀𝗵𝗼𝗿𝘁-𝘁𝗲𝗿𝗺. Maybe you made $50 instead of $40 from the customer this year – but next year you’ll make $0 from him, and the year after that. 𝗜 𝘄𝗲𝗹𝗰𝗼𝗺𝗲 𝗧𝗿𝘂𝗺𝗽’𝘀 𝗽𝗿𝗼𝗽𝗼𝘀𝗮𝗹 𝘁𝗼 𝗴𝗼 𝘁𝗼 𝗮 𝘀𝘆𝘀𝘁𝗲𝗺 𝗼𝗳 𝗿𝗲𝗹𝗲𝗮𝘀𝗶𝗻𝗴 𝗲𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗲𝘃𝗲𝗿𝘆 𝘀𝗶𝘅 𝗺𝗼𝗻𝘁𝗵𝘀 𝗶𝗻𝘀𝘁𝗲𝗮𝗱 𝗼𝗳 𝗲𝘃𝗲𝗿𝘆 𝗾𝘂𝗮𝗿𝘁𝗲𝗿 𝗶𝗻 𝘁𝗵𝗲 𝗨𝗦. This is not without downsides though. In high-growth industries, things can change very rapidly in a few months. So being 6 months away from the latest figures will make it harder to do the best value analyses. If analysts end up spending a lot of time to guesstimate numbers that they could have just been provided by the company, it may overall not be resource efficient. In this tradeoff, 𝗜 𝘄𝗼𝘂𝗹𝗱 𝗿𝗮𝘁𝗵𝗲𝗿 𝗵𝗮𝘃𝗲 𝘁𝗵𝗲 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝘁𝗲𝗮𝗺𝘀 𝗜 𝗶𝗻𝘃𝗲𝘀𝘁 𝗶𝗻 𝗳𝗼𝗰𝘂𝘀𝗲𝗱 𝗼𝗻 𝗺𝗮𝘅𝗶𝗺𝗶𝘇𝗶𝗻𝗴 𝗹𝗼𝗻𝗴-𝘁𝗲𝗿𝗺 𝘃𝗮𝗹𝘂𝗲, 𝗿𝗮𝘁𝗵𝗲𝗿 𝘁𝗵𝗮𝗻 𝗺𝗮𝘅𝗶𝗺𝗶𝘇𝗶𝗻𝗴 𝘀𝗵𝗼𝗿𝘁-𝘁𝗲𝗿𝗺 𝗽𝗲𝗿𝗰𝗲𝗽𝘁𝗶𝗼𝗻 𝗼𝗳 𝘃𝗮𝗹𝘂𝗲, and then I’ll happily do the extra work to guesstimate the numbers along the way. Best regards, Jeppe Kirk Bonde

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