Vagary of the stock market never ceases to amuse me!
It is easy to be consumed by the minutia of the stock market, in my opinion, a grave error. First problem as an investor you have little understanding of the magic sauce that makes your investment companies a success. Even the analysts will admit that they can understand a trend but not the decision process that makes a company successful.
As I mentioned before the bulk of our "savings" are invested in productive assets, of course, we have used our stock holdings as security and borrowed against our liquid savings, but we both consider our "wealth creation" to come from the direct investments we have made.
My day job was never to analyze the success of a particular stock, rather asset allocation was my thing, a more macro view of the world. I was reminded of this by my "new" asset manager. My previous broker retired, we both started at the same time in the same firm and he, like me, decided to do something else with his life. His replacement is a 30-something woman, whom he has trained for the past decade. She is highly competent and understands my needs. She spent the weekend with us at the house, and money management was a short conversation.
I pay my money manager a substantial amount every year to manage my money, so my objective is never to doubt her strategy but just to understand her goals. Last year I paid nearly 200k in brokerage fees, which is fine, but it also means that I expect them to do the work, and she really does. She inherited my old broker's team and is doing an excellent job at capital preservation and reasonable growth (less than 4% net per annum).
Our investment in the farm, and the other businesses (there are nearly 10 now), are all in the agribusiness sector, 90% are in the transformation segment where all the money is made in the sector (farming and distribution being the poor cousins). I say 10 because through our wholesalers we are in the process of acquiring a milk processing operation, that will take over the cheese and butter business, it's becoming too large for the farm, and the new business is less than 5 miles from our farm, so our employees will be unaffected (they are simply physically moving to the new operations), the key is that our dairy operations (both cows and goats) have grown tremendously, and was contemplating expanding the facilities at the farm, it was a lot cheaper to purchase the new plant, which comes with a master cheese maker...
Now, I mentioned these two things because I consider them separate; the fruits of our labour in investment in small companies in the agro sector is where we plan to create generational wealth. Not the stock market. Where preservation is the key focus. The nine businesses we partially acquired have seen massive increases in profitability. As I mentioned before, the margins in the transformation businesses are an order of magnitude greater than in the farming and selling of agricultural products. In the case of the milk processing business, the problem was identical, an inability to access more capital that was creating artificial constraints on production.
What they had in place was an order of magnitude better than what we have at the farm in terms of technology and know-how. Demand for our butter exclips the supply, just the ability to fully service our butter restaurant trade is huge because the demand is there. The same with the cheeses we manufacture. We are able to finance a huge increase in the business volume. This will help the current owner, who remains a minority shareholder and will liberate critical space on the farm.
Our calving season has been exceptional for the past two years. So our heard has grown by nearly 50%.
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