SGP.L (Supergroup) posted a cracking Q3 IMS today: +12% in group sales, and +10.6% in like-for-like. SGP is interesting, because it has in some ways shaped my thinking about how to invest in companies.
Awhile ago, Tony Loton of The Motley Fool, with a distinctly trading-style of investing, put a new twist on an old adage: “a long term investment is a short term investment that went right“. I first picked up SGP in July 2012 after the company made numerous screw-ups. The key points for me were that they were mostly logistical problems, sales were still increasing at double-digit rates, and the balance sheet was OK.
The market never rewards those so abundantly than when someone takes a contrarian stance that also happens to be correct.
It was Nassim Taleb who said that George Soros showed infinitely more investment skill than Warren Buffett. I really don’t believe that. Besides, I read that Soros rated his own skills more modestly. He said that it wasn’t that he was right or wrong more or less than anyone else, but that he knew how to capitalise on his winning ideas. I have heard that said about Peter Lynch, too. In Lynch’s book, it is clear how he thought of share ownership as a very fluid state of affairs.
To me, this suggests that we should perhaps be more humble about our positions. Although we try to be “clever” and “right” in our assessments, we should never forget that deep-down we are overgrown primates (or perhaps “otters banging rocks”) trying to predict the future, a nigh-on impossible task.
In everyone’s portfolio, it is likely that there is, or was, a company that will vastly exceed expectations; we just don’t necessarily know what that company is.
Apple. In the early/mid 2000’s, I read about Prof Bruce Greewald’s take on Apple, and about how it lacked competitive advantages, and all that stuff. Since then, Apple has rocketed in price. So much for a professorship. As I recall, Mike Burry – a bona fide investing genius – didn’t seem to fare much better. If memory serves, he correctly identified it as a buy, but then sold out a profit of 30% – leaving a mountain of gains for the next guy.
So what’s this all got to do with Supergroup? Well, the point is this. Here we have a company in the most fickle of markets, a tough economic background, shops that some people tell us are empty, product saturation, and those stupid logos which everyone is sure to be bored with real soon now. Oh, and French Connection, anyone? On the other hand, we could just well have an international brand that is in its growth phase.
So which is it, the stupid logos that everyone’s dad is now wearing, or the brand with an international growth trajectory?
I think the answer is: probably a bit of both, but today, it’s the latter. Sales are in double-digits. International franchises are progressing. And despite the allegedly customerless shops with naff merchandise, like-for-like are actually up. Apparently we should ignore the like-for-likes, though, as that was due to fluke weather.
I hold until I don’t. Happy investing to you all.