Knowing when to quit

After a challenging year, James Godrich reports stronger performance in the fourth quarter, both on a relative and an absolute basis, in the CSI funds.

by James Godrich

Fund Manager


A combination of a reduction in the rate of growth in global inflation, the dramatic end to China’s zero-Covid policy and a string of surprisingly positive earnings updates provided reason for optimism amongst mostly sceptical investors.

Included within that optimism were a number of retail businesses who had performed poorly but for which we felt opportunities had presented themselves to add to positions. The quarter saw impressive returns for fellow shareholders in LVMH (+11.4%), Burberry (+12.3%), Next (+20.9%), Nike (+40.8%) and Games Workshop (+47.8%) and we are pleased to report having added to our positions in these businesses at lower prices. Our perseverance amongst gloomy media headlines appears to have received some support (or at least some respite); however even after an exceptional quarter in the share price of some of these high quality franchises, we continue to look forward with great optimism.

Perseverance in investment however does not always pay off and during the quarter we chose to move on from Strix; a business held within the funds for a little under 18 months – a very brief stay on our preferred ‘til death do us part’ time horizon. During that period, we were disappointed with the capital allocation and the communication from the management team who we felt often, and increasingly so, over-promised and under-delivered. We continue to believe that the core kettle controls product offering in Strix offers attractive cash flow and characteristics but our confidence and trust in management as custodians of that fortunate position has diminished – we believe that the investment case had changed. We recycled the majority of the capital into Autotrader – another UK business with a monopolistic core offering but with a much greater record on nurturing, allocating and distributing their, and ultimately our, capital.

Whilst our hope is to take advantage of the often short term swings in markets through a long term approach to investment in businesses, we believe that there are times when it is appropriate to move on, give up or quit. Our sale criteria remains unchanged from that described in our June 2021 commentary where we wrote that; we follow the philosophy on when to sell that Philip Fisher sets out in his seminal book, ‘Common Stocks and Uncommon Profits’. In it he says that, “there are three reasons and three reasons only, for the sale of any common stock…when a mistake has been made…[adverse] changes resulting from the passage of time…to switch into a situation with seemingly better prospects.” It is this approach that led to us buying more of LVMH, Burberry, Next, Nike and Games Workshop and selling our holding in Strix.

James Godrich, Fund Manager


The value of securities and their income can fall as well as rise. Past performance should not be seen as an indication of future results. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities. At times, the firm or employees of the firm may have positions in securities discussed.  Should any conflict of interest arise, these are managed under conflicts of interest policy, a copy of which is available on request.  

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