Welcome to the first edition of the Guru Gems Newsletter! This will be a regular newsletter focused on unearthing investment wisdom from the world’s investing masters.
“Yet Another Newsletter on Investing” I hear you say… True, though I’m writing this in the first place for myself, to document my research as I am learning about Superinvestors’ portfolios. Other people may also find this interesting and hopefully get something out of it.
Investing is hard, so let’s just copy the best
Contrary to popular belief, it is possible to beat the market over the long term and many great investors have achieved this. My goal therefore is to find those ‘Gurus’ and study their portfolios to identify their ‘Gem’ companies. And if we can identify companies that are held by more than one Guru, we are truly leveraging the wisdom of the Guru crowd. Our underlying assumption is that if we can purchase those companies held by the world’s best long-term investors at the right price, then those world-class stocks will help us to generate above-average returns.
Superinvestors who manage $100 million or more need to report their US positions on a quarterly basis through so-called 13F filings. Since these filings are only released up to 45 days after the end of the quarter, the retail investor following the Gurus is at a disadvantage as the position may already have changed. But if we select those investors with a very long-term focus and holding period, this disadvantage diminishes significantly.
Relying on 13F filings alone has some challenges (timeline as mentioned, US positions only, no visibility on equity options or short positions, …) so I will also look for additional insights from investor’s annual letters, quarterly updates or interviews and podcasts they may have been on.
There are a lot of good resources, apps, and websites available that already track Superinvestors portfolios (Dataroma for example), so my goal will not be to replicate what already exists, but rather use these as additional research tools. For example, not all investors listed on Dataroma have a long-term focus, so it will still be key to identify those that do. Another example is the company we will be discussing today, which can also not be found on most of the existing Guru tracker sites because it is a non-US company.
Ultimately, my goal is to create a portfolio of 8-12 stocks found in Guru investors’ portfolios.
Step 1 is to select the Gurus. For this, I will focus on those investors that have outperformed the index over a long time while having an average holding period of 5+ or even 10+ years. Once I have identified a first selection of Gurus, I will look for companies in their portfolios that are owned by other Gurus as well.
Step 2 will be to figure out the right price to pay for these companies. To do so, we will follow the principles from Terry Smith (our first Guru!). Terry Smith is a legendary British investor who manages the Fundsmith Equity Fund, the UK’s largest stock fund. It has outperformed the MSCI World Index since it was launched in 2010. Terry Smith’s simple three step investment strategy can be summarized as:
Buy Good Companies
Don’t Overpay
Do Nothing
To find out whether we “Don’t overpay” we will use a simple approach and look at :
Key ratios like Forward P/E or EV/EBIT (more on these in future newsletters) and how they compare to their historical average and;
How much the Gurus paid on average for their positions in this stock.
Luxury
The first stock we’ll consider for our portfolio is LVMH, a French multinational holding company and conglomerate that specializes in luxury goods (high-end fashion, jewelry, wines, cosmetics). Famous brands include Louis Vuitton, Moët & Chandon, Dior, Tiffany, Loro Piana, Hennessey, …
Terry Smith purchased a stake in LVMH right after the COVID lockdowns. LVMH traded at around 320 EUR at its lowest during COVID in March 2020, and it did really well post-COVID, profiting from a booming demand in luxury goods. The share price reached 900 EUR in April 2023 but has since been in a decline due to a slowdown in luxury demand, especially driven by weakness in China over the last quarters.
Here is what Terry Smith wrote in his 2024 Annual Letter to Shareholders (bold emphasis added by me):
“L’Oréal and LVMH were both adversely affected by events in China where the economy is struggling under the weight of a moribund residential property sector and the associated credit problems. In neither case does it alter our view that these are fundamentally very good businesses. Moreover, the good news about business segments which perform poorly is that they wane in significance. China was the largest country/region for luxury goods sales in the world but recent performance has placed it behind America and maybe even Europe so the impact of its problems may wane over time.”
Guy Spier (our second Guru) who runs the Aquamarine Fund, wrote in his recent Management’s Letter to Partners that he started a new investment in LVMH. Guy Spier is known for making very little changes to his portfolio, so when he starts a new position, it means there must be a good opportunity to buy a great company.
Finally, Bernard Arnault, CEO of LVMH who owns nearly 50% (!) of the company, has been scooping up shares of LVMH while the price is at a low. He has been buying shares almost on a weekly basis for the past 2 months as can be seen here.
To buy or not to buy
Bringing it all together, we now need to decide whether to invest in the stock at the current price (524 EUR at the time of writing).
With 2 Gurus owning the company, significant insider purchases over the past months and a multi-year low valuation (see chart below), this looks like a very attractive investment. I will allocate 5% of my Guru Gems Portfolio to this stock as a starting position. The current uncertainty around US tariffs and LVMH’s Q1 earnings announcement later this week may bring the price further down, which I may use as an opportunity to increase the position further.
Learn more about the Gurus
I hope you enjoyed this first newsletter. If you are new to investing or on a learning journey and curious to learn more about investing Gurus, I would highly recommend William Green’s book Richer, Wiser, Happier which is a fantastic book about how the world's greatest investors win in markets and life. There is also a podcast under the same name (The episodes are featured on We Study Billionaires) and here are the episodes with Terry Smith and Guy Spier (Guy Spier made a few appearances on the podcast):