A stock can be bought today and sold tomorrow. But a stock could also be bought today and never sold. Stocks are unusual investments because they have no maturity date. Bonds mature and loans are repaid. Owning a stock means you own a small piece of a company forever. Yet the average investor only holds a stock for about a year.
This mismatch in time horizons is one reason why stocks can be mispriced, and this becomes even more pronounced in times of uncertainty, when fear takes over and attention narrows to the immediate risks instead of long-term fundamentals.
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Our goal is to identify great businesses, wait for the right entry point, and hold them through their ups and downs – sometimes for years – while their true value is realised. Below are three examples from our portfolio that reflect this approach.
Luxury: a signal of success
Luxury goods consumption boomed during Covid when spending on services was constrained. This temporary expansion was wrongly expected to last, and its recent reversal has created opportunities. The desire to signal success through possessions – what some call “positional goods” – is a deep and enduring human trait. From ancient jewellery to modern sports cars, status symbols have always carried weight.
Luxury-goods businesses earn high returns because they are hard to replicate. It takes decades to build a brand with global recognition and a sense of heritage. Burberry (LSE: BRBY), founded in 1856, is one such company. Its position as a symbol of British luxury, combined with global distribution and pricing power, gives it the enduring ability to generate high returns.
The funeral and crematoria industry is not frequently discussed, yet it has many attractive characteristics. Demand is steady, largely immune to economic cycles, and set to grow as populations age. We hold Dignity, a leading company in this sector, through Castelnau Group (LSE: CGL), one of the Aurora trust’s investments. Until 2021, Dignity suffered from poor management. Prices were raised too aggressively and capital was deployed inefficiently. Dignity has now embarked on a strategic turnaround, focusing on its core strengths, restoring competitiveness, and unlocking value from its unmatched network of funeral homes and crematoria.
Sometimes, great businesses shine brightest in difficult times. Enter Ryanair (Dublin: RYA), which we first invested in during a period of turbulence across the airline industry. What sets Ryanair apart is its relentless commitment to cost discipline. Its ultra-low-cost model fuels growth, creates scale, and strengthens its bargaining power with suppliers, all of which feeds back into lower fares and rising market share.
Today, the industry faces new constraints. Pressures on supply chains are limiting capacity across aviation, which is supporting pricing power, and Ryanair stands to benefit. Its frugal, shareholder-first culture remains intact, backed by a strong net-cash balance sheet and an active capital-return programme. For a business with its quality and growth prospects, we believe the valuation is highly attractive.
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