In April, the strategy delivered a 9.2% gain as investors once again demonstrated a preference for exciting futures over profitable presents.
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The market put its AI blinkers on. The intensity of it all struck home over dinner with a CEO recently. No small talk. He went straight in.
What does AI mean for your business?
What does AI mean for your business?
What does AI mean for your business?
“All day,” he sighed. “Same question. Different young analyst faces.” The familiar answers follow. AI drives efficiency. AI unlocks growth. Blah, blah, blah. Then he fixed us with an intimidating stare and said, “You know what? I wanted to shout; AI is coming for you before it comes for me!!”
The scary thing about AI is not that it replaces humans. It is that after a lifetime of listening to earnings calls, we might start rooting for the computer.
Interestingly, markets are already beginning to hunt for the next obsession. Another narrative is emerging…
Space. The Final Frontier
These are the voyages of British investors seeking strange new rockets and obscure satellite companies. Their continuing mission: to seek out anything with orbital exposure; to discover fresh speculative narratives and fashionable acronyms; and to boldly fund businesses with no profits.
People rarely buy things because they are valuable. They buy them because they think someone else might get excited after they do. Let’s share a secret. Nobody gets to the end of a DCF. The stock market crowd does not really buy earnings. It buys costumes for a party.
There are only two main space stocks listed in the UK: Filtronic and Seraphim. Awkward, because every fund manager wants exposure, and nobody wants to arrive wearing the same dress. Bull markets create an enormous demand for magical thinking. Naturally, the City responds by manufacturing more of it.
When the market fully moves on to this next big thing, we will be ready to pull the trigger…on defence shorts. The sector resembles yesterday’s narrative priced for tomorrow’s perfection. The Kernow model now flags defence as the most overvalued sector in the market, having overtaken resources.
Some lower-quality defence stocks trade as though management possesses detailed plans for the annexation of Jupiter and a Death Star somewhere in Swindon.
Real wealth is usually built more quietly. Which brings us to Saga.
The Silver Pound Starts Dreaming Beyond 2029
Saga is currently worth £2.35bn, compared with a paltry market cap of £0.88bn. The position, therefore, remains at maximum weight within the portfolio.
In April, Saga did a fantastic job upgrading expectations again. Frankly, there are signs that the Kernow valuation could jump even higher beyond 2029. A healthcare division here. Another ocean cruise ship there. Who knows.
We do not want management distracted by any of that. We are effectively two-nil up in the first ten minutes of the football match, so nobody should be thinking about winning the league. Though we know the market is starting to wonder about it.
We are not thinking about it. Not one bit.
Still, for anyone minded to think about such things, there is a path from our current six-bagger to one of those fabled 40-baggers investors rave about in excitable letters. That said, greed is a terrible mood for decision-making. This pensioner rocket ship appears to understand its customer deeply, execution remains strong, and the demographic tailwind is just tremendous. Better to stay out of the way of success. Leave them to it and don’t think about it.
One pattern appears repeatedly in our best investments: disciplined management teams making economically rational decisions while markets become emotionally distracted.
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