Tom Russo’s Hedge Fund Is Holding Strong with Indispensable Brands Despite the Wall of Worry

Tom Russo's Semper Vic Partners gained 8.7% in the fourth quarter, bringing its full-year 2023 return to 18.7% net. Since its inception in July 1990, the hedge fund has returned a cumulative 3,444.8% for a compound annual growth rate of 11.3%.

For comparison, the Dow Jones Industrial Average gained 13.1% in the fourth quarter and 16.2% in 2023, while the S&P 500 jumped 11.7% in the quarter and 26.3% for the year. The MSCI All Country World Index rose 11.2% in the fourth quarter and 22.8% for 2023.

Since July 1990, The Dow has recorded a compound annual growth rate of 10.5%, comparable to the S&P's 10.2% return and ahead of the MSCI All Country World Index's 7.8% compound annual growth rate.

Background on Semper Vic Partners

Semper Vic targets companies whose products and services customers believe that can't do without, which supports price-inelastic demand. The fund also seeks companies with two specific "capacities." One is the capacity to reinvest, and the other is the capacity to "suffer."

Semper Vic also prefers publicly traded companies still controlled by their founding families, who also retain significant investment exposure to their company. Usually almost 50% of the fund's portfolio companies are family-controlled.

At the end of 2023, Semper Vic's largest investments were Berkshire Hathaway, accounting for 18.1% of its portfolio, followed by Alphabet at 12.5% and Mastercard at 9.7%. Rounding out the top 10 holdings are Nestle's sponsored ADR shares (9.1%), Compagnie Financiere Richemont (7.2%), Heineken (6.9%), Netflix (6.4%), Philip Morris (5.8%), Pernod Ricard (5.3%), and Martin Marietta Materials (4.7%).

In fact, four of Semper Vic's top holdings currently were among the earliest positions it bought upon launch in July 1990: Berkshire Hathaway, Nestle, Heineken and Martin Marietta Materials.

Buying-the-dip on a massive scale

In his 2023 letter to investors, which was obtained by Hedge Fund Alpha, Russo said bull markets often develop after a growing pile of decidedly negative evidence. Initially, investors respond to the consensus pessimism by unloading shares.