Ricapitolare.

February, 2024.

Commentary.

There were a few relevant events throughout the past month:

• Fiscal 2023 was another record year for O’Reilly, delivering increases of 9.7% and 14.3% in sales and per-share profits, respectively. With roughly flat profitability levels, this difference is primarily explained by the effect of share buybacks (a further 3.5% reduction of the total pool compared to fiscal 2022).
  The picture below depicts O’Reilly’s flywheel since its capital allocation strategy shifted towards consistent share repurchases in fiscal 2010:

• Brookfield’s own invested capital amounted to US$132.9 billion at year end (19.5% higher than that of fiscal 2022) and distributable earnings before realisations per share, after adjusting for the special distribution of a quarter of its asset management business, grew by 8.3% throughout fiscal 2023. The only operating business that lacked behind was its property subsidiary (i.e. BPG), primarily as a consequence of a higher cost of debt capital.

• ZIGExN reported increases of 21.7% and 49.0% in revenues and earnings per share (respectively) for the third quarter of its fiscal 2024. Over a rolling twelve-month period, I estimate its intrinsic value to have grown by 44.7%.

• Water Intelligence published a press report on February 15th providing an update for fiscal 2023. Over the year, the group increased revenues by 6.5% and EPS by around 13.0%.

Performance.

Notes:
Performance is measured following the money-weighed return (MWR) methodology.
Unless otherwise indicated, performance values are expressed in EUR terms.

The market quotation of the portfolio increased by 4.6% in February, leaving the year-to-date performance at 4.5% and at 28.9% since inception in January 2022 (12.4% annualised). In TWR terms, the performance since inception has been 45.0% (18.7% annualised).
Comparatively, the S&P500 appreciated 5.2% in February, 9.6% since the start of the year and 18.7% since January 2022 (8.2% annualised).

Contributors.

The following table shows the top contributors and detractors to market performance on a weighted basis and converted to EUR during different time frames: last month, year to date (YTD) and inception to date (ITD):

The waterfall charts below are included for a more detailed breakdown of the individual contribution of each holding:

Activity.

There has been no activity during the period.

Content consumed during the period.

Some curated content whose read was enjoyable last month:

• Articles:

  • Musings on the attribution of total shareholder returns (Tristan Waine).

• Books:

  • Capital allocation (David Giroux).

  • Diamonds in the dust (Saurabh Mukherjea).

  • How to get lucky (Max Gunther).

  • Junk to gold (Willis Johnson).

  • Never split the difference (Chris Voss).

  • The John Deere way (David Magee).