GoodHaven’s letter to shareholders for the period November 2014.
To Our Fellow Shareholders:
In recent months, our performance has significantly lagged the S&P 500 with modestly negative absolute performance. In our careers, we have been through such periods before and although we are not overly concerned, we do recognize that most investors tend to measure performance over shorter time periods and expect correlation with broad indexes. We would like to remind our fellow owners that a concentrated portfolio normally experiences periods of significant non-correlation, that returns are usually lumpier than simple index alternatives, and that our portfolio does not resemble a broadly diversified index like the S&P 500.
GoodHaven: Our portfolio is more undervalued relative to our estimates
Nevertheless, and while not evident in recent results, we believe our portfolio is more undervalued today relative to our estimates of intrinsic value than during most periods since inception. Although we cannot predict performance or results, we believe we own a number of securities that are selling at a large discount to intrinsic value – a gap we expect to narrow over time. We also believe our risk profile (defined in terms of exposure to permanent loss of capital) remains conservative. In our opinion, GoodHaven’s overall portfolio does not have permanent and material impairments to value.
We have not changed our style, our discipline, or our large personal investment in the Fund since our last communication with you, except that both of us have bought additional shares of the Fund for personal accounts in recent months. We believe this demonstrates our confidence and belief that our current portfolio contains opportunity for long term gains. Despite frothy markets, we have achieved solid risk adjusted returns since inception. Over our careers we have experienced several periods of weak relative results. We understand how this can create investor anxiety. Yet we urge our fellow owners to combat emotion and, to the extent they believe we are pursuing a sensible investment strategy, to think of such periods as buying opportunities. We are doing nothing different today than we did during GoodHaven’s first few years, when we achieved better-than-index performance and strong absolute results.
GoodHaven’s investment focus
Our focus is first on avoiding both permanent losses and large foreseeable risks – and only then trying to earn the best returns we can. We remain confident in our approach and our ability to identify sensible ways to invest your money (as well as ours) over time.
We are both available to answer any questions you may have. Please call David Gresser in our office at 305-677-7651 to schedule a call and one of us will get back to you in short order.
We appreciate your continued support.