Putting Winners and Losers Into Perspective

31 May 2018 | by Todd Wenning, CFA

A few weeks ago, I met up with some friends in Central Pennsylvania for a weekend of fly fishing. I’d never fly-fished before, so I knew it wasn’t going to be pretty.

As the rookie angler in the group, the veterans kindly took me under their wing. They set up my rigs, gave me a crash course in Thinking Like a Fish, and said “good luck” before they headed off to their own spots along the stream.

The first three hours in the waist-high water were largely uneventful. Cast, nothing. Cast, nothing. Cast, nothing. Still, I enjoyed the solitude, quiet, and repetition of it all. And it sure beat staring at two computer screens.

On the way back to shore for lunch, I slipped on the stream bed – twice – and went for a swim. Water filled my waders and I looked like the Michelin Man as I crawled up the bank.

Back on dry land, I dumped gallons of water out of my shoes and waders. A bit embarrassed, I expected to catch some grief from the vets. And justifiably so. To my surprise, the response was uniformly, “Don’t worry, we’ve all fallen in that stream at one point.”

Luck vs. skill

After drying off, I ventured back into the stream and, what do you know, I caught a brown trout within ten minutes. Of course, it took zero skill. Yet, there was the fish. And just like that, falling in the water didn’t seem like a big deal anymore.

The “catch,” pre-release.

That evening in the cabin with the vets, I sat back and listened to their fishing stories, their strategies, and their debates on the nuances of fly fishing. It reminded me a lot of talking stocks with other investors.

A common theme emerged. As with fly fishing, so much of investing is about giving yourself the best chance for success. You can have the right flies tied on your line and be standing on the right part of the stream, but on any given day you might not catch anything. You might lose one of your flies under a rock. Indeed, you might even fall in the stream. Twice. So much is out of your control.

And some days, you just haul them in. Luck and skill come together. Other days you’re in the wrong spot and just get lucky, as I did.

Bottom line

Our belief at Ensemble is that by focusing on companies with dominant economic moats and high returns on invested capital that we place ourselves in the best possible position for success. Over time and over many casts, we think this will help us come out ahead of the market. We’ll have winners and losers along the way, but the key is to keep fishing in the right spots.



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