Unlocking Value Through Strategic Acquisitions
The first nine months of 2024 have seen Andvari’s net performance rise by 20.3%, outpacing the SPDR S&P 500 ETF (SPY) which has grown by 21.9%. While our performance may not be leading the market, we’re encouraged by the progress made in July and August, driven by investors rotating out of top-performing stocks and into our holdings.
The Power of Long-Term Thinking
It’s essential to judge our performance over an extended period, ideally ten years, where the market can accurately reflect the true growth in intrinsic value of the businesses we own. As Benjamin Graham once said, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” We believe this quote still holds true today, and our focus remains on creating long-term value for our clients.
Serial Acquirers: A Key to Success
Our portfolios feature several serial acquirers of vertical market software (VMS) companies, including Constellation Software, Topicus.com, and Lumine Group. These companies have acquired 22 software businesses in just the past quarter, demonstrating their ability to create value through strategic acquisitions. We also hold Arthur J. Gallagher and Rollins, two serial acquirers in their respective industries, which have a proven track record of creating value through M&A.
The Acquisition Advantage
These companies’ acquisition strategies are highly rational and have created enormous value for their shareholders over the years. They offer a fair price, but never top dollar, and provide a permanent home for the business and its employees. This approach allows them to select for business owners motivated by more than just money, and the acquired companies benefit from becoming part of a larger organization with greater resources.
Capital Allocation: The Key to Value Creation
Every business has only five choices when it comes to capital allocation: reinvest in its business, pay dividends, repurchase shares, pay down debt, or acquire other businesses. When done correctly, M&A can be incredibly additive to value creation. Our focus remains on the long-term, and we believe our clients will benefit from our disciplined approach to stock picking.
Performance Update
We’re pleased to report that our performance is catching up to the market, and we’re confident that our holdings will continue to create value for our clients over the long term. While a year or two is not enough to judge our skill in stock picking, we’re committed to delivering strong returns over the next ten years and beyond.
Contact Us
As always, we welcome your thoughts, comments, and questions. Please don’t hesitate to reach out to us with your feedback.
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