At this time of year a number of investors are happy to share their hopes and fears for the year ahead. We have pointed out in previous commentaries that there is little science and even less accuracy in these forecasts. Commonly, these forecasts are accompanied with more precise forecasts of timing (‘tough first half, but better second half’) as if the primary question is simply not exacting enough.

As we have said before, we do not get involved in such pointless competitions. Firstly, we know we would be wrong and secondly we don’t really understand the market’s obsession with calendar year returns.

The time we have saved on this pointless exercise has allowed us to conduct some navel gazing on our investment process. It is very noticeable that many of the best investors over a number of decades share at least two characteristics: patience and low portfolio activity. As contrarian investors we realise we are often guilty of buying too early and selling too early. While neither of these are sins in themselves – after all Baron Jacob Rothschild when asked how he had become so rich commented:  “I made fortune while selling always a little too early” - we wonder if we could improve our process by not always being SO early. The institutional imperative which demands continual outperformance probably increases one’s desire to deal as does the extraordinary amount of (useless) information to which everyone has access.

The ability to patiently wait for only the best ideas is not easily gained but pays great rewards (Baron Phillipe Rothschild, clearly from a family who both invested well and were eminently quotable, once exclaimed that the time to buy was "when there is blood in the streets.”)

Some people wonder if our focus on patience and low turnover (we aim to hold our stocks for between 3 and 5 years compared to an industry average of between 6 and 9 months) is the correct method given the speed with which markets move in the modern era. While this is a relevant question this ‘speed’ should not be confused with ‘distance’. For example, the equity markets have taken 9 years (‘distance’) to de-rate to their current levels from their valuation peak despite some intermittent bouts of extreme volatility (‘speed’). This is true for stocks too: think the steady decline and de-rating of formerly successful companies such as ITV and Rentokil – more a grind than a collapse.

None of this is easy to carry off (thankfully, otherwise we would be unemployed) but we continue to try and learn from our and others’ mistakes. Sitting on our hands, waiting for the right time to act and then avoiding selling too early are just some of our New Year’s Resolutions.