I penned the following in my first quarter investment letter. If you have confidence in your strategy and abilities you have to have the stomach to accept down periods. But out of some of the worst cycles come the best runs.
Following a robust 2023
performance in the general market, the first quarter extended the trend of
favorable gains. While we can't predict the future, our 25 years in the market
give us a good grasp of our strategy. Markets keep changing, and we're adapting
along with them. Our experience made us confident that our strategy was
well-positioned after a tough period. In the first quarter, WCP, LP was able to
capture outsized gains by being well positioned and riding the market’s upward
trend. Our focused portfolio of growth stocks did better than the overall
market. We still believe we're in the early stages of a big AI tech revolution
that will shake things up. That means they'll be some big winners, but also
some big losers, in this race to the top. Here's a snippet from our year-end
letter in January.
However, something changed in the 4th quarter that has us very bullish for the next 12-18 months. Starting with the Fed pivot on November 1st the market exploded higher and was accompanied by an expansion of breadth. It was the first time all year that multiple sectors and sizes participated in the rally. This is what has been lagging in the market and what made the first 10 months of 2023 so difficult. However, it is worth noting that the optimal time for a growth investor often emerges in the aftermath of a bear market. The extended duration of the bear market and the underperformance of numerous growth stocks are laying the groundwork for a substantial opportunity. Anticipating a promising future, we are enthusiastic about strategically positioning ourselves in the most promising growth names as opportunities unfold. Amidst the rise of AI, there could be a lot of new opportunities, almost like another big tech wave similar to or even bigger than the internet boom.
Yet not
one person contributed to WCP, LP at the end of the year, and human psychology
remains undefeated. While last year was challenging for our strategy, I
continue to believe our approach and portfolio concentration offers the best
chance of meaningfully outperforming our market benchmarks over a full cycle. However, it's crucial to acknowledge
that the concentrated nature of our portfolio, coupled with rigorous risk
management, may occasionally lead to periods of divergence from the broader
market trends. Our track record attests that success in investment is akin to a
marathon rather than a sprint. It's inevitable that in certain quarters, or
even entire years, we may underperform relative to our benchmarks while
diverging from market norms. Unfortunately, the market timing doesn’t
always suit our convenience, and patience is warranted. Nevertheless, our historical performance demonstrates a
significant outperformance relative to benchmarks over prolonged periods.
Embracing our strategy during periods of underperformance may prove favorable
for those who subscribe to our investment philosophy. Irrespective of
prevailing market conditions, I maintain unwavering confidence in our
overarching market approach, fortified by stringent risk management practices.
With time, adhering steadfastly to our strategy during opportune moments will
position us optimally for sustained success.
I'm excited about today’s opportunity landscape and our promising outlook for the future, especially with the unfolding AI theme. Yet, I recognize that our approach may not consistently deliver outperformance every quarter. Nonetheless, I remain committed in my belief that it will prove highly rewarding in the long run. Importantly, considering that the vast majority of my own investable assets are aligned with yours, it's imperative to underscore that we would never expect investors to shoulder risks that we ourselves are unwilling to bear.
