Transcript
Introduction
Patrick
What, in your now pretty long career investing in equities has been the largest error, 30 years in and 20 years running Semper, you do make a, a fair share of blunders and mistakes. And this year's letter, I wrote about a handful and probably the one that comes to mind that I would categorize as the worst, which was clearly an error of commission. Having sold Ross stores having owned it for the prior two and a half years, we owned at the outset of the firm. We had trained, positioned a very wealthy family's portfolio away from kind of large blue-chip businesses with very low-cost basis. A lot of businesses no longer earning their cost of capital prices ranging from 30 to 50 times earnings. Very tax efficiently with a foundation and some credits that liquidated a portfolio. And at the time, all of the value that we were finding was in small, mid-cap names.
So we buy Ross stores as an example, maybe 10 times earnings. We'd followed Ross for seven or eight years had never owned it. Terrific retailer. They probably had 350 375 stores at the time. We love the ramp at which they could continue to open stores. Unit economics were terrific, kind of high teens, low twenties returns on capital balance sheet was great. They used operating leases, but judiciously. So we pay 10 times earnings for Ross. And during that first 50% bear market, when the market fell. During 2000 Oh one Oh two, we made on the order of two and a half times, our money on Ross. So the stock, at that point, it was trading kind of high teens, call it 20 times earnings. And we figured as we did at the time that you could always sell things and buy them back.