Sabre Arc Capital June 2024 Review
June 2024 - $1,042,942
First, I want to thank those who have recently subscribed!❤️ Receiving a notification for a new subscriber is almost as gratifying as when the dividend hits, well, almost.
Portfolio Total
Sabre Arc ended the month of June above the million-dollar mark ($1,042,942.23). It may have also been the most action-packed month since March of 2020.
Portfolio Activity
After much consideration, we exited our positions in 3M and Pfizer. These positions were relatively small, and their impact on the portfolio was immaterial. We lost confidence in management’s ability to grow earnings sustainably, and litigation continues to be headwind.
3M & Pfizer
We started Sabre Arc in 2016, and 3M and Pfizer were both initiated during the portfolio's early days. My investment style has changed since then; as I have become more experienced, I have taken more concentrated bets. We seldom sell shares; it may have been a couple of years since our last sale. However, if we are unwilling to invest $10-20K at the drop of a hat, we may not be as comfortable with the position as we thought. The sales accounted for $9,893 of long-term capital losses, although both have spun off securities and have paid us dividends for several years. Overall, it was a poor use of capital, and although I am wiser, I am also poorer.
Nike
We continue to believe in Nike, and while the last earnings call was disappointing, it was not unexpected. The point of these updates is not to defend our capital allocation decisions, but I believe some of the fear may be overblown. Over the last couple of weeks, I have heard things such as Nike being a dying brand, that competition has lapped them (pun intended), that nobody wears their clothes, and that the stock is still overvalued.
I would assume that Nike has always had competition. I doubt the barriers to entry for footwear and apparel are high. However, if Nike continues to garner the share of consumer minds it currently has, I will continue to have faith in the brand. Given the drawdown it experienced, we purchased $10K of Nike after the earnings report.
Portfolio Allocation
The heatmap below looked much better when our Disney position was in the green. I’d rather not talk about it.
Sectors
I added a new chart listing the sectors we are investing in. Personally, I feel it would be great that our portfolio is 47% Internet Retail and Insurance, although we all know that Berkshire is not just an Insurance Company.
YTD Returns
Thus far, in 2024, our fund has earned $110,852, with $106,974 in capital appreciation and $3,877.38 in dividends and interest. $856.01 is a Sabre Arc record for monthly income!
Lastly, here are a few Substack articles that I found interesting:
#38 NIKE Stock Valuation Update
- does a good job of laying out the bear case. Although I don’t exactly agree with the conclusion (I may be biased), I appreciate his research.Nick Sleep: How The Secretive Investor Crushed The Market With Concentrated Compounders
The guys at Chit Chat discussed the elusive Nick Sleep.Starbucks: Buy Now, Make Easy 40%
lays out many reasons why Starbucks is a wonderful business. Although the market does not seem to think so at the moment, I remain excited about their future.PayPal vs Apple Pay – What Apple’s WWDC announcements mean for PayPal (It isn’t great)
does a wonderful job detailing how Apple is attacking Paypal’s economic castle and why the moat may not be as impenetrable as many would believe. However, this made me rather depressed, given my position in the company.Since you have made it this far, please check out past issues of Becoming Berkshire:
Issue 10| 1967 Part 1- Buffett & Clyde
Issue 9| 1966 Part 2 - Warren Buffett & The House of Mouse
Issue 8| 1966-Hochschild, Kohn & Co.
Issue 7| 1965 - Hostile Takeover
Issue 6| 1964 - Buffett's Folly
Issue 5| 1963/64 - The American Express Salad Oil Swindle
Great article I definitely enjoyed the read! Quick question though, Warren often has stated if he had a lower amount of capital to allocate he would focus on smaller caps as they have a higher chance of being overlooked and thus more prone to being mispriced. I noticed your holdings are almost exclusively very large companies and wondered if you would address that discrepancy?
I am new to your reading so I'd you have an article talking about just this you can direct me there. Thanks!