Personally, I find those long-term charts to be distractors in the discussion because an investor’s return differs significantly from the stock’s return unless the investment horizon and the holding period are identical. For example, Talvivaara’s lifetime stock return was -100%, but many who invested in Talvivaara saw returns that were even strongly positive, depending entirely on when they bought and sold. So, while that paper wealth looks sweet in these charts, practically no investor actually achieved that theoretical return because such holding periods are completely unrealistic.
In my opinion, one can argue for long-term ownership based on differences between the investor’s and the market’s cash flow estimates and preferences arising from the investment horizon. However, for a shorter ownership spanning only a few years, I don’t really see the point, as there are no tools here for an investor to differentiate themselves from the market. The management’s track record is public, corporate ownership is fragmented and neither it nor future acquisition targets can be rationally analyzed, and future cash flows are frustratingly stable. Thus, the stock is likely priced correctly to its full potential, and the shorter-term investor is doomed to mediocre returns.
Perhaps this does sound like trolling, but I think we are just on different wavelengths. To me, the premium paid for illiquid investment products is completely rational when looking at the real world instead of homo economicus. The typical investor loses return with every investment decision, whether it’s a buy or a sell. The optimal situation would be for someone else to assemble a suitable personal permanent portfolio allocation that the investor could not influence themselves—somewhat similar to how our pension fund system works.
However, this isn’t psychologically possible in personal investing, so an investor must either try to minimize the return losses caused by investment decisions through experience and study—which may eventually even turn their own decisions toward a positive expected value—or minimize the opportunities to make investment decisions by acquiring illiquid assets, such as an oversized owner-occupied home or those illiquid PE funds. Naturally, since illiquidity improves the average investor’s expected return, it is worth paying premiums for.
Now, if you look at the situation from your own perspective, the conclusion is the opposite. You are certainly an experienced and skilled investor and your investment decisions add value, so you must ensure that you are able to make them. Therefore, liquidity has value to you, as does finding yourself in situations where estimating a stock’s cash flows is uncertain or difficult, because in those situations, you are able to maximize the value generated by your investment decisions.
At the risk of @Verneri_Pulkkinen revoking my posting rights, I will state that I find this entire serial acquirer sector to be a bit of a silly target for a stock picker. Developing investors get enchanted by the ideology of long-term ownership and buzzwords like ‘asset-light business model’, but they learn almost nothing about investing by owning them for the few years the stock remains in their portfolio. For more advanced investors, on the other hand, there are no “fast and dangerous” situations where they could differentiate themselves from other investors and the market, producing added value with their hard-earned expertise.
Specializing in the sector as an investor doesn’t seem like a very attractive use of time either, because in the end, you are just buying teams and business models. Private equity seems, in every way, an easier and more sensible way to get nearly or completely similar exposure to unlisted companies in a portfolio than investing in serial acquirers.