Legendary investor Warren Buffett famously said that his favorite holding period is forever. Our aim at Baskin Wealth Management is to replicate this by owning great businesses managed by skilled & honest CEOs, and then sit back and let these CEOs work their magic. I’ve written posts before about some companies that we have owned for clients for many years that continue to find creative ways to grow their businesses and make money including: Brookfield (owned since 2004), TFI International (owned since 2005), and Microsoft (owned since 2010). In 2005, we certainly did not fathom that TFI International was going to enter the US less-than-truckload market in 2021, but we did recognize that it was an extremely well-run company under CEO Alain Bedard. This approach has worked very well for us and our clients over time.
The trick is that it’s actually very difficult to hold a stock for an extended period of time. Maybe the company’s growth slowed down and that causes you to question the prospects of the company and selling the stock at a loss would generate a valuable capital loss for tax purposes. Or on the flip side, perhaps the market in its enthusiasm had bid the company’s stock to new highs making you feel like its prudent to “take some chips off the table”.
Sometimes stocks tread water and don’t do anything for many years. It can be tempting to sell such stocks with a rationale similar to a sports team that trades a player who has not increased his/her production after a few seasons. But this is a flawed analogy as an athlete’s performance exists within a highly controlled environment while a company’s stock price can fluctuate wildly for reasons beyond the management’s control. As discussed in this blog post, the appropriate response to a declining or flat stock price movement is to continually re-examine the merits of the company rather than to sell a stock just to make the client statements look nice.
One such example in our portfolio today is Vail Resorts. Vail Resorts is one of the largest operators of ski resorts in North America. We first received shares in Vail in 2016 after it acquired Whistler Blackcomb and bought more shares over time as we studied Vail’s outstanding track record under then-CEO Robert Katz. Since 2017, shares of Vail have significantly underperformed the S&P 500 with the share price roughly flat over a 6 year period (though we have received over $30 per share in dividends). Vail’s business performance has certainly not been flat however: attendance has increased by over 60% with sales and profits also up significantly. Importantly, a significantly higher percentage of revenues now comes from season passes, which reduces the impact of weather from Vail’s financial performance going forward. To be clear, Vail was impacted significantly by COVID-related restrictions in 2020-2021, but the business remained solidly profitable during that time unlike most travel & leisure related companies.
To put this another way, Vail’s stock simply got cheaper over the last 6 years. Despite the underperformance of the shares, we remain convinced in the quality of Vail and its management team and will continue to own its shares until evidence shows us otherwise.
