THRY - Laughing Water Capital Q4 2023 Letter

2024-02-01 03:21:00 ET

Summary

• Laughing Water Capital is a concentrated, long biased investment partnership open to accredited investors. Our interests are fully aligned with our partners as nearly all of our personal wealth is invested in our strategy.
• For Q4 2023, Class A interests in Laughing Water Capital returned approximately 3.2%, bringing our year-to-date returns to approximately 11.8% after all fees and expenses.
• My focus on small and very small-cap stocks has done us no favors of late, as large stocks have significantly outperformed small, and small have significantly outperformed very small.

Dear Partners,

For Q4 2023, Class A interests in Laughing Water Capital returned approximately 3.2%, bringing our year-to-date returns to approximately 11.8% after all fees and expenses. ⁱ The SP500TR and R2000 returned 11.7% and 14.0% for the quarter, bringing year-to-date returns to 26.3% and 17.0% respectively. Since inception, LWC has returned approximately 245%, vs. 193% for the SP500TR and 118% for the R2000. As always, please check your individual statements for the most accurate reading on returns, as returns will vary based on class, fund, and timing.

In nearly every letter I have written, I have reminded you that over shorter periods of time the indexes are of little use to us because I am deliberately choosing to do something different than the indexes. That is as true today as it ever has been, but it is admittedly more difficult to issue this reminder when we trail the indexes.

My focus on small and very small-cap stocks has done us no favors of late, as large stocks have significantly outperformed small, and small have significantly outperformed very small (for reference, the [[IWC]] Micro-Cap ETF returned ~8% in 2023). However, I would be remiss if I were to blame our returns on index activity. I manage a concentrated portfolio, where security selection and portfolio management will ultimately drive returns. In good times, it is easy to see that this strategy is the surest path to long-term outperformance. Deliberately choosing to be different than the index is the only way to beat the index and small amounts of outperformance compounded over longer periods of time lead to large differences in ending sums....

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