Fund Manager’s Diary

Monday: Economic data and companies’ earnings are still poor globally. Rude awakening after a relaxing Sunday.

Monday: We start the week with a market meeting which lasts half an hour. Economic data and companies’ earnings are still poor globally. Rude awakening after a relaxing Sunday. Some macro leading indicators are less negative than a month ago, first signs that we are finally bottoming? Later on, we have our quarterly conference call with an investor. After great performance in 2008 we have had a slow start to 2009. Many of our core holdings like Richemont (owner of Cartier), Swatch (Omega) and Hermès underperformed. The chief financial officer of L’Oréal was a bit more cautious than usual when we met him last week, but cosmetics are doing much better than many other industries.

Tuesday: Today is chocolate day. Lindt & Sprüngli announces its 2008 results – they are solid but 2009 will be a “restructuring” year. That was not in the price. Minus almost 10% at opening. They are closing some shops in the US. Makes sense since malls are empty there. Marketing expenses will be further increased this year, no problem for a debt-free company. The stock still trades at a premium valuation and closes the day at minus 5%. The chocolates are delicious.

Wednesday: Pilgrimage to Swatch in Geneva. Sales of watches have slowed after many years of growth. The management is confident, however. Managed for the long run, the company has no plans to lay people off, just to re-hire them when the economic cycle picks up again. Less greedy and shortsighted than the financial industry? Margins are going to be squeezed but at 18% there is room, and the owner of Omega is another company with a pile of cash sitting on its balance sheet. Let’s see what the mood is at the Basle watch fair in two weeks’ time.

Thursday: We meet a smart beverages analyst. The consumer is still drinking, maybe more Smirnoff than Grey Goose Vodka these days, but the trade is destocking. The analyst presents his view on hedge funds’ positions and news that will move Diageo versus Pernod Ricard in the next few days including the trading ranges. I stay focused on analysing the numbers and valuing business models for the mid and long run – it’s easier.

Friday: Crunching numbers. But do they really matter in these volatile markets? Earnings estimates have never been so dispersed. What about the impact of forex? The dollar has moved almost 10% against the euro in the past few days. There are a lot of Japanese flying to Korea to buy luxury goods at a much cheaper won. Luxury consumers are smart shoppers. Sales have slowed and luxury stocks are trading at historical lows, but the key question is: how much is in the price?

Saturday: Field research. It is a sunny day at the Bahnhofstrasse in Zurich. The streets and coffee shops are crowded. Are people just taking a walk or are they also buying? I realise that there are fewer shopping bags being carried, but I see many tourists and local people in the Louis Vuitton and Omega shops. There is hope. Then there is this pair of purple shoes in the window. I can’t resist.

Sunday: Sunday morning is my luxury time. Time to read through all the newspapers and magazines I put aside during the week. No phone calls or emails, just coffee and reading. Most headlines are bad news. That’s normal but these days the headlines are even more depressing. One of my good friends is organising a ladies dinner tonight. The food is delicious and the mood relaxed. We are having a good time despite the crisis. I am glad I bought the shoes yesterday and it seems that I am not the only one still spending on life’s luxuries.