As the world closely watches the Federal Reserve’s decisions today, another seasoned investor offers his unique insights into the current state of the markets. Chris Bloomstran, the chief investment officer of Semper Augustus Investments, recently shared his views on his favored holdings, including Dollar General, and his less preferred stocks, such as Nvidia and Tesla, in a two-part interview on the Richer, Wiser, Happier podcast. Bloomstran’s investment firm, established in 1998, was named after the most expensive tulip bulb during the 1637 bubble peak, symbolizing his conservative investment approach.
Bloomstran’s investment acumen traces back to his first client, Robert Brookings Smith, who he hails as the godfather of investing. Smith exited the stock market in 1928, anticipating a bubble, and waited until 1932 to procure inexpensive shares of GE, Merck, and Dow Chemical. This story, told in Bloomstran’s 2021 letter to clients, sets the stage for his investment philosophy. Under Smith’s guidance, Bloomstran purchased Berkshire Hathaway in 1998, when it was undervalued following the tech bubble burst. He likens the past year and a half to the late 90s, when everyone was investing in the same overvalued 20 or so stocks.
Cautionary Investing: Insights from Veteran Investor Chris Bloomstran
Chris Bloomstran, the chief investment officer of Semper Augustus Investments, recently shared his investment philosophy and gave some predictions for the future in an interview on the Richer, Wiser, Happier podcast. Formed in 1998, Semper Augustus Investments is named after the most highly valued tulip bulb during the notorious Tulip Bubble of 1637, a nod to Bloomstran’s cautious investment approach.
Guided By The Past
Bloomstran’s first client, Robert Brookings Smith, exited the stock market in 1928 fearing a bubble and waited until 1932 to buy cheap shares of GE, Merck and Dow Chemical. Bloomstran, guided by Smith’s approach, echoes the sentiment that the current market has a lot of similarities with the late 90s, where too-highly-valued stocks were owned by the majority. In 1999, Bloomstran predicted that Microsoft shareholders would either lose or make little returns for the next 15 years, a prediction that largely turned out to be accurate.
Predictions for Nvidia and Tesla
Bloomstran also predicts that today’s Nvidia investors will lose money over the next 15 years, as he believes margins at the chip maker cannot grow as strongly as Wall Street expects. He also holds small short positions on Nvidia and Tesla. Regarding Tesla, he critiques its self-driving aims and ARK Invest’s promotion of the firm, along with its seemingly unreachable margins.
Favoring Dollar General
In contrast, Bloomstran is quite favorable towards Dollar General, citing its "whale of a moat" due to their rural footprint and the economics of their median household customer. He recently increased his position in Dollar General, as he considers it among the cheapest companies in his portfolio.
Berkshire Hathaway and Investment Advice
Bloomstran bought Berkshire Hathaway in 1998, following the tech bubble burst, and believes it will be a good investment for the next 10 years due to its valuation and roster of businesses and managers. He also expressed that there’s a price at which anything ought to be trimmed or sold, including Berkshire, advocating for a tax-efficient approach.
Bloomstran’s cautious investment approach, guided by historical events, offers a contrast to the bullishness seen in tech investments today. His predictions on Nvidia and Tesla highlight the potential risks of high valuations and unrealistic growth expectations. His support for Dollar General underscores the potential value found in companies with strong market positioning and favorable economics. Finally, his advice on Berkshire Hathaway and tax-efficient investing serves as a reminder of the importance of strategic investment and asset management.