Nothing to it!

All you have to do is put your money in the S&P 500 index and forget it, save on management fees and outperform at the same time! — Talk about a no-brainer, even Warren Buffett said so. Hey, hard to argue considering 80% of all money managers fail to outperform the index. But what they don’t tell you is that the vast majority of the investing public underperform even the managers! How is that possible? Simple — human emotions of fear and greed. Warren Buffett’s investing time frame is forever, yours —probably not. Trust me, there is nothing more frustrating than thinking you are actually costing your clients money when you underperform. So what do you do? The best you can!

You try to keep your clients in the market when it doesn’t feel right, they want to sell but prices suggest you should be buying. When everything seems terrific you begin to sell, you’re probably early but things are getting expensive. We all want to outperform, but honestly that’s not usually the primary goal. What we really try to do is not lose you money, provide you with results that are better than you could earn on your own, help you make rational decisions when things seem irrational, make the necessary adjustments when life changes and earn you a rate of return you will be pleased with. The indexes definitely have a place for lots of people but hopefully professional management and personal service do also.

Now let’s talk some shop, I recently made the following changes to the Top Holdings:


Sysco—due to the lack of clarity regarding the proposed acquisition of U.S. Foods and minimal cash available after the payment of dividends I thought we could do better.

Distribution Now—the business is tied to the rig count so with the recent decline in oil prices the outlook is less attractive.

Ebay—Apple pay is a major threat to the growth of the PayPal payment network, while Amazon and Alibaba threaten to take share from Ebay’s marketplace and ‘Buy it now’ business.

Coach—luxury goods are in a heated battle due to competition and a sluggish global economy.


Citigroup—it’s being priced below ‘accounting’ liquidation value and with improving fundamentals should be in a position to increase dividends and share repurchases in the near future.

Diageo—the world’s leading alcoholic beverage company is trading at a reasonable price due to slowing world economies and a Chinese ban on luxury gifts to Government officials.

Jacobs Engineering— one of the world’s leading engineering companies, they recently announced a share repurchase after the stock declined by more than 25%. This is very unusual for a company that normally uses its cash to grow the business—a sign they think it’s gotten too cheap.


The remainder of the portfolio continues to move forward with the exception of Tesco and the Gold Miners. Tesco has been destroyed due to competition from high end grocers at the top and discounters at the bottom. With the recent announcement of internal accounting errors one wonders what else can go wrong! This one was a big mistake and I’m still torn between selling for a tax loss or giving the new Chairman, CEO and CFO the opportunity to try and turn it around. After all, we are talking about selling groceries—not exactly rocket science. With 28% market share and being the largest private employer in the United Kingdom you would think that’s a decent place to start. As for the Gold Miners it’s simply a strengthening dollar. Since the dollar has been depreciating for the last 100 years and most governments in the world are trying to inflate their economies gold should be just fine. The only question is when to add.

Market Tidbits

From a seasonal perspective you now have a very positive trifecta of sorts for the stock market. The U.S. market tends to do very well in pre-election years, November – May and calendar years ending in five. We are approaching all three! Even though the U.S. market is one of the most expensive in the world it could easily move higher.

Lastly I want to thank you for your business, it’s greatly appreciated and I hope I can prove worthy of the trust you have placed in me.

The information contained herein does not suggest or imply and should not be construed, in any manner, a guarantee of future performance and/or investment advice. Past performance does not guarantee future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended and/or purchased by Burgess Investments), or product made reference to directly or indirectly on this newsletter or company website, or indirectly via link to any unaffiliated third-party website, will be profitable or equal to corresponding indicated performance levels. Returns are historical and based on data believed to be accurate and reliable. We believe the above information is reliable and true but cannot guarantee its accuracy.
David Burgess