Q3'24 CGC Quarterly Letter
Performance, positions, and commentary
Disclaimer: All information provided herein by Cedar Grove Capital Management, LLC (“Cedar Grove Capital”) is for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell an interest in a private fund or any other security.
Portfolio Performance
In Q3 2024, Cedar Grove Capital (“CGC”) returned 8.2% return compared to 5.8% for the S&P 500, 10.1% for the S&P Consumer Discretionary ETF XLY, (2.2%) for the Cannabis ETF, and 9.2% for the Russell 2000.
General Commentary
I listened to a podcast recently that said most quarterly letters are almost all the same because they just repeat what’s going on in the market which if you’ve been paying attention, you most likely already know. AI this, politics that, oil up, CPI down, etc. etc.
This is a valid point, so I won’t do that. Rather, I want to talk more about the mindset of whatever strategy you’re running with and the “noise” that comes along with that. For instance, earlier this year, I launched the paid version of my research and let everyone know that I was changing my investing strategy.
This strategy morphed from trading in and out more often based on quarterly earnings or other event-driven events to focusing on multi-year, core long holdings with some uncorrelated positions (multi-strategy). While I did have some success with the former strategy (trading), my risk tolerance really kept me up at night.
Not healthy and I speak about this briefly with
’s podcast (which will be out soon) in regards to investing in order to let me sleep at night.So I made a change to what the current strategy is which is running mostly a long book of core positions that will take years to play out while also simultaneously keeping a section of the portfolio uncorrelated to help with overall portfolio volatility but also because I enjoy investing in special situations.
If you looked at my performance in Q2 of this year, you’d think that it clearly wasn’t working having lagged the S&P 500 by 330bps. Additionally during this time, I as well as I’m sure you did, heard about how others were doing. Up 10% here, 20% there, +40% YTD!
FOMO is a real thing and quite the cancer for an investor who is trying to stay strict with their core principles and area of expertise. Many can and have fallen into this trap which can have disastrous consequences. Luckily, having learned my lesson(s), I’ve been confident in the strategy I was implementing and the positions I’ve been holding.
While running a super concentrated book can yield outsized returns, it, unfortunately, can cut both ways, at multiple periods during Q3, I had to deal with several positions facing a drawdown of anywhere from 20 - 50% which took the overall PnL to break even more than once.
However, being on top of the research and making sure nothing materially changed with the underlying fundamentals of the companies I’ve invested in (which I’ve shared with you throughout the summer), I stuck to my guns and avoided chasing momentum or trading.
With that said, I was able to generate an over 8% return for the quarter, beating the S&P 500 by ~240bps by doing nothing more than sticking to my new strategy. I cannot stress how difficult this is to do when the FOMO is real but I have to urge you to show restraint and strength to stick to your guns if you truly believe you’re right.
I’m confident that over the long term, this multi-strategy portfolio I’m underwriting will not only yield a total return exceeding the benchmarks above but also optimize the amount of sleep I get.
Remember, everyone looks like a genius in a bull market so when you look to see how “right” you are, make sure it’s for the reasons in your thesis and not because of beta.
Separately, if you’d like a recap of all the recent reports I’ve written, you can view them via the table of contents here.
Positions Quarter-End + Commentary
