A 100-Year quote that still applies today.
"And I realised that there was no connection between a share price and the value of the Company." - Joseph P. Kennedy.
You've probably heard of this legend, but here are his credentials.
- Patriarch of an American Royal Family
- Built his wealth as an early stock market trader (long and short)
- The first chair of the US SEC.
🧠 This guy knew his sh*t - so what can we learn from him?
I had more time on my hands over the Christmas break, so I prospected for new podcasts.
One called 'Founders’ stood out to me, where the host spends 10-20 hours reading a book and distils it into a 1-hour summary.
I'm a sucker for arbitrage, and this guy's done over 200 episodes, so there were some gems to choose from.
I've found with a lot of podcasts - their early episodes are rough, kind of like unpolished gems. 💎
They're not in the groove yet, but the content is usually some of their most informative because they're using their best assets first to hook listeners in for the ride.
So I scrolled back and saw #4 - ‘The Remarkable Life and Turbulent Times of Joseph P. Kennedy’ based on the book 'The Patriarch'.
The first thing I noticed was what a tremendous historical listen this was. This individual started, combined, ran, and then regulated listed companies.
How many others have that sort of background?
The second thing that really stuck with me was the aforementioned quote. That there's no correlation between your share price and the value of your company.
If this was true more than a century ago and is true today - then it isn't likely to change anytime soon.
So what do we do with that information? I think there are two key takeaways that we need to consider.
#1 Don't Let An Inaccurate Share Price Dictate Your Mental State
I spoke to a community member last week who expressed it like this.
"It's often said that CEOs should spend their time executing on strategy and not worrying about day-to-day share price fluctuations. Unfortunately, that daily closing price is such a visible and ruthless "scoreboard", so it's tough not to look."
Let's get something straight, the share price will move. It may go up. It may go down. It may go sideways.
And it will have nothing to do with the business, the market, or yourself.
My top three tips for managing the resulting worry are:
- Having access to the details - knowing who is moving the share price (selling or buying) and why they’re doing it can clarify your mental state.
- Engage more - some mental anguish can be down to "I could have done more there", so engaging more as a company can help stifle that.
- Give yourself permission - allow yourself to feel down about it sometimes; it does feel like a punch in the face some days. Accept it for a time, find a learning and move forward.
#2 Don't Wait For That 'Inflection' Piece To Re-Rate You
Too many companies think - "all we need is a discovery or that great big deal, and we'll re-rate."
Trust me. If you're undervalued now, you'll be undervalued then.
You might go up, but you're still going to be undervalued. To be fairly (or over) valued, you need to outcompete other companies for the same investor dollars.
If the market valued things right, then Newcrest would be excited about a $4.4b premium rather than viewing the bid as opportunistic.
So if you're feeling undervalued now, the only way out is to do more. And the sooner you do it, the better.
This isn't great (or sexy) sales language, but it is the reality.
The good news is, you can hire/delegate a lot of this - so YOU don't need to do it, but the Company does.
