Exploring an active quarter

Commentary17 days ago
The ground we stand on is always moving.
The Americas move further away from Europe and Africa each year. The Pacific Ocean is ringed with tectonic plates colliding with and sliding past one another.
In the investing world, change happens more quickly than the process geologists tell us will one day result in San Francisco and Los Angeles sharing the same latitude. But regime shifts like those facing investors today can feel as consequential as a reshaping of the earth’s topography.
The global economy continues working through the unprecedented challenge of reopening after a pandemic-induced shutdown. Inflation is at multi-decade highs. Supply chain bottlenecks are ubiquitous. Interest rates are on the rise. And U.S. stock indexes are trading at record highs.
Financial markets are navigating a transition from a world of emergency settings to one in which a new normal will take shape: a new normal that we believe may change the drivers of sales, profits, and valuations across the businesses held in Titan’s portfolios.
Against this backdrop, the fourth quarter has been a particularly active one for the investment team at Titan. Since the fourth quarter began, we’ve made at least one change in all four of Titan’s investment strategies. Through November 10, we’ve made six trades across the strategies in Q4, matching the number of portfolio changes in Q3, which was our most active quarter ever.
In our crypto strategy, October ushered in “Bitcoin season.” By month’s end, our view on the market warranted shifting our weight to make Ethereum the top holding in Titan Crypto.
In each of our three equity strategies, we’ve added at least one new position, sold out of at least one position, and changed the weights to existing holdings along the way.
New exposure to the U.S. healthcare industry through our purchase of Thermo Fisher for clients in our Flagship strategy and the purchase of Avantor for clients in our Opportunities strategy are moves we believe improve diversification in the strategies. Our fourth quarter moves have also resulted in a consolidation of exposure to the payments industry and China and an increase in our exposure to uranium stocks.
Taken together, these trades have added a combined +2.13% of net attribution across Titan’s three equity strategies, or performance gains compared to us having made no changes during the quarter.
Avoiding significant drawdowns can also be a key factor in achieving durable compounding results. For example, an investment that falls 20% one year and rises 30% the next has earned an annualized return of just 2%, and recent portfolio changes are moves we believe may help our strategies avoid the increased single-stock volatility present in today’s environment.
At Titan, we consider our investing process straightforward: we aim to own businesses that we believe can compound capital at high rates of return net of fees, over a 3-5 year time horizon.
This multi-year approach builds patience into our process. But we don’t believe being patient should be confused with being complacent. Not when we can see the ground moving like this.

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