What is the stock market anyway? 

In it’s pure essence, without all the associated mystery, it’s a mechanism for valuing stuff and a place to buy and sell that same stuff. 

Just like a fish market, except less honest, less healthy, less efficient and less fun…but maybe just as odorous much of the time.

The only difference is that the stuff being valued, bought and sold on the stock market are the shares of the companies which choose to publicly list on the various exchanges.  Substitute paper for tuna et voila…  the stock market, in all its smelly and sardonic splendor!

So what is something worth?

Well, whether it’s flounder or Facebook, it’s whatever we think it’s worth and are prepared to pay for it. 

Think about it for a moment.  Sometimes we are in a great and generous mood and a $17 glass of wine sounds like a fine idea. 

Other times we are feeling not so flush, our biorhythms are out of kilter, the morning coffee has worn off and we are quibbling over whether we should buy the $8 bottle of yellowtail, which is now on sale for $5.95. 

The market is the same.  Some days, Mr. Market is overly generous in his assessments, while on other days, he is tight as a drum. 

Either way, we don’t care.  We recognize Mr. Market and his mood swings for what they are.  We like him when he is wildly exuberant.  We adore him when he is morbidly depressed.  It’s his wishy-washy , indecisive side we can do without…so we ignore him on those days.  

So, it’s the times when he is at his manic best, that we like him the most…because he gives us opportunities to do what we like to do…make money.

You see….at Craven Capital, we like businesses.  We like good management.  We like free cash flows.  We like solid and consistent earnings. We like capital efficiency.  We like deep and broad moats.  We like dominant market positions.  We like steady and secure dividends.

In other words, we like companies that we believe will pay us for investing in them. 

The fact that they are listed on the major exchanges and are therefore at the mercy of Mr. Market’s capricious personality, invariably gives us the chance to buy the companies we like at prices that are not necessarily reflective of their true value.   This can be a very good thing.  And once we own the companies we like, Mr. Market’s moods help us to make more money by selling him call options when he is wildly excited and  put options when he is morbid and fearful. 

So let’s raise a toast (Stags Leap or Yellowtail…your choice) to Mr. Market.  May he never discover the benefits of deep sleep, meditation or yoga.