Yesterday, I sold all of my Titan Machinery (TITN: NASDAQ) for almost a 40% gain in four months. I like the company, like the business model and think it’s a long term winner. At today’s valuation, it’s not particularly expensive or cheap. “Fairly valued” is probably the phrase that I would use.
Throughout my career, I have made a whole lot of money buying great businesses at reasonable prices. Sometimes, I’ve even paid “overvalued” a bit on prices. What makes you money in the markets is buying growing companies that can go up 5-times in 5 years. I think that TITN is one of these—so why am I selling my Titan?
Honestly, I just dislike the global macro picture. The whole world is now on the money printing standard. It has almost stopped mattering if the central bankers print—we know they cannot stop. All that matters now is the pace that they print at. I cannot game this process and neither can most businessmen. The game of economics has gotten too difficult and the shakeouts will be more violent when the central bankers lose control of things. There will be a time to focus on 5 in 5’s, but for now, I’m much more interested to hit easy singles and keep my capital for the next time down. The lone exceptions to this are some money printing beneficiaries. This isn’t a time to be taking big risks.
I should also point out that Titan has benefitted materially from an obscure part of the tax code that allows farmers to accelerate the depreciation on their equipment. This accelerated depreciation benefit has not been renewed this year and unless it is renewed, it could hurt Titan’s sales of equipment. Between this, and my fear of the global economy, I would rather have cash, or gold.
I’m hoping that I get another chance to buy TITN. It’s a great business and employs a great strategy, but I have to get in at a great price. I can no longer hope that growth compensates you for paying a reasonable price. Welcome to investing in the world of central bankers run amok.