Ro Ro Farm Investment Partnership Co.
To the partners of Ro Ro Farm Investment Partnership Co.:
I hope all is well with you and your family members. Hope the new year is off to a great start. Sending blessings your way.
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ECONOMY & MARKETS
Below are some U.S. economic data to ponder:
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Inflation rate increased to 2.7%.
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The FED kept the interest rate steady at 4.25% - 4.5%.
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The population increased by 0.3% in 2024.
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Productivity increased by 0.6% in Q3 of 2024.
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Unemployment rate decreased to 4.1%.
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The economy expanded by 2.8% (GDP) in 2024.
Overall, the economy looks strong. However, that can change fast.
In terms of the markets, the Shiller PE ratio is at 37.81. The yield curve is positive. The Shiller PE ratio and the yield curve are not the holy grail of indicating what will happen to the markets and the economy. It just gives you an idea of where the markets stand. There are many other factors to consider. It's not that easy.
We still believe that we cannot make market forecasts. Our game is strictly buying undervalued income producing assets, where we become long-term investors.
We do pay attention to our level of aggressiveness given market conditions. When we feel risks are low, we are aggressive (vice-versa).
Market participants behave irrationally. Thus, the market provides 1) great opportunities from time to time, and 2) constantly changes the risk level.
We currently believe that the risks are high. Market participants are behaving more irrationally than normal. Plus, it is not easy to find great opportunities at the moment. At least not in our sweet spot. Thus, we plan to be less aggressive until an opportunity arrives.
DEEPSEEK & AI
We believe that there are over-reactions on the downside and upside. Especially, with the new knowledge of DeepSeek.
The market is an information game. We divide information into four quadrants: 1) known-known, 2) known-unknown 3) unknown-known, and 4) unknown-unknown. Concerning information, the tricky thing to think about is the future.
Given the known-known and known-unknown, it's hard to decide on the current and future situation of AI. We are pretty confident we won’t be the best in the AI investment arena. Thus, we stick to a game, where we know we can be the best in the world. We don’t have to be the best at everything. We are actually very stupid about lots of things but we are smart in certain areas and we stay in those areas.
Regarding AI and DeepSeek, we are not surprised by the current information and developments. The main disruption with DeepSeek is the commoditization of AI. Plus, there always exists efficiency and increased capability to continuously learn. A couple of years ago, we knew that the current development would occur sooner or later. We just didn't know when. Sure, like humans every AI is different. We do believe that the best of AI is yet to come. This is only the beginning. However, it's too difficult to pick a winner in the AI arena, thus we avoid it.
We do have indirect investments in AI. If anything AI will help us. However, there are risks on the upside and downside.
Now all the noise on Al had distracted us away from our investments. We will be entering 2025 by embracing cutting-edge technologies such as: home development, roof tiles, insurance, loans, etc. Please try to control your excitement.
SPECIAL SITUATIONS
Part of our portfolio consists of special situations: risk-arbitrage, merger-arbitrage, tender-offer, spin-offs, etc. Special situations are in aggregate ‘generally’ low-risk and ‘usually’ on aggregate provide positive returns regardless of the movement of the markets.
For example, we are currently looking at the hostile bid for Beacon Roofing Supply Inc. (BECN) by QXO Inc.. BECN currently sells for $118.70. QXO Inc. Launched a tender offer for $124.25.
Now the tricky thing is to evaluate the risk of special situations. Many special situations fail. For example, regulators step in and stop mergers, generally to avoid anti-competitive situations. Every case is different and evaluated with a different approach.
We will most likely increase activity in the special situations arena. However, given the modern world, it is very hard to find low risk special situation investments.
RO RO FARM CO.’S PERFORMANCE
Below is our return profile for January 2025. Our portfolio increased by +7.45% in January of 2025.
Compounded Annual Returns Since Inception (2018):
January 31st, 2025 Rojan K. Shrestha
General Managing Partner
