Ro Ro Farm Co.
Investment Partnership
2022 Letter To Partners
“If you don't find a way to make money while you sleep, you will work until you die.” - Warren E. Buffett
Below is the summary of Ro Ro Farm's performance since inception. For the year 2022, the partnership return was +2.43%. The most important thing to note form this letter is that we have invested in controls (described below). Therefore, we are implementing a lock-up period until January 01, 2024. Partners will not be allowed to make withdrawals until January 01, 2024. However, Partners are allowed to make capital addition.
The current market condition is normal relative to changes in interest rates. Interest rates acts like gravity to the prices and value of assets. If interest rates increases the value of most assets will decline (vice-versa). This will make investing to be more difficult than the past. The Fed will most likely keep interest rates around 5% until inflation hovers around 2% to 3%. Although, we keep an eye on macro economics, we don't focus on macro economics. However, we are curios how the new generation will cope with fertility rate issue. The fertility rate needs to be around 2.1 to replenish previous generation 1 to 1. However, currently fertility rates are below 2 for most developed countries. Some developed countries are depending on immigration to combat declining fertility rate. It will be interesting to see how fertility rate plays a greater factor in economic growth.
This year was a busy and unusual year. Our portfolio is currently divided into two parts. 1) controls & 2) general.
Controls, consist of business that the partnership has control over. In 2022, we found a family operated private business that we believed has locked value. In exchange for equity in the partnership, the partnership gained full control and ownership of the business. We believe that the value the partnership will gain will be three times '3X' to five times '5x' the equity that was exchanged. However, the risk is there is no gain. In the past, this type of transaction is often referred to "activist investing" and it involves hostile takeover. However, our transaction is not hostile. Further, unlocking value that we believe the business holds will be very difficult to unlock. It takes hard work and business intelligence. This project has been more difficult than expected. However, we believe our partners will benefit when our work is done.
The second part our portfolio consists of undervalued marketable securities, which we call generals. Although, the market prices of securities that we own has greatly declined the quantity of securities we own has almost doubled. Going forward, if the prices of the securities continues to decline then we will continue to increase our ownership more aggressively and with greater intensity. Most of the companies that we own will benefit form the current increase in interest rates. Plus, most of the companies that we own are small cap companies. Overall, revenue and profit increased this year and we believe our companies will continue to retain earning and increase value in the future.
With regards to crypto currency (bit-coin and all other crypto currency), we have not and will never invest in crypto currency. We only invest in income-producing assets that is ethical. For the partnership it's important that we have an ethical financial reputation. "It takes 20 years to build reputation, however, it only takes five minutes to ruin it {Warren E. Buffett)." Plus, we see crypto currency is immoral to society. Crypto currency has been know to be used by kidnappers, drug dealers, and human traffickers. Plus, it has been marketed to and by great investing institution. Wall street and financial institution marketing crypto currency will never say "here is some bad stuff" that we are trying to sell to you. Of course, they are going to say it's going to the stratosphere.
Cordially,
Rojan Shrestha
General Partner
