One of the most difficult parts of investment decision making is just how much to trust your gut instinct. Every day presents a new set of variables, so there is never a playbook. Yet, when you think in the context of the very long term, history is an excellent guide. Warren Buffett says to “get greedy when others are fearful, and fearful when others are greedy.” Another way to say that is: “Just don’t do what everybody else is doing.” This is the essence of contrarianism. Done correctly, it will always require nerves of steel, because swimming against any tide is tiring and there are always scores of people who want you in their camp to affirm them in their own uncertainty, and they are uneasy about their own choices watching you swim alone.

Segment recently bought shares of Royal Caribbean Cruise Lines. We bought a second tranche today. This raised a few eyebrows, since “everybody knows that’s a bad idea.” But is it really? It surely would have been a bad idea to have paid $133 for the stock six weeks ago. We bought the stock twelve days ago, at about half off. Of course it’s tumbled badly since, but so have other large swaths of the marketplace. But we only bought a tiny position of the stock, knowing full well what we could be wading into. With today’s market action being absolutely awful from the first trade this morning, RCL shares were actually quite stable. It has also traded huge volume over the past week or so, indicating big positions are being unloaded at ever lower prices. We took that as an opportunity to complete our purchase, a full $40 cheaper per share than those bought in round one.

Yes, coronavirus will ravage the cruise business and the restaurant business too, and it has already. This is not news to anyone. But isn’t that fact fully reflected in shares trading at 25c on the dollar? In crazy times, it does feel better to “wait and see.” But minimum prices occur at times of maximum uncertainty. We are betting that a year from now, coronavirus will have played out and cruising will be back in style. We believe that RCL shares will be markedly higher in price when that day comes.

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