Composure, discipline and patience are far more valuable to investors than intelligence

Our decision to persevere with a lacklustre holding in the Wealth Preserver portfolio is now paying off and demonstrates the qualities an investor should have

Intelligence is often viewed as the key differentiator between successful investors and their loss-making rivals. However, the reality is that successful stock market investing does not require a high level of intelligence. Almost every investor can understand business models and financial ratios, should they wish, while even the most intelligent human beings cannot predict the future.

Of far greater importance, and scarcity, are traits such as composure, discipline and patience. They allow an investor to avoid being drawn into the stock market’s irrational short-term behaviour, while sticking with their investment strategy over the long run. Even the most intelligent investor will fail to generate high returns if they do not possess such attributes.

For example, many investors would have sold Antofagasta as a result of its disappointing share price performance since we added it to our Wealth Preserver portfolio in October 2021. The FTSE 100 copper miner has experienced highly challenging operating conditions as a result of rampant inflation, volatile commodity prices and production problems at its mines in Chile.

However, the company’s shares have recently recovered and are now 9pc higher than our notional purchase price. Furthermore, its long-term prospects remain upbeat. Copper is poised to experience a substantial supply/demand imbalance as a result of its widespread use in renewable technologies and a lack of major discoveries over recent decades. The fact that this had previously failed to be reflected in the company’s market valuation, which was down by more than 30pc on our notional purchase price at one point, was at least partly a result of the global economy’s lacklustre performance.

This, though, is beginning to change. Interest rate cuts in America and other developed economies should start as early as this year and continue for several years until they fall towards pre-pandemic levels. This is likely to act as a global economic stimulus. Meanwhile, the IMF recently upgraded its economic growth forecasts for China, the world’s largest consumer of copper, for 2024.

Alongside the potential for a higher copper price, Antofagasta should benefit from lower inflation and consequent reduced cost pressures. In fact, its latest quarterly production update showed that cash costs fell by 8pc relative to the previous quarter. And while production problems have frustrated investors over recent years, its copper output rose by 4pc in the first nine months of the year as its recently constructed desalination plant alleviated pressure on water supplies. The company’s latest update

‘Copper is poised to experience a substantial supply/ demand imbalance as a result of its use in renewable tech’

also stated that it was on track to meet full-year production and cost guidance. It expects to further increase copper production by more than 5pc in 2024. When combined with the prospect of higher commodity prices and a slower pace of cost increases, this is likely to result in a rising bottom line that acts as a positive catalyst on its share price. Therefore, we will continue to hold.

Update: Diageo

Our disciplined and patient approach is also highly likely to prove fruitful with the drinks company Diageo. Its shares have fallen by 14pc since it released a profits warning on Nov 10. As a result, our notional holding in the firm is now worth 18pc less.

The company’s trading update highlighted challenging operating conditions in Latin America and the Caribbean, which comprise one of its five geographical divisions and account for around 11pc of sales. The company now expects total profits to fall year on year in the first half of its current financial year before a gradual improvement in the second half.

While this is disappointing news, and comes shortly after the appointment of a new chief executive, it does not alter Diageo’s long-term investment prospects in our view.

It continues to have an exceptional stable of brands that enjoy extremely high levels of customer loyalty. It also has a sound “premiumisation” strategy that should lead to growing profits as consumers trade up to higher-quality drinks. And thanks to its exposure to a wide range of emerging and developed economies, the company is well placed to capitalise on the global economy’s improving performance.

In the meantime, its solid balance sheet means overcoming temporary industry-related difficulties is unlikely to prove challenging. So it remains a worthwhile holding in our portfolio ahead of a likely share price recovery.