This manager commentary provides insight into our philosophy and the key tenets that have consistently underpinned our investment approach, which have remained unchanged since our founding. These excerpts are not all-encompassing, though they should provide a clear sense of "how we think" and to our application of a value investing philosophy as pioneered by - among others - Ben Graham, Warren Buffett, and Charlie Munger.
Commentary Excerpts
Power of Well-Aligned Management
We are pleased with the performance of our holdings during the first quarter as business value growth outpaced share price appreciation for some of our most compelling ideas. Read more…
Research Trips in Eastern Europe, Greece, and Turkey
We have been fortunate to cover a lot of ground in the last four months. We took trips to England in March and in May... Read more…
What to Build (or Buy) in Today’s Opportunity Set
When making the decision to prospect for oil by drilling a well, one must estimate the likely cost of extracting the oil and compare that to one’s expectation of the market price of oil over the useful life of the well. Read more…
Focus On The Customer’s Decision
Earlier this month, Kraft split into a faster growing international snacks business and a slower growing domestic foods/grocery business... Read more…
The Virtue of Inactivity
We have heard many variants on this theme from Munger and others over the years, and yet it remains one of the least appreciated aspects of investing. Read more…
Margin of Safety
We are actively looking for more investments that meet our qualitative criteria of good businesses with a sustainable competitive advantage and with talented, honest management. Read more…
“Real” Risk
We are often asked to discuss our investment philosophy as it relates to our expected long-term returns. Read more…
The Psychology of Errors
An important differentiator between our selection process and the processes of the value managers we respect is the time and effort we spend on analyzing how psychological factors affect decision making. Read more…
The Danger of Leverage
As value investors, we make the assumption that the market is irrationally pricing a security now, and we expect the market to value the same security more rationally in the future. Read more…
Making Disciplined Allocation Decisions
This past year was difficult for virtually every asset class. Our results would have been significantly better if we had had the foresight to simply hold cash. Read more…
Pricing Power and the Potential Impact of Inflation
The recent shifts in monetary and fiscal policy in many of the world’s largest economies have made it timely to discuss the effects of inflation on intrinsic value Read more…
The Importance of Price
One of our four guiding principles of investing is to be disciplined about the price we pay for any security. Read more…
Overpriced Markets
We do not think it is unreasonable to expect the Fund to underperform in runaway markets and make up for that underperformance in other types of markets. Read more…
Commitment Bias
Any honest post-mortem of the investment decisions we have made at Cook & Bynum over the past nearly ten years will reveal plenty of mistakes. Read more…
Einstein, CERN and the Limitations of Models
In 1905, a twenty-six year old patent clerk named Albert Einstein upended nearly two centuries of conventional thought when his ideas of Relativity displaced Newtonian Physics. Read more…
The Mind of a Value Investor
We are relentlessly trying to impose a system of checks in an effort to resist this negative natural propensity, including constantly challenging the assumptions key to every current and potential holding. Read more…
When “Mr. Market” Frets, Opportunity Knocks
Diligence when adding new capital is imperative to ensure that existing partners are not diluted out of sizable positions in businesses that we currently own. Read more…
Geometric Means, Kelly Criterion, etc.
We continuously have in-depth the issues surrounding the purchase or sale of a given security, but there exists another equally important problem for the investor – how to allocate capital between competing qualifying ideas. Read more…
What Does a “Moat” Look Like?
We often talk about a “moat” around a business. A moat is a sustainable competitive advantage that allows a business to earn outsized returns on capital over time and allows us to better predict the future prospects of a business. Read more…
“Invert, Always Invert”
The great 19th century mathematician Carl Jacobi was fond of saying that when you encounter a tough problem, “Invert, always invert.” Read more…
2009 Post Mortem
When we think about our goals at Cook & Bynum, we are not trying to earn a certain return or accumulate a certain amount of assets. Read more…
Greedy When Others Are Fearful
The first quarter of 2009 saw continued turmoil and fallout from the bursting of the housing bubble. The broad-based decline of virtually all equity markets around the world continues to present us with attractive buying opportunities Read more…
Expanding the Geographic Circle of Competence
We were able to spend a great deal of quality time with many levels of management in one of our core holdings and to get a much better understanding of what is actually happening on the ground. Read more…
Avoiding the Loser and the “Too Hard” Pile
Short-term quotational changes in the value of a business do not concern us. We do, however, spend a significant amount of time thinking about how we might suffer permanent capital loss in a holding, as this type of loss is a major obstacle to long-term investment success. Read more…
Arca: Dissecting an Investment
As a way of further elucidating our investment approach, we wanted to illustrate the research and investment process for one of our major holdings, Embotelladoras Arca, S.A.B. de C.V. Read more…
Wal-Mart De Mexico Postmortem
Despite the generally poor performance of many emerging markets, one of our Mexican holdings has become very expensive relative to our appraisal of its intrinsic value, even when accounting for the decline of the peso versus the dollar. Read more…
