How We Think

These topics, which are largely excerpted from client letters dating back to our 2001 inception, provide insight into our philosophy and the key tenets that have consistently underpinned our investment approach, which has remained unchanged since our founding. These ideas and concepts are not all-encompassing but do provide a sense of “how we think” and our application of our investing philosophy.

Inflation

Inflation

Inflation headlines have been easy to find in the financial press this year.  This topic came into particular focus earlier this month when the U.S. Bureau of Labor Statistics reported that the year-over-year rise in the consumer price index (CPI)…

Read More
Archegos Capital & the Impact of Portfolio Leverage

Archegos Capital & the Impact of Portfolio Leverage

As markets have clearly demonstrated over this past year, stocks can trade at any price in the short-term.  Introducing leverage to a portfolio of stocks means this price variability can carry out an investor with a drawdown in prices.  This…

Read More
Emerging Market Bottlers

Emerging Market Bottlers

One of the key characteristics that we prize with bottlers is the underlying reliability and predictability of their earnings.  In past economic downturns, the performance of these businesses was particularly resilient, as consumer demand for their goods was income inelastic,…

Read More
The Long-Term Effect of Engagement Algorithms on Earnings

The Long-Term Effect of Engagement Algorithms on Earnings

In the last decade, we have watched internet/social media companies iterate and improve user engagement first through a deluge of A/B tests and now through machine learning techniques.  Powerful computers are collecting mountains of data about a wide variety of…

Read More
Cook & Bynum as a “Conglomerate”: Bottlers, Broadband, Brewers, & Berkshire

Cook & Bynum as a “Conglomerate”: Bottlers, Broadband, Brewers, & Berkshire

One way we think about the Cook & Bynum portfolio as a whole is as a conglomerate comprised of nine carefully selected companies that are organized into four principal divisions with significant operations on five continents: (1) a geographically diversified…

Read More
Covid-19’s Economic Impact

Covid-19’s Economic Impact

The global economic impact of COVID-19 has been stunning.  The resulting trillions of dollars of lost wealth will be borne by many, with some of the immediate impacts obvious while the longer-term, second-order effects are less clear.  Just in the…

Read More
Thoughts at the Onset of the Pandemic

Thoughts at the Onset of the Pandemic

It has been decades since the entire world simultaneously altered its behavior in such an extreme and sudden way.  It has been even longer since a global health crisis was the cause.  We are saddened by the toll that it…

Read More
Competitive Advantages, Growth, Economic Resilience, and Strong Balance Sheets

Competitive Advantages, Growth, Economic Resilience, and Strong Balance Sheets

We have written in the past about how we consider the relationship between price paid for and expected returns from an investment to be a “law” of investing: the higher the price one pays for a stock, the lower long-term…

Read More
No, Not Now, Too Hard, or Never

No, Not Now, Too Hard, or Never

The portfolio update sections of our letters almost invariably share only the buy and sell decisions that we do make, rather than the ones that we do not.  Meanwhile, we spend most of our time evaluating investment opportunities that we…

Read More
Where We Are Looking For Value

Where We Are Looking For Value

Previously, we shared the year-to-date results for several international indices and discussed how short-term volatility creates opportunities that we work to exploit.  Longer-term returns for this group of indices are even more interesting.  This chart shows their performance against the…

Read More
Undiscovered and Unloved

Undiscovered and Unloved

The stock market is generally efficient, and the prices of individual stocks trend towards the underlying intrinsic values of their respective businesses.  As value investors, we rely on this efficiency – we expect that temporarily mispriced businesses will eventually be…

Read More
An Often Unexploited Advantage of a Controlling Shareholder

An Often Unexploited Advantage of a Controlling Shareholder

In October 2016, we had a discussion with the CEO of one of our companies about not surrendering the advantages of having a controlling shareholder or a small group of well-aligned controlling shareholders who have a long-term orientation.  The conversation…

Read More