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.

Increasing Our Odds

Increasing Our Odds

As the new Lindley investment reflects, our mandate (i) is focused on finding attractive investments one-by-one and (ii) affords us the flexibility to invest capital only when we think an investment is truly compelling on an absolute basis. We assess…

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The Mystery of the Missing Goods

The Mystery of the Missing Goods

A Brief Introduction to Price Controls: Consumers see the price of a good as an expense and therefore price increases as a burden. Producers see prices as income and therefore price reductions as a threat. This healthy tension between buyers…

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Recency Bias, Global Interest Rates, and Return Expectations

Recency Bias, Global Interest Rates, and Return Expectations

Evolution has rewarded humans (and animals in general) for recency bias.  For example, if one of our ancestors found food down a certain path one day, that was probably a good place for him to look again the next day. …

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Incentive Misalignment in the Money Management Business

Incentive Misalignment in the Money Management Business

As we have written before, the art of successful investing requires both discipline and an even temperament.  The more emotional an investor becomes, the more likely he is to buy high and to sell low – following the herd to…

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Price Matters

Price Matters

The math of investing is not difficult and can be done with a little division and some basic algebra, but the math is essential.  Buying and selling securities without a fluent understanding of how intrinsic value is calculated is mere…

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Determining Intrinsic Value

Determining Intrinsic Value

We have written extensively in the past about the centrality of intrinsic value in our investment process.  A company’s stock price can sometimes diverge widely from its intrinsic value, which Ben Graham explained thusly, “In the short run, the market…

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What to Build (or Buy) in Today’s Opportunity Set

What to Build (or Buy) in Today’s Opportunity Set

Capital Investment Decisions: 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…

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The Virtue of Inactivity

The Virtue of Inactivity

I think the [Berkshire Hathaway’s] record shows the advantage of a peculiar mind-set – not seeking action for its own sake, but instead combining extreme patience with extreme decisiveness.  It takes character to sit there with all that cash and…

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Focus On The Customer’s Decision

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.  Despite neither of the companies’ fundamental business prospects changing one iota, the market reacted to the news by trading both of the stocks…

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The Mind of a Value Investor

The Mind of a Value Investor

Seth Klarman, one of the best investment thinkers and writers within our discipline, recently gave an insightful perspective on the mindset of value investors during an interview with Charlie Rose: Value investors have to be patient and disciplined, but what…

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Einstein, CERN and the Limitations of Models

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.  Newton’s model was useful and an enormous achievement but imperfect at explaining our world…

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Overpriced Markets

Overpriced Markets

In his January 1962 letter to his partners, Warren Buffett wrote, “I have consistently told partners that it is my expectation and hope (it’s always hard to tell which is which) that we will do relatively well compared to the…

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