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.

Topic: Business

We invest in businesses with durable competitive advantages that allow them to produce predictable cash flows and earn attractive returns on capital for extended periods of time. Without this "moat," a company’s results will be difficult to effectively forecast.

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,…

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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…

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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…

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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…

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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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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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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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Expanding Our Geographic Circle of Competence

Expanding Our 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.  This company’s management…

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Pricing Power and the Potential Impact of Inflation

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.  Pricing power is a key factor to predicting how a business will…

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What Does a “Moat” Look Like?

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….

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The Psychology of Errors

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.  A number of different factors cause people to systematically…

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