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.
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
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
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
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
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…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. Pricing power is a key factor to predicting how a business will…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. A number of different factors cause people to systematically…Read More