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: Discipline
To produce attractive returns on capital over time, we must apply our philosophy and core investment criteria in a consistent, disciplined, and patient manner. We have a high bar for information sufficiency, but we must complement this preparation with an ability to act decisively when opportunities are present. We work hard to marry "extreme patience" with "extreme decisiveness."
Absolute Value Investing
We scour the world for businesses that we believe can return the cost of our investment plus an additional cash return in excess of our cost under a wide range of economic and business scenarios. We only invest in a…
Read More
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
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
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
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…
Read More
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…
Read More
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…
Read More
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…
Read More
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…
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…
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. Rather, we are trying simply to execute well a pure, concentrated value investing philosophy…
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. We can give no…
Read More