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."

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…

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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…

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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…

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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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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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Avoiding the Loser and the “Too Hard” Pile

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…

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2009 Post Mortem

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…

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Greedy When Others Are Fearful

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…

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Making Disciplined Allocation Decisions

Making Disciplined Allocation Decisions

The year 2008 was difficult for virtually every asset class.  Our results would have been significantly better if we had had the foresight to simply hold cash.  We were not that prescient, but our policy of simply ignoring companies that…

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