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: Research

Our investment decisions are based on bottom-up, on-the-ground research. We travel extensively to observe and interact with a company’s customers, assess its competitors, evaluate its suppliers, meet its managers, visit its facilities, and survey its operations in action.

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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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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Where We Are Looking For Value

Where We Are Looking For Value

Previously, we shared the year-to-date results for several international indices and discussed how short-term volatility creates opportunities that we work to exploit.  Longer-term returns for this group of indices are even more interesting.  This chart shows their performance against the…

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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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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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