Providing An Advantage
Our investment decisions are based on a core set of fundamental principles that guide us on all of our ideas and serve as the basis for all investments made by the fund.
Our unique investment strategy allows us to identify undervalued small-cap companies that few other funds are aware of and with these investments we are able to provide our partners with a superior investment result.
The majority of our investments are made in small publicly traded companies within the United States. While There are many other investment opportunities outside of this criteria we find that many of the best investments are made in these smaller companies for a few main reasons.
When thinking of the stock market most people will refer to the largest 500 companies on the stock exchange, frequently called the S&P 500. While these 500 companies make up most of the stock market's total capitalization they in fact represent a very small percentage of the total number of publicly traded companies.
In total, there are over 15,000 publicly traded companies in the United States, many of which are small-cap companies. Because these companies are so small they frequently go overlooked by the analysts on Wall Street which therefore increases the chances of their stock being undervalued.
By consistently looking through these small cap companies we aim to invest in ones selling for the lowest price in relation to value. This sometimes means purchasing stock for 30-40% of what they are worth. Once we do come across these undervalued companies we try to purchase as much of their stock as we can.
While the partnership occasionally partakes in other investment strategies, such as event arbitrage, we are mainly focused on investing in these undervalued small cap equities.
All rational decision making is based on a unique set of principles set out through the course of life. We take the same approach towards investing by basing all of our investment decisions on a unique set of guiding principles.
Over the course of their lives the world's greatest investors have developed many principles that have served them well throughout their career.
By studying their investments and writings we have found that there are 6 core principles that serve as the foundation of successful investment.
An investor must understand the difference between investing and speculating.
An investor must have the right temperament towards the market.
An investor must view stocks as businesses.
An investor must understand that every stock has an underlying value.
An investor must have a wide margin of safety.
An investor must stay within their circle of competence.
The vast majority of investment funds are set up so that the managers of the fund have a large portion of the upside and no portion of the downside. This is done by charging clients a 1-2% fee of their total assets, meaning the management of the fund gets compensated by the clients regardless of how well they invest the clients' money.
Because we find this arrangement extremely flawed our fund is set up as a partnership in which the managing partner only gets compensated if a positive return is delivered to the other members of the fund. In addition, a substantial portion of the managing partner's personal assets must be invested in the fund.
To keep all members of the partnership informed on their investment, the managing partner will send out letters during the course of the year as well as an annual letter detailing the performance of the previous year.
6 Principles that All Investors Follow
May 2, 2020
There are two requirements for a security to be considered an investment: 1) A safety of principle 2) An adequate rate of return. If a security is lacking one of these requirements it cannot be considered an investment and should instead be classified as a speculation. In order to be successful, an investor must restrict themselves to securities consisting of both requirements.
Case Study on the Valuation of Oracle
April 3, 2020
In 2019, Oracle saw another year of increased competition as more of the large tech players in the United States tried to move their way into cloud-based data management systems.
Lessons From Warren Buffett's Annual Letter
May 2, 2020
On February 22nd Warren Buffett released his 2019 Letter to Shareholders and as always it was filled with timeless information. The following is a summary of the three most important lessons we took away from this year's letter.
Overview of the Country's Largest Bank
May 6, 2020
It’s been said that there are more banks than bankers; something that seemed to have been proven true during the financial crisis. Fortunately, Jamie Dimon, the CEO and Chairman of J.P. Morgan Chase, has proven to be one of the great bankers of our generation. After steering J.P. Morgan through the turmoil of the financial crisis Jamie Dimon has secured his bank's position as the largest bank in the United States.