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Handymen come with an entire complement of tools, not just a hammer and a screwdriver. We think investing should be the same – go as wide and as deep as is possible – whilst remembering that the main goal is to compound capital sensibly, and avoid the permanent destruction of capital. We prefer to be known as style-agnostic investors, rather than be bucketed as ‘growth’, ‘income’, or ‘value’ investors.
Though this may be a bit unusual, we trust that with time, our returns speak for themselves.
Our long only strategy aims to beat our chosen benchmark by 500 bps each year. To do that, we deviate significantly from the benchmark and don’t shy from taking contrarian bets – especially with a 2-3 year horizon. We believe in concentration, and own less than 25 stocks, with an ideal range somewhere between 18-25 names. Portfolios that hold 60-100 names, whilst impressive, are effectively index huggers. If a portfolio owns 100 names, with positions 70-100 having a weight of 10-20 bps, we wonder what is the point in owning them (if, indeed, there is a point at all). By staying concentrated, we try to maximize our returns.
Our hedged strategy is market neutral, aiming to earn returns over cash. This strategy involves buying businesses that we perceive are undervalued, and shorting businesses with stratospheric valuations, or businesses that require the suspension of one’s disbelief. Risk management is key here, especially on the short side, where irrationality can persist for long periods of time. We try to be as pragmatic as possible, always remembering that it was his obsession with the white whale that ultimately killed Ahab.
The allium is a charming little flower – symbolizing prosperity, good fortune, patience and humility – all desirable qualities, when one thinks about investments, and the managers of those investments. We are confident that with time, these strategies will allow us to bloom.