If we're investing in competitively advantaged businesses run by excellent management, we won't go too wrong even if we hold companies trading above our estimate of intrinsic value from time to time. We've owned Morningstar since its IPO and I can see it one day becoming a $10 billion business. The founder and CEO owns [...]
It's just very hard to trade in and out of positions successfully over the long-term. It's only possible when you can have unusually high confidence in the precision of your intrinsic-value estimate. The most common reason we sell is when we find a better opportunity that naturally takes us out of some higher-valued stocks that [...]
We pay attention to end-market diversification, within our companies and across the portfolio. One large holding in a company with five separate global financial businesses is probably more diversified than five holdings in similar regional bank stocks. Our goal is to own businesses with uncorrelated enough end markets that we can continue growing the intrinsic [...]
If you're buying high-quality businesses at what you think are discounted prices, you can be a little bit wrong on your intrinsic-value estimates and still make money. If you've ever done a DCF analysis, you know how variable the results can be with small adjustments in things like operating leverage or discount rates. We want [...]
It’s always important to ask whether you have any competitive advantage in analyzing a particular company. Can we know the business better because no one else seems to be paying attention? Is the market’s view being distorted by some behavioral or structural bias that we don’t have?
In the same year I started my firm, 2000, I read David Swensen's Pioneering Portfolio Management. He talked a lot about how institutions using a multi-manager approach ought to find managers who concentrate capital in their best ideas and who look off the beaten path to produce above-average results. That dovetailed perfectly with what we [...]