Our Investment Philosophy

Our investment philosophy outlined below will serve as a guide for all our investment decisions

Stay the Course

Stay in the game for the long haul to benefit from the exponential tail of the compounding engine. A key principle underlying the framework of “stay the course” investing is the concept of laziness arbitrage or as Charlie Munger calls it — “sit on your ass” investing! We will strive to be on the lookout for opportunities to buy a few outstanding businesses and let compounding do the magic!

Keep it Simple

In the investing game, there are no extra points to owning difficult businesses. Here we are reminded of Charlie Munger's inversion principle– smart people solve problems and wise people avoid problems– The beauty of keeping it simple lies in problem avoidance. We want to find opportunities to invest in businesses with clear visibility and simple-to-understand high upside with limited downside.

Follow the Cash

Look out for investing in businesses that are consistently cash flow positive and are able to reinvest the generated cash back into the business to continue generating above-average returns.

Disavow Macro Forecasting

Focus on bottom-up investing in businesses that are simple, cash flow positive, are run by management teams with skin in the game with long-term owners' frame of mind. Have a complete disregard for macro factors influencing investment decisions. Wars, inflation, fed action, interest rates, currency fluctuations, and climate change– are but some examples of macro factors that are complicated societal problems beyond the ability of any single individual to influence or benefit from.

Be Cheap Within Reason

Prefer owning businesses on sale at lower multiples than not. However, be willing to pay a fair price for a chance at owning wonderful businesses as opposed to owning fair businesses at a cheap price.

Loath Originality

Avoid being original both in ideas generation and mistakes! Lean on super-investors to dictate the course of ideas initiation and mistake avoidance.

Risk Minimization through Portfolio Sizing

Sooner or later markets will humble all great players. Portfolio sizing will be our survival anchor. Even the best of ideas can spur unwarranted surprises leading to permanent loss of capital. Aim to adhere to 2-5-10 principle of portfolio sizing at cost– up to 2 % allocation limit to high-risk high reward ideas; up to 5 % limit to investments in profitable growth businesses at a fair price and up to 10 % to holdings that are high conviction one-decision investments.

Disavow Market Timing

Strive to remain fully invested through the purchase of long-only securities bought at an attractive price through all market cycles. No investment decisions will be made conditional on identifying “correct” entry or exit points for equities in the portfolio.

Sell Discipline

Aim to maximize absolute returns through the process of decision minimization. All successful investments and wealth generation involve at least two correct decisions: buy decision and sell decision. Buy decision is solely based on expectations for future wealth compounding. On the other hand, there are myriad of reasons to sell a security which are therefore prone to error of judgment. Limit sell decisions to (a) our failure in evaluating business prospects or our investment thesis suffering a significant pivot and (b) the security getting egregiously overpriced in the marketplace.

Strive to Maximize Luck

At the end of the day, investing is a game of calculated risk. Optimize for luck, i.e., increase the odds of success, through the process of lifelong learning.