Robert Vinall  Omaha, 1 May 2014 Presentation at the Value Investor Conference. Check back for more presentations, or sign up for our free newsletter to get all the presentations in your inbox. H/T ValueInvestingWorld for the find

About RV Captial

  • RV Capital was founded in 2006.
  • A one captain ship: Robert Vinall is the sole owner and employee
  • AUM are US$120 m
  • Concentration is high. The fund has 10 holdings
  • Turnover is low: <10% p.a.
  • High concentration + low turnover permits a wide investment universe.

Robert Vinall RV Captial Mistakes of Omission

Why do we make mistakes of Omission?

Behavioral Pressure

  • Losses hurt more than foregone profits

Career Pressure

  • You do not get fired for missing a ten bagger

Social Pressure

  • Rather fail conventionally

Anchoring

  • On quantitative outputs

Vanity

  • Value investors are proud of not paying up even for a great business

Why do mistakes of omission matter?

  • Mistakes of commission are capped at 100%, whereas mistakes of omission are unlimited
  • Mistakes of commission are rare in a concentrated portfolio, whereas mistakes of omission are more frequent
  • It is well understood how to avoid mistakes of commission
    • No hidden leverage
    • Last man standing
    • Easy business to understand
    • Managers with integrity

Lots of ways to miss an opportunity

  • Insufficient preparation
  • An excess of opportunity
  • Greed
  • Lack of liquidity
  • Too short a time horizon
  • My Focus today is just one….

Fear of paying a high multiple (Valuation heuristics)

“Whether appropriate or not, the term ‘value investing’ is widely used. Typically, it connotes the purchase of stocks having attributes such as a low ratio of price to book value, a low price-earnings ratio, or a high dividend yield. Unfortunately, such characteristics, even if they appear in combination, are far from determinative as to whether an investor is indeed buying something for what it is worth and is therefore truly operating on the principle of obtaining value in his investments. Correspondingly, opposite characteristics – a high ratio of price to book value, a high price-earnings ratio, a low dividend yield – are in no way inconsistent with a ‘value’ purchase.”

See full Robert Vinall: Mistakes of Omission in PDF Format here via valueinvestorconference