Dear Investment Partner,
In the interview, I discuss my general investment philosophy, why I prefer investing in compounders (businesses that can grow earning power over time), the importance of patience, and some thoughts on the investment business in general. I thought you might be interested in reading it.
Importance of Patience
In the interview, I also mention one of our investments, Tencent Holdings. For those of you who are new investors, or for those who aren't familiar with Tencent, I wrote about it in my last investor letter, and I also did a presentation this past June. See those links for my reasoning on why Tencent is in our portfolio.
I mention Tencent because it is the last main investment I made (other than a few small special situations). This investment was in late 2016, and it brings me to some comments that I wanted to pass along on the topic of patience.
I think that patience, although it is often talked about, is rarely actually practiced in the investment business (at least not to the degree that I think maximizes the chance of great long-term results).
The reality is that most investment funds are not set up in a way that allows for a very thoughtful, patient investment approach to be implemented. Most clients - and by extension, most managers - think of stocks not as long-term investments in real operating businesses, but as numbers on a screen that can be traded back and forth. Also, most clients want results now, and this influences investment managers to act in a way that they (consciously or sometimes subconsciously) believe will maximize the probability of good results in the near term.
The pressure to outperform each quarter ends up leading to decisions that are often detrimental to maximizing the likelihood of long-term outperformance. I believe the vast majority of actively managed capital in the stock market is inside a structure that greatly emphasizes or incentivizes short-term results (even if this isn't explicitly stated).
The time horizon of the client works like a magnet: the investment manager's time horizon will be drawn in that direction. So as I've mentioned before, I am very lucky to have what I think is a really remarkable group of long-term oriented, patient clients.
2017 has been a good year so far for our portfolio, but it has been one with virtually no activity. I have plenty of self-induced pressure to locate our next investment idea and allocate some of our cash, and I continue to actively work on that. But I'm thankful that I don't feel rushed or pressured to engage in activity for activity's sake alone. Many clients (outside of the Saber Capital family) mistakenly equate activity on their investment statements with production. Often, the two are inversely correlated.
I hope to maximize our long-term production (our returns), regardless of how much (or little) activity is required to produce those results. I'm grateful that I have you, as clients, who support that objective and have confidence in my ability to execute on it.
I'll discuss the year's results in the next investor letter early next year. In the meantime, I wish you all a Merry Christmas and Happy Holidays, and for those of you in the US, I hope you and your family had a nice Thanksgiving.
Please reach out to me anytime, should you have any questions about your portfolio, our strategy, or anything else.
Thanks again for being a valued client of Saber Capital Management.
Managing Member, Portfolio Manager
Saber Capital Management, LLC