The Value Firm Explained by Peter Coenen
There are some great investment minds out there. It makes sense to stay as close to them as you can.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
Great investors outperform the investment crowd by thinking different.
Often the long-term potential of their decisions is not obvious for other investors or they do not have the nerve to follow through.
Many times we wondered “Why could anyone else not see this?” but they don’t or they disagree.
When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever. – Warren Buffett.
We prefer to buy when the markets are way down
Whether we are talking about socks or stocks, I like buying quality merchandise when it is marked down. – WB.
Our investment process
- A good amount of time is spent finding the ideas and opportunities. We find them by reading the reports of the great value investors of our time.
- Then we try to get an understanding of the (future) business economics of the company. The business description of the 10K is a great place to start.
- Then we move on to the risk disclosure section. These are put together by management and lawyers to figure out what can go wrong with the business.
- Finally we move on to the financial statements and footnotes. We also read trade articles and other publications that are relevant to the business.
The better an investor knows a business, the better the ensuing investment decisions tend to be. Therefore, the starting point is detailed fundamental analysis. The aim should be to get to know a business better than anyone who is not an insider. There are few shortcuts and this process involves a meticulous review of all public information, such as financial reports, as well as mining other independent sources. – Lawrence Cunningham
Companies we like
We look for companies with the power to outperform competition for many years to come.
We will avoid companies that do not comply with good citizenship values linked to human rights, the environment, labor relations and anti-corruption. It’s much more fun to look for companies that not only deliver shareholder value, but even more importantly add good value to society.
Disclaimer. The information in this presentation, is not intended to be, nor does it constitute, investment advice and/or recommendations.
Our favorite books
- The Intelligent Investor. Benjamin Graham.
- Common Stocks and Uncommon Profits. Philip A. Fisher.
- Poor Charlie’s Almanack. Charles T. Munger.
- Margin of Safety. Seth Klarman.
- The Clash of Cultures. John C. Bogle.
- The Most Important Thing. Howard Marks.
- Investing between the Lines. L.J. Rittenhouse.
- Manias, Panics and Crashes. Kindleberger & Aliber.
- Financial Shenanigans. Howard Schilit.
- Irrational Exuberance. Robert J. Schiller.
- The Outsiders. William N. Thorndike.
- Good to great. Jim Collins.
- The Essays of Warren Buffett. Lawrence A. Cunningham.
- The Warren Buffett Way. Robert G. Hagstrom.
- The Warren Buffett Portfolio. Robert G. Hagstrom.
- Buffett beyond Value. Prem C. Jain.
- The Quest for Value. G. Bennett Stewart
- Valuation. Tim Koller, Marc Goedhart, David Wessels
- The John Deere Way. David Magee.
- Stress Test. Timothy F. Geithner.
To understand the investment style of Warren Buffett you can wait for Warren to write a book or you can start reading the annual reports of Berkshire Hathaway.
Our favorite quote
“A concentrated portfolio of strong and predictable companies acquired at a price that makes sense will do the job.” Charles T. Munger
Charlie Munger on finance. You all see what goes on in finance:the craziness, the promotions, the fuzzy accounting, the crazy trading cultures…. We have a vast gambling culture, and peoplehave made it respectable. Just being shrewd about buying little pieces of paper…It's not a good example for other people.
It would be a good idea to listen to or read a transcript of “24 Standard Causes of Human Misjudgment”, where Mr. Munger speaks about the framework for decision making and the factors contributing to misjudgements.
See full slides below.