our investment process
our investment idea generation is eclectic
The goal of our investment process is to identify mispriced assets and capture the opportunity presented by such mispricing. We are constantly looking for areas of the market where assets have a higher than average probability of being mispriced. Mispricing may arise for a variety of reasons. At times, market participants focus excessively on long-term growth prospects of businesses; at other times, such prospects may be ignored. At times, near-term risks are foremost in market participants’ minds; at other times, these are glossed over. A thorough understanding of human psychology and incentives in relation to markets often guides the general direction of our quest for great investment ideas.
there is no single recipe for generating excess returns
We read widely and screen markets; we explore the ideas of investors we admire and we talk to other sensible investors. We are very familiar with and have a healthy respect for the historic evidence relating to market anomalies, and this often features in our thinking. But great investment ideas, and true excess returns, can be found anywhere.
understanding why the market is mispricing an asset is critical
To make sensible investment decisions, we need to know enough about the economics of an asset to make a reasonable estimate of its fair value. But although the critical aspects of an investment idea are often few in number, they tend to be difficult to quantify. Sound judgement is typically more important than supreme numerical modelling skills in estimating fair value. Sometimes in-depth fundamental research gives one an edge on the market; often one’s advantage is purely behavioural. And in many instances the ability to take a longer-term view, free from short-term psychological pressures, makes the difference between implementing sensible investment ideas and idly standing by while the market delivers an exceptional opportunity. Understanding the nature of one’s edge on the market in any given investment idea is key. Without this understanding, investing is little more than a guessing game.
our investment process aims to encourage thorough research without stifling sound judgement
Our team is small with ample opportunity for informal engagement. We know each other well and trust each other’s judgement. We find value in a degree of structure when it comes to investment idea generation and portfolio construction. But we do not believe that process can fully substitute sound judgement and the unfettered implementation thereof in investment decision making. The details of our investment process are captured here