Investment Philosophy

I strive to find situations where the market is not properly valuing businesses due to a fundamental misunderstanding, allowing shrewd investors to profit. This often comes in the form of small-cap stocks and special situations, but nothing is off limits if it has a great risk/reward.

  • Long-term, value oriented investor
  • Demand a large margin of safety—either from balance sheet protection or from franchise value
  • Prefer simple investment theses that do not rely on optimistic growth assumptions
  • Strive to find excellent businesses that are trading at bargain prices because of a “masking effect”
  • Concentrated positions—focus investments on only top conviction ideas
  • My portfolio is very long-biased. Short positions, while sometimes attractive, are expensive and generally offer worse risk/rewards
  • Focus on obtaining an edge on the market. This is incredibly tough to accomplish, but the rewards are significant. Always understand why your view is the variant view
  • Intellectual honesty—admit when you are wrong and always strive to get better. No shame in staying away from situations you do not understand (helps you avoid getting burned).

My investing process has been greatly influenced by the readings and teachings of famous investors such as Bruce Greenwald, Joel Greenblatt, and Warren Buffett, as well as personal mentors and great investors such as John Lewis and David Gardner. While my own investing style is different from all of them, I try to learn a little bit from each of them and incorporate their greatest strengths into my investing framework to help me better evaluate risk/rewards in the market.

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5 thoughts on “Investment Philosophy

  1. Pingback: Focus on Risk and Eliminating Mistakes | The Variant View

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  3. what do you think about DCF? to me, they give the illusion of precision and is worthless. EPV seems ok, but it relies on WACC (flawed) and using normalized earnings makes more sense. net cash should usually be discounted depending on mgmt’s capital allocation. I doubt that any of the top value investors in the last 15-20 years have used DCF, especially 3-stage model. it’s too much work if you might have to use a spreadsheet. it doesn’t make sense throwing in so many assumptions and throwing in a perpetuity growth. no one can predict that far, so valuation could be seriously skewed towards the higher end. simple valuation method seems more logical. look ahead 3-5 years and set a (EBITDA-MCX)/EV hurdle rate. or look at normalized earnings and use a reasonable multiplier to estimate intrinsic value; then examine several scenarios based on your understanding of the business. Greenblatt’s lectures really influenced my view on DCF.

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