Control over whether, not when, we are right
“Our preferred route however is to be assessed on a compounded, multi-year basis for the reason that the only event we control is whether we are right, not when we are right.”
Investing
Nick Sleep and Qais Zakaria's December 2003 letter to Nomad partners, one of the letters in Nomad Investment Partnership Letters, 2001–2014.
Winners often matter more than losers
“For investors the implication of [mistakes hurting more] is great as it is often the favorable outcomes that drive performance more than losers destroy it.”
Buying at fifty cents on the dollar
“Our aim is to make investments at prices we consider to be fifty cents on the dollar of what a typical firm is worth.”
Allocation mistakes stall value but rarely sink price
“Capital allocation mistakes such as these often prevent the compounding of value but to date have rarely resulted in a permanent decline in the share price to below our purchase price (50 cents).”
Price and capital allocation decide outcomes
“The prime determinants of outcome are price (sticking to 50 cents on the dollar) and capital allocation by management.”
Price to value as the best indicator
“Rest assured, nothing occupies your manager more than reducing the price to value ratio of the Partnership, as we believe this to be the best indicator of latent value and future performance.”
Rising prices lower prospective returns
“There are very few absolutes in investing, but one thing about which we can be certain is that as prices rise prospective returns go down.”
New money makes subscribers unwitting stock pickers
“In our opinion, [purchases at ever-higher prices] risks devolving the initial investment decision back to the subscribing party, who are likely-as-not unaware of their additional role as stock picker.”
Matching new money to new ideas
“In our opinion [matching subscriptions to ideas] is the superior strategy as incremental funding is invested in new fifty cent dollars, thereby lowering the price to value ratio of the fund and with the effect that new investors bring something to the party.”
Preferring investment-led growth to new assets
“Our preferred state of affairs is to close and for growth in assets to be investment-led.”
A share discount is an asset for buybacks
“Our view is that the discount that the shares trade at in the market is an asset to be harvested for the benefit of all shareholders through share repurchase.”
Property seized for cents on the dollar
“In no other sphere of capitalism can your property be seized in exchange for cents on the dollar (except compulsory purchase on the grounds of national interest).”
Owning enough to influence the outcome
“The best defense is to own enough of the company to influence the outcome. In most cases in excess of 10% of the shares outstanding would suffice.”
Partner patience as competitive advantage
“One of Nomad’s key competitive advantages will be the aggregate patience of its Partners.”