Stoic indifference to short-term swings
“As ever, a stoic indifference to these short-term steps, both up and down, is the right way to think, and Zak and I would encourage you to mentally reallocate recent excess to leaner periods.”
Investing
Nick Sleep and Qais Zakaria's June 2007 letter to Nomad partners, one of the letters in Nomad Investment Partnership Letters, 2001–2014.
Delayed rewards trouble the long-term investor
“The lag that often exists between investment decision and eventual reward is a problem for long-term investors, as the brain is wired to learn from immediate feedback.”
Messy reality calls for intellectual honesty
“The real world is messy, and moves in a messy sort of way, and means that long term investors probably have to work harder at intellectual honesty so as not to mis-analyse cause and effect.”
Learning from intellectual superiors
“One way not to fool oneself is to spend time with one’s intellectual superiors and it is in this spirit that Zak and I became members of the Santa Fe Institute (SFI) some years ago.”
Economics is inescapably behavioral
“After all, how can economics not be behavioral – who is making the decisions after all?”
Long holding periods leave time to simmer
“There is a lot to be said for gentle contemplation. And of course, a long investment holding period allows one time between decisions to ‘retreat and simmer’ a little.”
Growth funded by the business itself
“A business ought to be able to self-fund its own growth, and if the opportunity set is large, then the return on capital needs to be suitably high.”
A structure that grows mouse to elephant
“In short, we want a skeletal structure that can support growth from mouse to elephant without too much skeletal re - engineering.”
Complexity undoes firms as they grow
“So, whilst quality is inherently patchy at most high street retailers, it is fixed at Amazon. This is important as it is complexity that is one of the main reasons firms fail as they try to grow.”
Selling a young Wal-Mart, the biggest error
“In previous Nomad letters we have argued that the biggest error an investor can make is the sale of a Wal-Mart or a Microsoft in the early stages of the company’s growth.”
Building a portfolio down from 100 percent
“There is another way to construct a portfolio, which is to invert and start at a hundred percent weighting and work down! If fund managers did this, I am sure they would end up with completely different portfolios.”
Chasing novelty is more marketing than investing
“To our way of thinking [chasing the new-new thing] often has more to do with marketing than it does with underlying investment reality.”
Capital raised only for opportunity
“As we have always said in the past, capital should only be raised in response to investment opportunity sets (to be slipped into the suggestion box of marketing-oriented fund management operations).”
Frequent reporting of a long-term fund
“In our opinion, more regular reporting of a long-term fund is meaningless at best, and counter-productive at worst.”