Investing
Nick Sleep and Qais Zakaria's June 2008 letter to Nomad partners, one of the letters in Nomad Investment Partnership Letters, 2001–2014.
“We consider ourselves contrarian, value-based investors. Ordinarily what we are buying is hated and reasonable value. When investments go from hated and reasonable to despised and cheap something is normally up in the markets.”
“Dilution risk occurs when companies issue equity at less than the firm is worth. This risk is always with us but is most pernicious at stock market troughs.”
“Investors can protect themselves from [dilution risk] by putting in their proportional share in any new capital raising. The problem comes when investors start to question the size of the capital raising.”
“Dilution risk comes from doubt about one’s original analysis.”
“The shorts know the institutions are weak minded. And the institutions themselves know they are weak. They are weak because, although equity is permanent capital, the owners of the equity are short term oriented.”
“The business model at many firms is not to make investments, to research and provide permanent capital; instead, the business model is to gather and retain assets.”
“We all know [having owners swap seats] is pursued in the name of the efficient allocation of capital and liquidity, but it fails at the former and the latter is prized by the insecure.”
“The point of equity is that it is the only permanent capital in the balance sheet.”
“In effect prices rise just because they have already risen.”
“Psychologists argue that the last mistake is so vivid that, if anything, we tend to over - correct, as anyone with a whisky-hangover will tell you.”
“At ten times revenues, to give you a ten-year payback, I have to pay you 100% of revenues for ten straight years in dividends.” — Scott McNealy
“We can all do momentum investing, but it is emotional investing and I just don’t think it is that intelligent, or profitable.”