Why Darwin's humility appeals
“Darwin’s humility is an attractive human quality, perhaps because such understatement recognizes that the ideas were bigger than the man.”
Investing
Nick Sleep and Qais Zakaria's June 2009 letter to Nomad partners, one of the letters in Nomad Investment Partnership Letters, 2001–2014.
Advertising as the price of unremarkable products
“‘Advertising is the price you pay for having an unremarkable product or service’.” — Jeff Bezos
Price givebacks pay only if customers reciprocate
“The whispered voice of price givebacks is economically fruitful but only if the customer reciprocates in the form of more spending, even in the face of more promotional approaches by competitors.”
Share prices swing more than business values
“Today I would update [my desk notice] to read, ‘ share prices are more volatile than business values ’, but the gist is the same: a reminder to focus on lasti ng value, not transitory prices.”
Certainty in the voice often masks weakness
“The absolute certainty in the voice of the proponent so often seeks to mask the weakness of the argument.”
Few things knowable, so few investments
“In our opinion, just a few big things in life are knowable. And it is because just a few things are knowable that Nomad has just a few investments.”
Many holdings reflect few insights
“The church of diversification, in whose pews the professional fund management industry sits, proposes many holdings. They do this not because managers have so many insights, but so few!”
With little knowable, more stocks raise risk
“We would propose that if knowledge is a source of value added, and few things can be known for sure, then it logically follows that owning more stocks does not lower risk but raises it!”
Index funds offer real diversification cheaply
“Real diversification is offered by index funds at a fraction of the price of active management.”
Great fortunes were not built by diversifying
“Sam Walton did not make his money through diversifying his holdings. Nor did Gates, Carnegie, McMurtry, Rockefeller, Slim, Li Ka-shing or Buffett. Great businesses are not built that way.”
Commercial genes crowd out investment skill
“When investment skills share a seat with business management, in time, it’s the commercial genes that tend to thrive, and investment skills that are not used end up atrophying.”
The three parts of long-term investing success
“The trick, it seems to us, if one is to be a successful long-term investor, is to recognize the sources of enduring business success, get in early and own enough to make a difference.”
Heuristics stand in for real valuation
“Investors use valuation heuristics rather than assess the real value of the business.”
A failure discount applied even to winners
“Investors know that in time average companies fail, and so stocks are discounted for that risk. However, this discount is applied to all stocks even those that, in the end, do not fail.”
Investors see the information but misweigh it
“Investors see the information (on conference calls they cheer ‘great quarter, Wal- Mart’) but, in our opinion, they incorrectly weigh the information.”
Scale economics turns size into an asset
“There are very few business models where growth begets growth. Scale economics turns size into an asset.”
Removing failure risk opens a patient opportunity
“The removal of a portion of failure risk from the investment equation creates a huge opportunity for those investors that can see the company in its true perspective and act with a bit of patience.”
Honest, simple investing is not easy
“What we are doing is investing at its most honest and most simple. But it is not easy. It is hard because one first has to reject industry dogma.”
The comfort of received wisdom
“The non-thought of received wisdom is shouted from the rooftops and it is safe and comfortable, glamorous, exciting even, being part of the crowd.”
Letting facts speak is hard, as Darwin found
“As Darwin found, it is hard to let the facts speak for themselves, reject the established way of thinking and to do so in good conscience.”
Honest long-term investing is un-exciting
“Isn’t it exciting that honest, simple, long-term investing is so, well, un-exciting.”
Fund managers imagine clients expect action
“One common psychological trap that agents may fall into is that clients expect action, or to be more accurate, fund managers expect their clients to expect action!”
Each day of inaction is a decision
“The investor Seth Klarman was once challenged on whether Buffett’s track record was statistically significant as he traded so little? To which Klarman answered that each day Buffett chose not to do anything was a decision taken too.”