Conflicts of Interest, Biases and Beliefs

A conflict of interest may be defined as any situation in which one party is in a position to exploit a professional or official capacity in some manner for one’s personal benefit. We have worked diligently to mitigate, if not eliminate, conflicts of interest.

A bias may be defined as any internal filter that may influence one’s perceptions of reality. We all have biases. Our experience is the most enjoyable and productive client relationships spring from common biases, beliefs and values.

We believe:

• The best solutions spring from process, not product.
Process solutions require sophisticated expertise, labor intensive collaboration, and fiduciary responsibility.

• The stock market represents an opportunity to purchase fractional ownership interests in businesses.
The better the business, purchased at a correct price, the greater the opportunity.

• In this discipline called investing, winning is largely a function of not losing.
In other words, the most successful investors are defensive investors. Warren Buffett once remarked that his best investment ideas have not produced better returns than other people’s best ideas. But, he added, his mistakes were fewer, and of smaller magnitude.

• Always be prepared for bad times and for the bad times to last far longer than anyone anticipates.
We would point out one need never prepare for the good times. They have a way of taking care of themselves. However, a string of bad years, when the emotion of the investment climate transitions to despair, can be unnerving and undermine even the most successful investors.

• There is no better investment, including in an inflationary environment, than a well-capitalized, profitable business that enjoys pricing power, purchased at a discount to its intrinsic value.

• “The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.”
– Warren Buffett

• Greater risk does not necessarily produce greater returns.
Greater risk increases the probability of loss.

• “All intelligent investing is value investing – to acquire more than you are paying for.”
-Charlie Munger

• “Risk can be greatly reduced by concentrating on only a few holdings… Risk comes from not knowing what you are doing.”
– Warren Buffett

• The return of your principal is more important than the return on your principal.

• To perform better than average one cannot do what everyone else is doing.

• Investment safety is mostly a function of the balance sheet.

• Business cycles will forever be with us.
Business cycles are largely expressions of the natural self-correcting process of the complex adaptive system we call the economy. The ebb and flow of these cycles is as natural as breathing. It is when the politicians, special interest groups, and policy makers monkey around with these cycles that we invite adversity.

• Never confuse genius with a bull market.

• “The dumbest reason in the world to buy a stock is because it’s going up.”
-Warren Buffett

• There has always been, and will remain, an enduring relationship between price and value.
There has never been a time when an asset is so good that it was incapable of becoming a bad investment if purchased at too high a price. Similarly, there are few assets so bad that they could not become excellent investments if purchased cheap enough.

• The late John Templeton said,
“To buy when others are despondently selling and sell when others are euphorically buying takes great courage but provides the greatest profit.” Warren Buffett similarly said, “Be fearful when others are greedy and greedy when others are fearful.”

• A correct process will occasionally yield a poor result.
A poor process will occasionally yield a good result. However, an excellent long-term result will always be a result of consistently applying a correct process over time.

• “If we find a company we like, the level of the market will not really impact our decisions.
We will decide company by company. We spend essentially no time thinking about macroeconomic factors. We simply try to focus on businesses that we think we understand and where we like the prices.” Warren Buffett.

• The most profitable investments are unconventional, scorned by the crowd.
Sustaining faith in these unpopular commitments requires confidence and conviction – a confidence and conviction that springs from exhaustive research, knowledge, and experience.

• It is impossible for an investment to be cheap and be popular.
Popular investments are dear.

• “Compounding is the greatest mathematical discovery of all time”
-Albert Einstein