Mavos Capital Strategy Overview

Helping you to understand how we think about investment opportunities

Now that I put together a long post detailing the Mavos Capital investment philosophy, I would like to dive deeper into the strategy. I thought about breaking this up into separate posts to detail each pillar in its own unique page but then I decided that it is best to see everything in one place. While these pillars have their own unique characteristics, there is a central theme that runs throughout them all and that is best tied together in a single post.

Due to the length of the post, I have included large titles for each “standalone” section to make it easier to explore this post at your own pace. I do recommend reading at least the intro first and then taking other sections in whatever order you think is best. I put it together in the order I think is best to read it in but I know it is long and I made it so you can jump around sections and still be able to get the full picture.

Before jumping in, here is a beautiful pic I took from a recent hike in the mountains.

Sections

• Introduction

• Pillars Introduced

• Dark Horses

  • Hidden Assets

  • Misunderstood Companies

• Sustainers

  • Roll-ups

  • Must Haves

• Catalysts

  • Coattails

• Conclusion

Introduction

Everyone thinks their strategy is the best. Some think their strategy is the only way. I believe there are more successful investment strategies than there are flavors at your local ice cream shop. Some overarching themes that most strategies fit into:

• Quant — focused on mathematical and statistical models to buy and sell securities using computer algorithms

• Fundamentals — analyzing financial statements and other pieces of data to establish a buy and sell target to then making an investment decision

• Hybrid — combination of quant and fundamentals — using fundamental analysis done by humans to feed computer algorithms that then buy and sell securities

• Long-only — investing in securities with the expectation of price appreciation

• Short-only — investing in securities with the expectation of a decline in price

• Long-short — using a combination of going long on securities (expecting them to go up) while also going short securities (expecting them to go down)

Most funds are some combination of these 6 broad buckets. There are probably 10 subcategories for each of these larger buckets and within each of these subcategories is probably another 10+ sub-subcategories. I can keep going but my point is there is no silver bullet; if there was, everyone would employ that single strategy and there wouldn’t be 100s or 1,000s of different strategies. If someone like Ray Dalio tried to copy Warren Buffett’s exact method, he would not be nearly as successful at it as Buffett. And vice versa, if Buffett tried to copy Dalio’s exact method, he would not be nearly as successful at it as Dalio. But staying in their lane and focusing on their own strengths, they are two of the most successful investors of all time even though their investment strategies are almost entirely different (and often times contradictory).

To become a successful manager, you must be hyper focused at staying in your lane and understanding your circle of competence. As I discussed in the post on philosophy, it is okay to “miss” some great opportunities. By trying to be an expert at everything, you are more than likely to become great at nothing.

Pillars Introduced

At Mavos Capital, our circle of competence focuses on fundamentally analyzing companies in which we can have some kind of “edge”. Typically this edge comes in the areas of the market that are less explored by other investors. I will not get back into it but this refers back to the anecdote about fishermen from my previous post. To better understand where we find this “edge”, I will discuss the way we define our investments and investment opportunities.

Dark Horses

A Dark Horse is defined as “a candidate or competitor about whom little is known but who unexpectedly wins or succeeds”. When I think about Mavos’s Dark Horse strategy and where we look for opportunities, I cannot think of a better definition. We look for companies and opportunities that are not, or only lightly, researched by other market participants and sell side analysts. These companies and opportunities are overlooked because they are unexpected to win or succeed. So, by definition, these companies are Dark Horses.

Dark Horses can take many forms. Sometimes these companies are too small for large institutional investors to even think about or too complex for other investors to even think about exploring them. This points to our discussion previously on fishing where the fish are, not where the other fishermen are. Often times there is also little to no analyst coverage on these companies. This sets Mavos up to have an “edge” purely by being willing to put in the work necessary to find these hidden gems.

Investors looking to invest in Dark Horses will typically need to put in extra work. They need to pour through SEC docs and other financial statements. This is opposed to more popular areas of the market where an investor can rely on a news story or an analyst report and form an “opinion” based on someone else’s opinion and then call that a “thesis”. By having limited analyst and news coverage creates an opportunity to dig in and uncover the real facts about a company and paint a picture of what the company is truly worth using our own analysis. Often times in the Dark Horse area of the market, there is a large gap between the true “value” of a company and what is being offered in the public markets. Being able to acquire shares of a company at this large discount to their true value is a source of alpha for a fund like Mavos to take advantage of. Over time, this gap begins to close as more investors become aware of the true value of the company, thus leading to price appreciation.

This is the overarching definition of a Dark Horse. All Dark Horse investments will fall under this definition. There are two subcategories that help us further breakdown opportunities and therefore help us to research and discover new ones: Hidden Assets and Misunderstood Companies.

Hidden Assets

Hidden Assets can take on many forms. One form I will explore is a legacy company with multiple divisions but one or two main divisions that “define” the company. These main divisions are likely slowly growing or might even be in the decline. Investors take a cursory look and see this company as a “xyz” company and dismiss it because who wants to own “xyz” businesses in 2023? Most of the time, we would agree and not take another look. But sometimes, there are Hidden Assets within these companies that are worth more on their own than the full market cap of the overall company. This is where Mavos digs in to find Hidden Assets to invest in.

One good example is the company that owns legacy Yellow Pages assets, Thryv ($THRY). Everyone knows Yellow Pages is going away — I for one don’t know anyone that has looked at any printed Yellow Page offshoot in many years if not over a decade. Why would anyone want to own these legacy assets that are declining 20% per year and will eventually go to 0? $THRY trades at less than 5x EBITDA and 6x FCF, this is a classic “value trap”, right? 99% of investors will DQ this company and move on. Savvy investors might wonder why the Yellow Pages are now called Thryv and take a bit of a deeper look. They will find a software business growing at over 30% annually with > 20% operating margins. This savvy investor might see a software business that they can buy for these super low multiples. Eventually the market will realize THRY’s main business is a growing and profitable software company and not the legacy Yellow Pages business. At that point, this software business will not be trading at a 5x multiple and there will be price appreciation. I am not pitching THRY so I will not go into any more detail. There are other reasons Mavos is not invested in THRY but this is a perfect example of a Hidden Asset.

Once the Hidden Asset is recognized by the market (and therefore no longer a hidden asset), there is a re-rating of the stock and usually not just a turn or two but typically something pretty drastic. This is the thesis behind Hidden Asset investments: they take hard work and detailed analysis but when you find the right one, they pay off big time. This is an immensely simplified explanation of a very complex process but I hope this explains the Hidden Asset subcategory well.

Misunderstood Companies

Similar to the Hidden Assets category, Misunderstood Companies are by definition, “misunderstood” by the investment universe for various reasons. Where Hidden Assets companies have a specific reason why they are misunderstood, Misunderstood Companies is more of an umbrella term. I will throw out a few examples: a new CEO joined the company, a large customer has decided to go another direction, something happened at a facility that paused their production, any legal issues (real or perceived), a negative news story (again, real or rumor), etc.

Typically the stock price will fall off a cliff. This could be because of limited analyst coverage and/or not a lot of public discussion of financials or the business by management —> something happens that is not fully understood, thus pulling down the price of the stock. This is where an investor like Mavos can dig in and understand if this is truly a one-time problem or is this a new secular trend for the company. If it is the former, Mavos can acquire shares at this heavily discounted price. Once the market realizes this otherwise great company just had a short-term issue, there will be significant price appreciation.

Sometimes the market reaction to an event creates a price fall much greater than the overall effect on the business. For example, let’s a company loses a major customer who was 10% of their revenue, for no fault of the company. But the stocks falls by 30% on this news. If this was truly no fault of the company and in reality their revenue is only going to be down 10%, in theory the stock should only fall a commensurate amount because stock price is supposed to reflect business value. So there is a 20% discount in price for no other reason than investors overreacting to the news. This is an oversimplified example but gets the point across.

This is similar to another pillar, Catalysts. Catalysts are more of a secular shift in mindset for a business or an industry but I will get into that in a bit.

Dark Horses conclusion

You might be saying to yourself this sounds too good to be true, why do these opportunities exist? Isn’t the market too efficient for that? Great question! There are a few reasons why others do not explore these opportunities.

The biggest reason is these do not “screen” well. A lot of investors, both those that utilize human work and those that utilize computer algorithms, use screening to research and explore opportunities. While screens are a good way to filter out the noise and more efficiently discover companies, many Dark Horses are missed in these screens. And we LOVE to discover opportunities that others explore. Pointing back to THRY above, this company would screen over the last 5-10 years as either declining or not growing. Most funds would DQ it right away because of that. Even if it passes a “sniff test” (a fund doesn’t care about growth as much), seeing the description that it is the parent company of the Yellow Pages would lead to the rest of firms DQing it. This is where the alpha for Mavos is, finding these ignored opportunities. I can get into a whole discussion why screens should be used as a tool in the arsenal vs the only way to find opportunities (which 99%+ of firms utilize) but that will make this already long post exponentially longer.

This points to another reason that these opportunities exist: they take a lot of work to find. For every THRY that has the hidden software business hiding behind the Yellow Pages business, there are countless businesses that really are “only” the legacy business and not attractive at all. Time is the most valuable resource in the world. How you spend your time dictates many things in life. Many investors would rather spend their time looking at analyst reports or running more screens and finding the more “low hanging fruit”. This is not to say that we are the only firm that works hard; most firm works hard. But it is just a matter of where that time is spent. There is a popular saying, work smarter not harder. At Mavos, we want to work harder AND smarter.

There are many more reasons but I will discuss one more and I think this ties into all of our investment pillars. Many investors are chasing returns on a quarterly basis. I think about the quality, time, cost triangle so popular on legacy sales company floors across the country (I myself started my career at 21 years old selling Canon, Sharp and Konica Minolta copy machines at the largest independent dealer in the country). In investment management it is a bit different because I would say the “fast & good” category isn’t possible, no matter how much you want to pay for it. Anyway, to be successful in investing over a long period of time, you have to think long-term…sounds obvious, right? On paper this is obvious but too many managers are chasing quarterly returns. Think about a company like THRY again. They aren’t going to be recognized as a software company overnight. These investments take time and many investors don’t have the luxury of time but we do.

So to summarize these points, only by being willing to put in the work to go beyond the screen and having a longer time horizon, Mavos is immediately at an advantage when it comes to finding these Dark Horses.

Sustainers

So we talked about Dark Horses. They are companies that are not expected to do well but “come out of nowhere” and succeed. The other side of this coin is Sustainers. Some people call them compounders. These are companies that have done well for awhile but for one reason or another, the market thinks they will not “sustain” for long. Our thesis is that these companies will do well for longer than expected for various reasons. When they do “outperform” their expectations, they will rerate and capital appreciation will ensue.

Here are some characteristics we look for in Sustainers:

• Companies that have a strong competitive advantage and value proposition that will compound their growth over time

• Companies that have a wide moat which leads to high margins

• Strong businesses that have secular tailwinds which leads to predictable free cash flow

• In addition, the characteristics listed in my previous post regarding investment philosophy still apply.

Management is very important in every “bucket” of investment for Mavos but especially so in this category due to these companies having higher than average free cash flows, thus leading to very important capital allocation decisions.

Some of the capital allocation decisions we like to see are buying back shares at attractive prices, M&A that is done strictly for shareholder value creation (vs empire building which we will get to later) or re-investing retained earnings into the business if there are investments they can make with IRRs that outpace buy backs and M&A.

Before moving on to explaining the subcategories a bit, I want to note something important. While part of the thesis for investments into Sustainers is that they will be successful for a long time, that does not mean we just “set it and forget it”. We will stay abreast of any developments that may cause a change in our long-term thesis. This is not to say a bad quarter or some short-term volatility will spook us into selling an otherwise great company. Similar to what I have discussed in this and previous posts, we look at investments over a long time horizon which helps us to evaluate short-term volatility for what it is, short-term.

These are also investments we will add capital to over time if we see an attractive disconnection between price and value. For example, let’s say the stock has moved up 10% in price over the last year but there was a positive development that added 25% to the long-term value of the company. We will happily take advantage of the discount the market is offering us and acquire more shares being offered at this value gap.

Diving deeper into Sustainers, there are two subcategories that I want to define: Must Haves and Roll-ups.

Must Haves

One of my favorite themes in great companies is something we like to call a high value:cost ratio. This means the product or service being offered by the company is incredibly valuable to the customer or client but a relatively small % of the overall cost.

For example: I will use one company I have done a couple of write-ups on, Perimeter Solutions ($PRM). They do a lot and I have all the details in my write-ups but just to simplify it let’s look at the firefighting foam they sell that drops from aircraft to fight wildfires. CAL FIRE is one of the biggest firefighting orgs in the world and for every $100 they spend on their firefighting budget, only $3 is spent with PRM (3% of their overall budget). But, without PRM’s products, their ability to fight fires would be drastically worsened; much more than the 3% they would be saving from their budget.

This is a perfect example of the ratio I like to look for in Must Haves. These companies will likely have incredible pricing power, leading to sustaining high margins for an extended period of time. Often these companies are asset light with low and predictable capex needs which leads to a sustainable stream of free cash flows. While it is not a requirement, something we like to see in Must Haves is a company having a pseudo monopoly or operating in an elite oligopoly. For the most part, to be considered a “must have”, these companies have very little competition and a very high barrier to entry.

To see capital appreciation over a long time horizon investment, we expect these companies to compound their growth at higher than average rates of return. Like the overall Sustainers category, we like to see management who we feel very confident in their ability to accomplish this task. Unlike some of our other categories, we are not expecting much of a re-rating of the stock and instead are looking at predictable, steady rates of return over a long period of time. If anything, we are more so expecting that the stock does not re-rate in the other direction. This “negative” re-rating could be due to many things such as an elite management team leaving/changing, a secular change in the industry dynamics, regulatory change, etc. Must Haves fall under the bucket of “Sustainers” because typically once we own these companies, we plan to own them for a very long time, barring any secular change to our thesis of course.

Roll-ups

Roll-ups, as defined by Mavos Capital, are companies that make bolt-on acquisitions for either geographic or other strategic rationale. This could be value accretive for many reasons but some include synergies, eliminating fixed costs, increasing volume, providing a better back-office solution to an already great business, etc. There are some roll-ups that rely almost exclusively on acquisition fueled growth. These are not the companies Mavos prefers due to many reasons. One of which being in a market downturn, especially today with a higher rate environment compared to the last few years, the cost of capital (and therefore the cost of the acquisition) will be prohibitive and thus the growth machine essentially shuts down. There are some very successful companies that have relied on this such as Constellation Software, but in my opinion these are the exception and not the rule.

The types of Roll-ups we look for are companies that have good economics on a stand-alone basis and benefit from strategic acquisitions only following the strictest guidelines and more importantly only those that are accretive to shareholder value. This is opposed to management teams that are in the business of empire building. According to Charlie Munger, “Show me the incentives, and I will show you the outcome”.

Typically management teams that pursue a goal of empire building do so due to some kind of misaligned incentive. It may be that their compensation is linked to EPS growth or revenue growth or something else that has nothing to do with shareholder value. If your company right now earns $10 per share and you are incentivized to grow EPS 10% and you acquire a company that will increase your EPS by $1, you hit your goal and get your reward. But what if that company that you acquired you had to pay $50 per share for. That is almost guaranteed to destroy shareholder value but this CEO is in the business of empire building and growing just for the sake of growth (and to line hers or his pockets with cash).

There are many qualitative aspects to an acquisition being accretive to shareholder value. Not to say this is a silver bullet but the most obvious quantitative way to look at an accretive acquisition is looking at the multiple paid for the business versus the multiple the acquirer currently carries in the marketplace. If they paid roughly in line with their own multiple, or even better less than their market multiple, that has a much better chance of being accretive. As opposed to paying much higher than their own market multiple and relying on a lot of intangible qualities to make the acquisition accretive. While this could work itself out, there is much more risk in this scenario and one of the key pillars of the Mavos investment philosophy is to mitigate downside risk. When this calculated downside risk outweighs the value we see in the investment opportunity, we will typically move on.

Roll-ups that Mavos focuses on are companies that are typically in a fragmented industry but have a unique competitive advantage that allows them to acquire (or “roll-up”) other companies in their industry and take advantage of this competitive advantage to make the acquisition accretive to shareholder value. We prefer companies that otherwise have organic growth engines but use the roll-up strategy as a tool in their arsenal as opposed to their only strategy (as described above). These consolidators will typically be able to implement operational improvements at the acquired company and thus create value just by eliminating inefficiencies. Again, like other companies in the “Sustainers” bucket, management teams are increibly important to analyze and to make sure these management teams are looking to increase shareholder value. There is a fine line between management teams that are empire builders and those that are acquiring companies for the purpose of increasing shareholder value. The former are what we like to call “acquisition traps” where they might look attractive and growing quickly but in reality management teams are just creating value for themselves while destroying shareholder value. For this reason, the diamonds in the rough are harder to come by. However, we like the environment this difficulty creates. It presents the opportunity for investors like Mavos, willing to put in the hard work, to find these hidden gems to generate incredible alpha for the investment fund.

To summarize, we look for a leader in a fragmented industry that has some kind of distinct competitive advantage. By acquiring smaller competitors, they can implement their competitive advantages and make the acquisition accretive to earnings. We are staying away from consolidators that fall into two buckets: 1) their only growth strategy is by acquiring companies and 2) management teams that are looking to build their empire, which is typically tied in some way to their compensation and bonus incentives.

Sustainers Summarized

Like I said in the intro to “Sustainers”, there are a lot of different themes that come up that are attractive to Mavos. I broke it down into “Must Haves” and “Roll-ups” because those are two subcategories that I feel are best defined as a group. But outside of these two subcategories there are other companies that fall under “Sustainers” but not necessarily the two defined subcategories. We think it is important that there is a mix of both Sustainers and Dark Horses in a portfolio. The last investment pillar we will be exploring are “Catalysts”.

Catalyst

Investment opportunities in the Catalyst pillar are affected by some kind of catalyst. After this catalyst occurs, the share price will reflect this, thus leading to capital appreciation. The investments in the Catalyst pillar can either be short-term or long-term.

Investments that are more short-term in nature can take on many forms but some examples are:

• A strategic alternative proposed by the board

• A spin-off from a larger parent company

• An acquisition bidding war

• A sale of a large division

• A large pay-down of debt

• A regulatory change

• A legal case with material upside

• …and many more

Longer term event driven investments are typically some kind of macro theme that is leading to secular change in the prospects of a company and industry. These could be a change in consumer sentiment that takes an out of favor industry and puts it back in the limelight, a world event that creates a supply/demand imbalance (this one is important to analyze because these situations can either be very cyclical or under other circumstances lead to secular changes in the way industries operate), etc. Typically in long term Catalyst investments, capital appreciation will occur when the rest of the market realizes the longer term value created by the catalyst. Sometimes there is a distinct event or catalyst that causes an immediate realization of value but more often in these scenarios, this will be recognized over a longer time horizon.

One example of a Catalyst is an example from my own life. TLDR; I sold software for a data analytics company, now very large, but at the time focused on fleet analytics for long-haul trucking. We were a tiny start-up but we had the best product on the market, by far. When we were still in our infancy a treasure landed in our lap. The DOT had proposed regulation a few years back that was coming into effect in the next 12-18 months. The regulation required that, by a certain date, every long-haul truck had to be equipped with a device that electronically logged the driver’s hours (ELD). In the past, drivers would log their own hours manually and it was, for a lack of a better term, built on the honor system. But truck drivers wanted to drive as many hours as humanly possible so sometimes they would “estimate” their hours a bit incorrectly just to be able to drive more hours. With the new regulation that was no longer possible. The ELDs would automatically log the hours a driver drove and that would be reported to the DOT.

Anyway, the point of this story is that 1,000s of companies were now in a rush to get these devices installed because not having one would lead to a punitive fine. My company was in a unique position. Our whole business was selling a device that plugged into the truck’s analytics port that spit out a bunch of data to a fleet manager. Why not add the capability to have these devices now double as an ELD as well? That is precisely what we did and we now had a lot of “forced buyers” needing to buy our product. We were not a public company (at the time) so there was no way for a canny investor like Mavos to be able to take advantage of that regulatory catalyst but this is an example of an opportunity that does come up relatively regularly in the public markets. I guess this could technically fall into the “Must Haves” category but it is a bit different because this was a short-term catalyst for capital appreciation and would not be sustainable for long-term capital appreciation. Where as “Must Haves” are longer term investments intended to compound over an extended period of time.

This is just one example and I will not dive into every single one in detail but you get the point. We are looking for some kind of catalyst that will lead to a change in market sentiment. Unlike every other investment Mavos looks at, if there is a short-term catalyst, we are looking at capital appreciation based on the investment opportunity. Not that the typical fundamentals are not important (they still very much are). It is just that some fundamentals carry less weight in some of these scenarios. Going back to the ELD scenario. If this company was not producing a lot of cash at the time but knowing the regulatory change was coming and knowing this would be reflected in their financials and thus leading to price appreciation, we might be a bit more lenient. **VERY IMPORTANT CAVIAT** this is absolutely not to say we will ignore fundamentals. We very much will still evaluate the fundamentals and look for any red flags that may increase the downside risk of an otherwise outstanding investment opportunity, making the risk-adjusted return unattractive. The point is that some fundamentals carry less weight, not no weight. For example, management teams are just as important, if not more important, in these scenarios to make sure they can capitalize on these short-term catalysts. Ok you get the point.

Long-term catalysts are secular changes in the industry and/or company. These secular changes will lead this company to eventually be considered a “Sustainer” but since this does not qualify as one yet, I like to think of it under the long-term catalyst pillar. One example that is prevalent to Mavos is the offshore drilling industry. I will write a whole blog post on this so I will not get into details right now. But TLDR is that the industry was absolutely awful for a long period of time in the mid 2010s and essentially all companies either went bankrupt or close to it. This was such a hated industry but slowly over the last 3-4 years the companies have started to turn things around. The need for offshore is exploding and demand significantly outweighs the supply of available jacks and rigs. This is definitely not currently a Sustainer but is moving in that direction. That is why I would categorize this as a “Long-Term Catalyst”. A catalyst is causing a secular change in the industry and a large imbalance between supply and demand. This isn’t a short-term catalyst where changes will be seen “overnight” (or over the course of a quarter or two) but will be longer-term in nature. Even without a re-rating of the stocks, the contracts that these companies will be signing for use of their rigs and services will lead to very large capital appreciation, even at today’s conservative multiples.

Coattails

A subcategory of Catalyst investments are what we call Coattails investments. These are companies that will “ride the coattails” of these secular changes. An example is a company we are looking at, but not invested in currently (as of September 2023). It is a company that provides air transport and other services to offshore oil rigs. This is a “Coattails” investment because even though they are beneficiaries of these secular changes, they are not directly affected by fluctuations in industry fundamentals. I can somewhat understand why these offshore rig companies are partially based on the longer-term trajectory of oil prices over the next 1-3+ years (because they sign long-term contracts from E&P companies based on where these E&P companies expect oil prices to be). However, offshore oil rig companies’ stock prices fluctuate daily based on the daily fluctuation of oil prices for whatever reason. Anyway, the company I mentioned previously that provides air transport and other services is not subject to the same daily fluctuations in stock price based on oil prices. While we do not really care about daily stock price fluctuations anyway, my point is these “Coattails” investments are 2nd or 3rd derivatives beneficiaries of these secular changes and will benefit from a positive change in investor sentiment without being subject to some of the short-term volatility.

That was a long-winded way of saying we like Coattails investments because we can benefit from the long-term secular change but are not subject to some of the short-term volatility that can occur. Offshore oil rigs is one example of this but there are many more we look at. Another one being homebuilders, but again that is a post for another time.

Catalysts Summarized

We like Catalyst investments because a tangible catalyst can be analyzed and a value determined by putting in the work. Again, these are types of investments a lot of investors just simply do not look for because they are hard to find, they do not typically “screen” well and sometimes they are just flat out boring and complex to research. But again, we like these scenarios because remember, we like to fish where the very best fish are.

Conclusion

I know this post was incredibly long. I thought about breaking it up but I think it is important to have everything in one place since there are common themes that run through each of the distinct pillars and subcategories. I tried to break it out in a way for you to be able to digest all the info at your own pace. While there is no particular order you have to read the post, I wrote it in an order I think is the best to consume it in.

I also want to make a very important point. These definitions and explanations are how we think about investment opportunities at Mavos. There are times that we won’t be able to neatly define an opportunity. Some investments might fall under an amalgamation of multiple themes. But for an investment to be considered for our portfolio, it will likely be either 1) defined by a single category or subcategory or 2) contain attributes of multiple of these themes. This is because we want to make sure we stay in our lane. If an investment does not fit into this overall “3-pillar” umbrella, it is likely not in our circle of competence and therefore we will pass. Like I have discussed many times in these posts, if it is not in our circle of competence, this adds an unmeasurable amount of downside risk. One of our main investment philosophies is reducing downside risk. So, by definition, adding downside risk, especially that which we cannot reliably measure, will cause us to move on and find a better opportunity that fits into our strengths and expertise.

Warren Buffett describes being patient and staying in your lane well using baseball. The hardest part about hitting a baseball is that you only get 3 strikes and then you are out. Therefore, even if you do not like the pitch, even if it is a “good pitch” (a strike), you have only 3 opportunities. Now let’s imagine you are hitting a baseball and instead you get unlimited pitches. Even if many strikes (“good opportunities”) come in, you can let them go if they are not exactly the one you want to swing at. That way you only swing at the pitches that you feel give you the very best chance to get a good hit on. Again using baseball, one of the statements we make on our website is “We are not looking to be the home run hitter that also leads the league in strikeouts”. This is all saying we are going to be picky and only invest in the very best opportunities while making sure that we are thinking about protecting our downside risk at the same time.

I know this was a very long post but I wanted to make sure I went into detail about the way we look at investments and opportunities. I also tried to make it readable for people without a finance or investment background. If you have any questions or if anything did not make sense, please feel free to reach out. I am happy to discuss any aspect of this post in more detail.

Cheers,

Ryan