Deals Deals Deals

My investment strategy is focused on investing in quality companies. I go through screenings, monitorings and evaluation of fundamentals and valuation, before determining if I want to buy stock in a company. After that, I let management do their job to hopefully increase earnings per share, and dividends and intrinsic value.

I believe in the coffee can investment strategy, where I buy a company, and just hold it pretty much forever. I rarely sell. Actually, most data available about investor behavior seems to point out that the higher the turnover, the lower the expected returns. This goes accross the board for individual investors, mutual fund managers etc.

This stems from the idea that once I invest in a company, the largest loss I will take on this position is limited to the amount I invested, sans any dividends received and reinvested elsewhere. But my largest win is potentially unlimited. I expect to be right 40% - 60% of the time. Thus I expect to be wrong 40% - 60% as well. Let’s call it 50/50.

Mathematically speaking, if 40% of my portfolio value went to zero, that’s scary. But if the other 60% went up 10 fold over a period of time, then the overall portfolio ends up being up by 6 times. Not bad ( with this kind of review, the assumption is linear growth - overall portfolio value being up 6x, overall dividend income being up 6x, overall earnings power being up 6x)

Therefore, to make money investing, I need to keep winners winning as long as possible. If I sell too early, I will be essentially shortchanging my future potential. I am not afraid to invest in a security that goes to zero. I am afraid of selling too early a security that will end up compounding dividends, earnings and intrinsic value for the next 50 years.

While I start out extremely diversified, and taking as many “bets” (quality companies available at a good entry price), I then let the portfolio companies do their work without micromanaging them. Essentially I let the portfolio concentrate on its own, based on merit and performance.

That’s only possible if you do nothing. Investing is possibly the only human endavour, where doing nothing beats doing something.

Note that this is only possible with quality blue chip companies with competitive advantages. The large popular name brand ones that we discuss and focus on.

Anywho, I am saying all of that because some of you are asking me about some deals that are happening, that are hitting existing portfolio companies. I will also discuss two companies I am buying below as well: