We don’t have access to better information than do our competitors.  Nor do we have a greater ability to predict the future.  Our advantage lies in our combination of perspective, experience, and temperament. What does this mean?

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Our “perspective” is longer term.  It means we evaluate every stock by examining the long-term fundamentals, rather than short-term trading factors, and compare those to the prevailing price.  Due to a confluence of factors (speed and accessibility of information, low trading costs, pressure to avoid short-term declines), the market’s focus on short-term factors has increased, creating more opportunities for long-term investors like ourselves.  Experience helps us identify these situations and to steer clear of those that may appear attractive but have long-term problems.  The proper temperament is critical.  A manager may claim to be a long-term investor but lack the gumption to act when market dislocation occurs.  This is because such dislocation tends to happen when stress in the market is high and prices of various stocks are declining rapidly.  In such situations it is extremely difficult to overcome one’s emotions and buy, even if you feel good about the company’s long-term outlook.  Our ability to stay even-keeled and our willingness to go against the crowd are key advantages.

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In our opinion possessing all three of these (long-term perspective, experience, proper temperament) gives us a distinct advantage and is the driver of any investment success we have had or will have.*  If one has a long-term perspective and experience but not the right temperament, he or she may not have the fortitude to act when opportunities arise.  Similarly, if one has the right personality but is too focused on the short-term, it may lead him or her into dangerous situations.  The fact that so few portfolio managers outperform the market over a long period may indicate that possessing all three is rare.

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*There can be no guarantee that any strategy (risk management or otherwise) will be successful.  All investing involves risk, including potential loss of principal.

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