It was early 2013 when I really started contemplating investment options with some seriousness. I reflected on my institutional funds management experience and my interests in value investing, behavioural finance and psychology. I also cast my mind back to the old academic days as well as my earlier careers in the fields of property valuation and corporate finance. This knowledge and these experiences together with my values and beliefs contributed to form my investment philosophy. At the heart of this investment philosophy is a disciplined process.
It took a while to appreciate the extent to which one’s investment philosophy and process can be so reflective of one’s personality. But in hindsight I see it makes perfect sense. A process that accords with our own beliefs and personality provides us with the fortitude to stick with it during inevitable periods of poor performance. In fact, I now question how an investor can have the discipline to stick with a strategy that does not complement their values, personality and beliefs.
“You have to invest in a way that’s comfortable for you.” – Walter Schloss
In October 2015 my family was fortunate to be holidaying in Europe. Amongst the many memorable experiences was our day long Porsche experience, including a guided factory tour. I mention this because there were two relevant observations:
- the controls, systems and processes in place at the factory, and the measures to ensure discipline is maintained; and
- the following quote, from the great man himself, Ferdinand Porsche:
“In the beginning, I looked around and could not find quite the car I dreamed of, so I decided to build it myself.” – Ferdinand Porsche
A few days later we were in Italy, so of course I took the opportunity to tour the Lamborghini factory and this provided further perspectives. The tour guide who was a long term employee often referred to the Lamborghini of old. This was prior to the Volkswagen/Audi Group’s purchase of the company in 1998. She spoke mainly of the process changes in the production line (which were largely rules and disciplined based). Ad-hoc :”smoko” breaks, and multiple “espressos” at random intervals became a thing of the past.
Mildly intrigued by this, my subsequent research points to reports that the Audi boss at the time saw in the Lamborghini acquisition the promise of “Italian creativity and design with German precision engineering”. He recognised that although the cars themselves were something unique and impressive, the quality, however, was suspect and something, “which could be extremely improved”1 .
From the factory tour guide’s comments it is evident that much of this was achieved simply by improvements to the process, and enforcing some discipline.
I mention these examples because my observations about the value of processes, systems, rules and checklists (and the discipline to reinforce them) are not only relevant to investing, they are applicable across a variety of endeavours.
My investment strategy is objective, process driven and sensibly diversified. Further, it employs a “value” based analysis framework. Because it has access to businesses across the globe and across the size spectrum, there are a plethora of opportunities available. Accordingly, it can be very selective in terms of the types of businesses it invests in, and it can employ stringent criteria for “making the cut”. The strategy combines the principles of “value investing” and discipline with the aim of generating attractive returns with an emphasis on capital preservation for the long term investor.
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