Charlie Munger, the Vice Chairman of Berkshire Hathaway and one of the greatest investors of all time, believes that when one is trying to solve a problem, it is often helpful to figure out what you should not do, rather than trying to figure out what you should do to solve the problem. With that in mind, we think that one of the best ways to describe our investment philosophy is by telling you what we are not:
We are not speculators
We are not gamblers
We are not oracles who predict the future
We are not focused on the short term
We are not day traders who rapidly buy and sell investments
We are not salespeople and we will not buy anything for a client that we do not own ourselves
We are investors.
An investor is someone who believes in buying great businesses with high and stable profits, quality shareholder oriented management, low debt levels, and a strong enduring competitive advantage. We call these competitive advantages a moat, and they can come in many forms.
When we talk about making sure we never lose money, a moat is a crucial part of ensuring that we protect our clients’ money, as much as possible.
An investor is someone who buys great businesses, but not at any price. By identifying businesses that we think are trading at a significant discount to their intrinsic value, we believe that we are helping to ensure that we don’t lose any money, even if the future results of the business are more negative then we expected.
An investor is someone who invests for the long term. We believe that when a person invests in a stock, bond, or mutual fund, they should treat that investment as if they were the owner of a business, because that’s exactly what they are. Business owners focus more on the long term prospects of a business. By focusing more on the long term, we can ignore some of the short term noise and avoid making mistakes which can cost us money. When we buy a business, our ideal holding period is forever. When you intend to own something forever, you are more careful about what you buy.
Our #1 priority, as shown by the two rules, is to always protect our clients’ money as much as possible. By acting as investors, we are doing just that.