No BS Investing: Nomad Partnership Letters
Full Collection here. They are a long and extremely funny read. I suspect you will keep coming back to them - they contain a ton of insight.
Along with Maboussin’s Frontiers of Finance series and Coase’s seminal 1937 paper on the Nature of the Firm, this collection is in my opinion, a must read.
Most importantly, it highlights the value of NOT DOING ANYTHING. It’s a choice in and of itself and can be extremely powerful. Especially in a high uncertainty environment. Like Private Equity.
Here is a gem:
There are, broadly two ways to behave as an investor. First buy something cheap in anticipation of a price rise, sell at a profit, and repeat. Almost everybody does this to some extent. And for some fund managers it requires, depending on the number of shares in a portfolio and the time they are held, perhaps many hundred decisions a year. Alternatively, the second way to invest is to buy shares in great businesses at a reasonable price and let the business grow. This appears to require just one decision (to buy the shares) but, in reality, it requires daily decisions not to sell the shares as well! Almost no one does this, in part because it requires patience.
Here is another:
The church of diversification, in whose pews the professional fund management industry sits, proposes many holdings. They do this not because managers have so many insights, but so few! Diversity, in this context, is seen as insurance against any one idea being wrong. Like Darwin, we find ourselves disagreeing with the theocracy. We would propose that if knowledge is a source of value added, and few things can be known for sure, then it logically follows that owning more stocks, does not lower risk but raises it!