What is the investment philosophy?

There are at least three important tenets to my approach to investing for wealth creation.

Concentration:

I believe that intelligent concentration is the ideal investment philosophy. While concentration by itself does not guarantee positive returns, I posit that excessive diversification will most likely result in mediocre performance. I concentrate our holdings in a few companies that meet my investment criteria. Good investment ideas, companies that meet my investment criteria, are difficult to find. When I do find a suitable investment idea, I like to make a large commitment. I believe that owning ten to fifteen businesses, properly analyzed, will provide enough diversification.

Long Time Horizon: 

I am a long-term, buy-and-hold investor. I believe that predicting short-term swings in individual stocks or the stock market is not likely to produce superior results. Frequently buying and selling stocks has three detrimental impacts on the portfolio—transaction costs, taxes, and disruption of the compounding process. Limiting the impact of such costs and allowing the investment to compound over a long period of time can allow the capital to grow more rapidly.

Global Investor: 

While the US has the largest and deepest pool of publicly traded businesses, there are great investment opportunities outside the US as well. Being geographically diversified acts as a natural hedge. However, my interest in being a global investor is bounded by a couple of self-imposed constraints.

• First, since accounting is the language of business, companies that I am interested in owning follow either US Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).

• Second, such businesses are from countries with corporate governance laws comparable to that of the U.S.