At Avenir Capital we seek superior long-term performance through the purchase of low risk securities selling at prices materially below our estimate of intrinsic value. This process of “winning by not losing” protects capital from permanent loss (as opposed to short term declines in quoted prices) and allows for long term compounding of value.
Bottom-up not top-down
We believe that the best performance records in the investment management industry are created by small teams conducting fundamental, bottom-up analysis of companies. This is overlaid with an understanding of the psychological and human biases that can drive short-term divergence between the price of a security and the intrinsic value of the underlying business. Our investment process is designed to uncover special situations and quality companies undergoing change that we can buy at a 50% discount to a growing intrinsic value.
Worry about the downside first
We worry about the downside first and exercise discipline in avoiding investment ideas that are outside areas we understand or involve unquantifiable risks or unacceptably high risk of permanent capital loss.
Focus on absolute not relative returns
We run a concentrated portfolio of 15-20 companies, which allows our best ideas to drive performance, and do not seek to match any index in the short term. Our goal is to materially outperform the major indices over the long term and, by definition, this cannot be achieved if we devote energy to matching the indices over the short term.
At Avenir Capital, we invest with a longer time horizon than many other investment managers as we believe that, given time, the underlying value of a well chosen business will always prevail over short-term mispricing that may occur in a company’s securities. This ‘time arbitrage’ is one of the most important weapons in our armoury as it allows us to identify and benefit from opportunities that others miss due to a lack of patience and discipline. This can involve special situations in which a predominantly short term focus obscures the potential for material gain over the longer term.
Focus on simple investment ideas
While we are always data driven and analytical in our approach, we patiently look for simple investment ideas in which the odds are heavily weighted in our favour. We discount the future heavily and do not rely on the false accuracy of detailed financial forecasts or overly rigid formulaic approaches. At all times we remember that we are investing in real business run by real people with uncertain futures, and there is no simple formula for good judgement.