Q1 2024 - Seeking Winners Quarterly Letter
April 3, 2024
Table of contents
Dear Fellow Investors
Seeking Winners Fund Commentary
Constellation's Financial Performance: A Deeper Look
Topicus Throws a Curve Ball
Be Not Tempted to Shoot at Anything Small
Understanding the Risks of Trading like a Gambler
Why Capital Allocation is the CEO’s Secret Weapon
Newsletter Improvements
Suggested Reading
Dear Fellow Investors
Investment Philosophy in Action: Building Long-Term Value
This report offers insights into my investment philosophy and the distinctive themes driving the portfolio construction. I meticulously manage an ultra-long-term, concentrated equity portfolio that targets a select group of publicly traded companies. These companies stand out for their exceptional financial performance and strategic brilliance.
My core philosophy revolves around four key pillars:
Unwavering Focus on Cash Flow: I prioritize companies with a business model I understand and a proven ability to consistently generate high levels of free cash flow. This robust cash generation serves as the lifeblood of future growth and investment opportunities.
Identifying Capital Allocation Masters: Beyond simply generating cash, I seek companies with management teams who excel at allocating that capital effectively. This expertise in making strategic investments fuels long-term shareholder value creation.
Investing Alongside Outstanding Owners: I believe in the power of ownership mentality. I gravitate towards companies led by individuals who are themselves invested in the company's long-term success. This alignment of interests fosters a strong commitment to sustainable growth and value creation.
A Price Conscious Mentality: The starting price you pay does matter. I use a reasonable estimate of future cash flows to arrive at what I consider an acceptable price to pay for an exceptional business.
The Seeking Winners portfolio translates this philosophy into action by specifically targeting companies that align with this approach. I own a number of companies that have established themselves as experts in identifying, negotiating, and integrating smaller, private businesses at compelling valuations, while other businesses in the portfolio have unmatched network effects or limited competition leading to hard to replicate returns on reinvested capital.
By prioritizing these types of companies I aim to unlock the full potential of compounding over a number of years. I’m confident that this approach will allow me to identify and invest in the best-in-class companies poised to deliver substantial and sustainable value over the long term.
Thank you to all the new subscribers to the Substack in Q1 2024 and to the existing subscribers, thanks for the continued reading and support.