John Templeton aptly said, “If you want to have a better performance than the crowd, you must do things differently from the crowd.” At Abernathey Holding Company (AHC) we look for opportunities that produce superior returns for our partners. Our unique selling proposition and approach to investing is that we pride ourselves on being a boutique partnership for the sophisticated individual. Though finding contrasts between funds/partnerships is rare, differences do exist on a certain level, a level that can compound to a large competitive edge over time.
We at AHC give more than passing thought to our dissimilarities and whether they serve to help or hinder us in producing superior returns. Here are some differences that we note:
- We only do offerings for the amount of capital we know we can place in a timely and responsible manner. We never want to raise large amounts of cash at once, because it will not only dilute our partners value in the partnership, but it will dilute the AHC team’s as well.
- We can go for months at a time without a new investment and we expect to only make a few per year. When we do find exceptional investments, we take concentrated positions and make them count.
- We have a group of investors/partners with a long-term mind set, which actually allows us to do all the above. We are incentivized against gathering assets that dilute returns for our partners.
From our prospective, most other funds/partnerships try to raise as much capital as possible to continue increasing the fund managers management fees. Additionally, concentration in investments is avoided. The capital that makes up these partnerships/funds usually has a short term investment mind set, which contradicts those claims of long-term thinking that overlays a short-term capital base.
Our first competitive advantage as a fund is that we are bottom up investors. This allows us to excel at underwriting better than the average market participant. We focus on analyzing opportunities with a long-term perspective regardless of industry or macroeconomic trends. We never rush into an investment. Rather we focus our attention on companies with at least a 10-year track record, with a solid management-team in place and a strong balance sheet. Our capacity for attention is unparalleled when focusing on discovering and retaining the appropriate investments for our partners long-term gain. We don’t assume where the market is going to go, we make sure we act upon it appropriately letting the market serve us as we position ourselves in the right place and the right time. We believe that all fund managers have access to the same information, but we have more time to review those investment opportunities in more depth.
Our second competitive advantage is our focus. We avoid looking at almost anything that promises results in the short-term. From our prospective that field is too competitive. The average holding period of a stock is now 150 days. At AHC we have disciplined ourselves against short-term gain. It takes practice and commitment to say “no” in a world of infinite distractions and opportunities. But we know the more distracted we are the more shallow our thoughts the less likely we can uncover a business that is not obviously exceptional now but will be in half a decade. Focus itself is an edge.
Businesses with undiscovered potential do not come around often. The money management industry employs many intelligent people to search for those investment opportunities so long as that potential is set to be revealed in the short-term. Determining what will happen in the short-term, from our prospective, is a crowded field.
Our third competitive advantage is that we are investors, not speculators. Warren Buffett once said, “Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.” That is why we condition ourselves against instant gratification and invest for the long-term.
From our perspective short-term performance comes secondary to studying patterns and opportunities in the long-run. Our edge remains, and will always remain that our focus, due diligence and approach to investing gives us an advantage against the average participant in the market.