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A Purpose Driven Decade

It’s been a year of significant growth for us. A year ago, we merely suggested to managers value creative actions they could implement at their companies. Today, we are effectuating change from inside our largest position. We’ve continued to lower our cyclical exposure in the portfolio, while increasing the positions we have. This was enabled in part by Chris joining the company, helping significantly ease the diligence bottleneck we had built up on new ideas. The number of new positions we’ve added recently would not have been possible without the “divide and conquer” approach we take.

Now that we are a scrappy team of three, and we’re evolving into the constructivist role I had always wanted to play, I think it is important for us to articulate our purpose. Mission and purpose statements are crucial in any value-creating firm, and a full decade of experience went into it.

To put it simply, our purpose is to be the catalyst that helps our investors, companies and team members perform at the top end of their range of possibilities. In the same way we show the range of outcomes in a stock, we visualize the concept by borrowing from a portfolio company’s range of possibilities.

Exhibit 1: GreenWood Mission Statement

This purpose is evolved from the Fourth Quarter 2016 letter which articulates our primary objective to deliver a constantly optimized and actionable portfolio to our investors. That’s now a given, and our ambitions are far greater than they were when GreenWood was essentially a single guy.

2019 was the first year our portfolio generated notable gamma. We have become even more active in trying to effectuate positive change from within our companies, most recently with TripAdvisor, Rolls-Royce, and our newest short, Boeing.

But some of our companies frankly don’t need the help, as they are already firing at the top-end of their anticipated possibilities. The chart we used to make the example at the investor day was taken from Exor, a company we’ve held for most of the decade and who’s management we greatly admire.

At this November’s investor day, John Elkann outlined Exor’s mission statement:

“The purpose of Exor is to build great companies. And what we’ve tried to be very clear about is that on one side ‘to build’ is about making sure that the elements that make a company great, which is fundamentally how companies are run, what they believe in, and how they’re governed, but also what they aspire at becoming. If you define, and that’s how we’ve defined it, greatness, it’s really about performing to the highest standards in what you do. Making sure that you’re distinctive. Acting in a way in which you’re responsible… And be always looking at how you renew and change, because one can get incredibly excited about new ventures, but reality is that we’ve been associated with companies that are more than 100 years old, and within their journey, have been able to renew, to change to adapt.”

Exhibit 2: Updated Exor Realized Performance vs. Range of Possibilities in August

Elkann needs no help. As we zoom in on realized performance since we put the chart together in late August, we can see he’s performing one standard deviation above where he would have otherwise been without the FCA-PSA merger. To be clear, when we show these probabilistic ranges, the bottom and top tiers are only meant to represent 2.5-6 standard deviations, or less than 10% probabilities. That’s why we call them extreme scenarios.

As we close the decade in which GreenWood began, we saw fitting to share some of the closing remarks I made at GreenWood’s September investor day where I discussed our mission. We hope you enjoy, and we sincerely thank you all for being a part of our first decade.

Disclaimer:

This article has been distributed for informational purposes only. Neither the information nor any opinions expressed constitute a recommendation to buy or sell the securities or assets mentioned, or to invest in any investment product or strategy related to such securities or assets. It is not intended to provide personal investment advice, and it does not take into account the specific investment objectives, financial situation or particular needs of any person or entity that may receive this article. Persons reading this article should seek professional financial advice regarding the appropriateness of investing in any securities or assets discussed in this article. The author’s opinions are subject to change without notice. Forecasts, estimates, and certain information contained herein are based upon proprietary research, and the information used in such process was obtained from publicly available sources. Information contained herein has been obtained from sources believed to be reliable, but such reliability is not guaranteed. Investment accounts managed by GreenWood Investors LLC and its affiliates may have a position in the securities or assets discussed in this article. GreenWood Investors LLC may re-evaluate its holdings in such positions and sell or cover certain positions without notice. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of GreenWood Investors LLC.

Past performance is no guarantee of future results.

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