The world is our oyster. We’ve developed a proprietary system that helps us ensure we’re not missing any pearls.

How do we do it?

We get this question a lot, with our nimble staff, how do we find time to do our in-depth research and still manage the portfolio and the business? Clearly we work hard, but there’s a constantly-evolving formula we’ve developed that helps hone our focus only on the best global opportunities. We force-rank our current portfolio next to our ever-expanding pipeline. If a new idea can’t compete with our highly attractive portfolio, we just won’t find the time to work on it. This helps us ignore what we call, “noise,” and focus only what will help our future returns: our next big idea.

How do we force-rank?

We develop four sensitivity scenarios for every investment prospect, and have a moderate and extreme version of a downside and and upside. All data is transparent to investors on each position. We use this to find our risk-adjusted return profile, which constantly changes with the stock or bond’s price. We then consider other factors: the quality of the business, which we adjust by the price we’ve paid for the company, or ROOIC, a maximum draw-down estimate, the quality of the management as well as the businesses’ competitive advantages, the crowded nature of the investment and the ability of the business to compound over time. We’ve recently added a methodology to analyze whether the sentiment and the consensus of stakeholders is divergent from the reality of the fundamentals.

The World is Our Oyster

By ranking each idea by all of these important factors, we’ve developed a constantly-evolving formula that helps us rank widely divergent ideas next to each other. We can now compare a high-quality business (such as Apple) with a cigar-butt (such as some of our biotech blow-ups), and dedicate our time and resources only to the securities which offer the best forward-looking prospects. We are constantly optimizing our portfolio to minimize opportunity costs, and give our investors a timely and right portfolio for every new day.

We Give the Pearls to Our Investors

We’ve taken transparency to a new level for our sophisticated investors and now subscribers. We share our analytical thinking behind every idea. We share our research reports, our model and even conversation notes in The Grove. This transparency allows our sophisticated network to simultaneously get up to date on the latest changes in the fundamentals of our portfolio. This, in turn, helps our network to continue to adapt to the ever-changing environment, and also gives us feedback on our perceptions so that the thinking on our positions is constantly evolving. If you are a contributor, don’t worry, your pearls of wisdom are kept anonymous and confidential. But pearls are meant to be on display, not hidden in a drawer.

Vignette on Our Process