INVESTOR LETTER

Partnership Letter
Think of this letter as the “reverse fine print”.  I want to highlight all of the reasons not to invest with me upfront and in bold letters to make sure you have a clear understanding of any potential potholes along the road.  And I anticipate this letter getting longer over time as I see more potholes.  Stay tuned.

Attracting the Right Partners
Imagine a restaurant that serves Chinese food.  It expects to attract people that love or may enjoy trying Chinese food.  My mother would love this restaurant.  My father wouldn’t touch the food with a ten-foot pole.  The owners of this restaurant will continue to churn out Chinese food to satisfy my mother, but will simply have to settle with not being able to attract my father. They should not remake their menu to attract the likes of my father (steak and potatoes).  If they did, they would lose the interest of my mother.  And, if they switched their menu each day, they would probably lose both my mother and father because neither would know what to expect.

I want you, as a potential partner, to know what to expect.  And I only want those partners who like my cooking.  I won’t change my cooking style to attract more or different people.  What follows is a description of my blend of cooking.

Patience
Doing nothing for quite some time can provide you with the chance to do something big when the opportunity presents itself.  I take no pleasure in investing for activity’s sake.  Holding cash is preferable to investing unwisely.  I try to always remember that there are no called strikes in investing, in fact, I hit best when they finally bring out the tee.

In practical terms, if you provide the Fund capital to invest in January, I may not invest that money for quite some time.  It will instead remain in cash, something you could have done yourself.  This may sound counterintuitive and is not typical of the investment world, but let’s imagine an annual American pastime for why this method has merit.  I like pumpkin pie.  It is probably the nostalgia of eating it around a joyful Thanksgiving with my family.  But I also hate paying full price for anything, investments or pumpkin pie.  If I wait until after Thanksgiving, I can usually buy two pumpkin pies for the price of one.  That’s 50% off (although, it is a 100% increase in my calorie intake).  If you gave me money to buy pumpkin pies in January, this wouldn’t alter the fact that the best deal on pumpkin pies is usually following Thanksgiving.  Similarly, capital contributions to the Fund have no connection to the timing of the best investment deals.  If the contributions come in January, but the best deals are in August, we would rather wait than buy at full price.

Compensation
I believe my compensation should be tied to what you would like me to accomplish.  If you want me to accomplish above-average investment returns, then my compensation should be tied to that goal.

Concentration
I manage a concentrated portfolio of investments. I would be more than happy to invest an equal sum of money in 100 equally great companies with equally great outlooks.  Alas, some ideas are better than others and I will focus the Fund’s investments on the best ideas. I have no magic portfolio number size, but I anticipate holding positions in under 15 companies.

Any future deviations from the norm or potholes along our partnership road will be highlighted for you in clear terms as soon I become aware of them.