A clear and simple description of our Investment Philosophy is a long-term strategic priority.
I already created a first draft of some important key concepts in the Wiki.
Please feel free to read it and ask any clarifying questions, which helps me to clarify and refine the descriptions. (It might take me a while to respond though given that the topic is longterm important but no current priority)
In light of recent questions here are a few more details about the investment philosophy and strategy. (To be added to the Wiki)
Investment style
“Buying stakes in the empires of tomorrow at reasonable valuations”.
Growth Investing. My main investment style is growth investing. Successes of the past are based on it. It relies on having a clear framework/system of tested correlations that allows you to spot investment opportunities ahead of others in the adoption cycle. (As described here) It basically means figuring out the winners of tomorrow already today (both in terms of industries and individual companies/tokens).
Concentrated high-conviction bets. Similarly to Warren Buffet and Charley Munger I believe that you cannot earn a lot of money with your 20th best investment idea and you cannot understand 20 investment ideas well. I, therefore, concentrate investments on approx. 6-10 different bets and do everything I can to really understand them well and in detail which either helps me to increase my conviction (which will be needed in times of market distress) or find the exit.
I am very picky about inputs into my “mental model” and try to get good supporting data on any assumptions about the future I have to make. (Basically, eliminate blind assumptions as much as possible)
Clear Investment Framework. As mentioned above I have a clear system of filters and investment circumstances I am looking for. As an example, I like founder-led companies. If one criterion is not given in an investment case I need compelling and strong other arguments to compensate for it. I will lay out my investment framework in the future in more detail and try to make it more tangible.
Risk-Reward asymmetry through reasonable “undervalued” valuations. The key to investment success is to have an attractive entry price. I always seek situations with strong risk-reward asymmetry and try to understand the company/project holistically and take all relevant factors into account. (E.g. Management, Industry growth, competition, future cashflows and p/e, balance sheet, etc.) Unfortunately investing in growth or crypto became impossible in 2021, which is why I shifted more focus to value companies.
Contrarian Bets through independent research. An asset can only be exceptionally cheap if the majority of the market does not recognize it’s value. Only by developing independent in-depth data-based insights and having an independent battle-proven valuation system you will be able to develop unique perspectives which enables you to generate alpha and have an edge on the market.
Cross-asset and cross-strategy flexibility. In order to pursue the most attractive opportunities I change allocations across different asset classes (equities, crypto) and strategies (value, growth) depending on a variety of circumstances most importantly valuations, macro environment, and fundamental technological developments. My current main focus and most experience is in (growth)equities followed by crypto. While some bonds look interesting in the current environment we lack the resources to seriously enter the field as of now. Experience with different asset classes helps to have better references and a clearer sense of valuations.
Mid-Longterm Time Horizon. My typical time horizon of 5+ years helps to ignore the noise and focus on the most fundamental developments or problems that make or break a company or crypto project over the short or long run. I deeply enjoy owning small parts of great companies and projects and would ideally never want to sell but just enjoy the benefits of my stake. (Dividends or growing stock value in case the company accumulates investments instead of cash distribution)
Ownership bias. Contrary to popular belief that it is way safer to hold great assets long-term compared to holding cash. By holding cash you will almost certainly lose purchasing power over time, even if you manage to collect small interest payments as real returns are negative.
Surf the wave. I always look for catalysts with could accelerate the repricing or even price discovery of any company/token. In the past there have been some special circumstances in which i was willing to continue surfing a wave a bit longer beyond the fair valuation given that the entry was sufficiently cheap, sentiment & price discovery were strong, and I was able to take profits on the way up.
Minimal technical analysis. I am not a huge fan of technical analysis but recognize the self-fulling power it sometimes has. I mostly take simple support and resistance lines into account.
No perfect market timing. I don’t think it is possible to perfectly time the market or predict where a button or top is. Therefore my focus is on buying below intrinsic valuations with a margin of safety. Position sizing depends on the delta between intrinsic valuation and price as well as my conviction in the thesis and assessment of the risk-reward profile.
Double down and go against the trends. If I am convicted in a thesis I double down or even try to catch the knife once in a while. In this case, even more effort into understanding the company is needed to reduce the chance of missing any sufficiently large fundamental problem or risk.
Constant adjustments and improvements. I always try to evolve my thinking and consider new theories, feedback, and ideas. In my opinion, in investing it is very important to have a system of well-proven convictions esp. in times of market distress which needs to be balanced with the constant desire to improve and reflect.
The role of the Macroenvironment
As I am having a mid to long-term horizon I am mostly looking to invest “through” a macro environment. Nevertheless especially for some specific investment cases having a good understanding of the macroenvironment is paramount for the following reasons.
“Insurance Policy”. I don’t want to be catched off-guard by a completely different than expected macro-environment. Therefore it is very important to me that we are focusing on spotting fundamental risks to the (financial) system as early as possible. We want if possible be “ahead of the cycle” and make the necessary adjustments before other players move and while prices are still reasonable.
Cyclical Investments. Especially for our cyclical investments e.g. Volkswagen, Upwork it is very important to be ahead of the cycle. For other Investments which are more long-term bets e.g. Meta (AI advances), it is less important.
Cross-Asset allocation. Understanding the macro environment is very important for asset allocation. E.g. If we catch a change to liquidity early we can start preparing to allocate more to risk assets like crypto.
Long-term trends. If we are moving into an environment in which long-term inflation or interest rates are substantially higher than before this is going to have substantial implications on valuation that we have to take into account. Additionally, certain asset classes with limited supply e.g. crypto/commodities will get more interesting.
Depending on our goal set and if we are analyzing a section of the economy in relation to a specific investment case or if we want to have an overview of the whole economy different levels of insight and precision are necessary.
In order for you to know how I am seeing the economy right now and which kinds of events on an individual investment basis are totally acceptable for me, I will create an overview assessment of how I am seeing the macro environment in a separate post as well as develop descriptions of each individual investment case what is acceptable to me.
See also: Acceptable and Non-Acceptable Scenarios for Companies.
Important basic concept. You need to develop a reasonable understanding of a company, have an idea of how its industry will develop, and which competitive position this company will likely have in the industry ten years from now.