Investment Philosophy

Look beyond the price. Question the assumptions. Stay open to being wrong.

A market price reflects a set of beliefs about the future.

Those beliefs draw on economic conditions, business fundamentals, policy, and human emotion. They are also shaped by practical constraints: who needs liquidity, who can bear risk, who is forced to sell, and who is forced to buy.

My starting point is to ask: What must be true for this price to make sense?

The gap between expectations and reality

In his 1987 Berkshire Hathaway shareholder letter, Warren Buffett quoted Benjamin Graham:

“In the short run, the market is a voting machine but in the long run it is a weighing machine.”

Benjamin Graham, as quoted by Warren Buffett, Berkshire Hathaway Chairman’s Letter, 1987.

This distinction captures an idea central to my approach.

In the short run, prices can be driven largely by market preferences and expectations about the future of economies, industries, and companies. As time passes and more evidence emerges, prices move toward the underlying reality.

I look for situations where an important assumption behind the market’s expectations differs from my own assessment.

Disagreement alone does not establish mispricing. I need to understand why the assumption may be wrong, how much it matters to value, and what could cause the market to reassess it.

Liquidity conditions and extreme market sentiment can further amplify these gaps.

Valuation without false precision

In Margin of Safety, Seth Klarman describes a central tension in investing:

“An unresolvable contradiction exists: to perform present-value analysis, you must predict the future, yet the future is not reliably predictable.”

Seth A. Klarman, Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor (HarperBusiness, 1991), Chapter 8, “The Art of Business Valuation,” p. 124.

I take that limitation seriously.

I may have conviction that a major market assumption is flawed and will eventually change. Yet I do not know when that change will happen, how much further prices might move against me, how long the disconnect will persist, or how fully it will eventually close.

For me, valuation is therefore a range of plausible outcomes, with room for error. The opportunity must be attractive enough that it does not depend on one precise forecast coming true.

Positioning for uncertainty

Uncertainty shapes how I invest.

Position sizing and active exposure management allow me to express a longer-term view while responding to changing conditions. I also use shorter-horizon trading around positions with the aim of lowering my effective cost basis and building a greater margin of safety against uncertainty.

The distinction I try to maintain is between a change in price and a change in the underlying case. A falling price can improve an opportunity, but it can also reveal something I have misunderstood. I need to remain willing to consider both.

Conviction should be strong enough to support a decision and flexible enough to respond to new evidence.

Knowing when to leave

As the gap between price and my assessment of value narrows, I gradually exit the position.

When evidence undermines my original investment thesis, I exit immediately. Waiting for the market to agree with me only makes sense while the underlying reasoning remains sound.

The aim is to earn a return from a well-founded difference in understanding, while managing the uncertainty along the way.

My process is a continuing cycle: observe, question, form a judgment, invest, and keep observing and refining.