Our Partnership's fundamental reason for existence is to compound our clients assets at a better than average rate with less exposure to long-term loss of capital as compared to the S&P 500 index. Our policy is to concentrate holdings. We try to avoid buying a little of this or that when we are only lukewarm about the business or its price. When we are convinced as to attractiveness, we believe in buying worthwhile amounts. Simply stated, this means we are willing to concentrate quite heavily in what we believe to be the best investment opportunities. While this means our results will be more volatile, we believe it also means that our long term margin of superiority should be greater.
We attempt to invest in situations that we consider undervalued and are at least partially insulated from the behavior of the general market. This should lead to superior results in bear markets and be on par in bull markets. Our job is to pile up yearly advantages over the performance of the S&P 500 without worrying too much about whether the absolute results in a given year are plus or minus. There are bound to be years when we are surpassed by with S&P 500, but if over a long period, at least three or more years, we can average better results than it, we will feel that the results have been satisfactory.
While we do examine a macro view of the world, we are not in the business of predicting general stock market fluctuations. We attempt to bring risk of permanent capital loss to an absolute minimum by obtaining a wide margin of safety in each commitment and a disciplined diversity of commitments.