What is Billinger Förvaltning’s ambition?
We are trying to grow our capital in real terms at an attractive rate over time, including both asset appreciation and dividends. While doing this, our first priority is downside protection.
The ultimate goal is to leave a more valuable business for the next generation of owners.
What is unusual about your set-up that supports you in achieving this ambition?
The most important aspect of our structure is the access to permanent capital; we have no outside investors. This enables us to ignore short-term swings in mark-to-market valuations and to focus on the very long term. Also supporting this long-term view is the fact that we don’t employ any leverage and don’t make any use of derivatives, we only invest in cash equities
The lack of external capital also creates perfect alignment of interest.
Other aspects of our set-up that are supportive of our ambition is the focused strategy, the simplicity/lack of complexity (which also enables us to operate at very low cost) and the flexibility of investing in which geographies and industries etc we like.
In terms of culture, we subscribe to the view that while a solid technical foundation is helpful for investment success, temperament is ultimately much more important. As expressed in different variations, the money is made not in the buying and selling but in the waiting. We are happy to wait.
What does your process look like?
Our process is aligned to our ambitions and set-up:
- We read
- We reflect
- We speak to companies, other investors etc
- We worry about being wrong
What we do very little of is actually doing something. Our turnover is very low and our ambition (though not always fulfilled) is to never exit investments that we enter into.
We are very busy following the principles of ‘sit on your ass-investing’ as expressed by the inimitable Charlie Munger.
What sources do you use?
In terms of reading, we use a wide variety of sources.
Much of what we read is material produced by companies that we are looking to invest in or that we are already invested in. This includes 10Ks and annual reports, quarterly releases, material from Capital Markets Days etc.
Some annual letters really stand out to us; Tom Gayner at Markel, John Elkann at EXOR, Terry Smith at Fundsmith, Nick Train at Lindsell Train, Guy Spier at Aquamarine Capital, Jamie Dimon at JP Morgan and, of course, Warren Buffett at Berkshire Hathaway.
We read books, lots of them. Ideas that have especially helped to form our investment philosophy are found in ‘The education of value investor’ by Guy Spier (as relates to our set-up and working environment etc), ‘The Black Swan’ and ‘Antifragile’ by Nassim Taleb (as relates to downside protection etc), ‘Quality Investing’ by Cunningham, Eide & Hargreaves and ‘Celebrating five years of investing in decades of success’ by Terry Smith (in terms of investment approach and analytical framework), ‘Buffett’ by Roger Lowenstein (for a great insight into Buffett’s mindset both as an investor and human being) and ‘Poor Charlie’s Almanack’ for all of the above and more.
We also consume newspapers and magazines as well as third party research and expert opinions.
Importantly, we exchange ideas with other investors through participation in networks like MOI Global which is a great forum for discussion with some outstanding thinkers.
Which asset classes, markets and industries do you invest in?
We only invest in the equity part of the capital structure.
Although agnostic in terms of which geographies and industries we invest in, our circle of competence and focus on high quality compounders has resulted in large weightings towards consumer goods and industrials although we also have some exposure to e.g. financials.