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Andrew Brenton

lines on the record: 70
first: 2023-12-08
most recent: 2023-12-08
sittings or episodes: 1
sources: podcast

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“Sure, well, we have a website, just Google Turtle Creek, Toronto, I guess, and you'll find us when you go to the website, if you're an American, you have to click that you're in a U.S. citizen, there is a tab where you click that you're an international investor, which has full access to the website. But if you go through the US portal and then qualify US investors, and then you have full access to the website, we've got, I think, pretty good content with.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“10 years, we would have been all over this. But we've just elevated our view. And I think we'll continue to do that as we meet more companies that just keep raising the bar. And that's what makes my partners and I excited because we recognize the portfolio in terms of the quality. And sometimes I look back and think, how did we earn those returns with those companies? Think a lot more confident with the companies we own today than I would have been 10 or 15, 20 years ago.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Like we're identifying and wanting to dig in on less quality companies. And if anything over the years, we keep raising the bar on the companies that we think meet our criteria. Why is that? Because over the last 15 years, as we've met these remarkable U.S. mid-cap companies, it causes us to just elevate the criteria for a company that actually meets our terms. And it doesn't mean they all have to be perfect. I mean, if you only would look at perfect companies, you aren't going to have a very long, long list, but they have to be above average. They have to be honest. They have to be shareholder focused. But I remember a few years ago, we met with a Canadian company that we've known about for a long time, but it had had management change. And so we met with them, and we thought, you know, if we hadn't met all of these U.S. companies in the last”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Try. We love doing this. The three of us as founding partners are all in 100% engaged and we love it. But I think part of the culture here, or I know part of the culture here, it's a very collaborative model. And so everyone on the investment team beyond the three founding partners, whether it's people who've been with us for 15 to 20 years or starting people, it's really a team approach. It's a collaborative approach. We then can't point fingers at somebody saying, well, how come the company missed because everyone's bought into the forecast for each of the companies? And I think that creates longevity. So we'll see. But what I know and what my partners know is that the portfolio today has never been as high a quality in the past. And if you think about it, it's kind of what you would expect, right? It's not.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Well, it's funny. So I make a point of never talking about those guys in Omaha, but you've brought them up a couple of times in this conversation. So I will bring it up. Teasing one of my partners the other day that he's about to turn 60. He did his MBA in Chicago more than 30 years ago. And when he was there, he heard about these guys in Omaha that were pretty good investors, like it was pretty good opportunity. And he looked into it. And he said, oh my God, like this Warren Buffett, he's in his 60s and just decided, well, that can't be interesting because how much longer can he do it? And so was pointed out to Jeff, you know, Jeff, you are going to be almost as old as Buffett was when you first found Berkshire all of that long time ago and then decided it wasn't worth digging in on. And so I can't suggest that we're going to make it that far, but the plan is to...”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Stock, let alone to five, all the way down to three dollars a share. So that's what I mean by those market dislocations have provided opportunity to us. Do you have to have the temperament and you have to be willing to buy more stock at lower and lower prices, which needs the building block of having done the fundamental work on each of the companies so that you're not worried that the market knows something that you don't know?”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Of 09 to $5. I don't think any scenario would have gone to $5, but for the credit crisis. And so that was a remarkable opportunity. And we added it to the portfolio at that point and made it a decent holding. And then over the next few months, all that happened was the stock went down. And it actually went as low as $3 a share. And now if I'd known it was going to go to three, I would have waited. But we were buying at each price point lower all the way down. And if it had gone below $3, we would have bought more. It turns out it only went as low as three. And this is back to my point. You can never predict these things. If there hadn't been a credit crisis, think of the spring of 09 where the S&P 500, I think, hit the famous 666 number. We would not have had the opportunity to buy.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Well, I mean, let's come back to just one simple example. You mentioned automation tooling systems, ATS. The stock was in the 20s when we first met them. And there was actually a board change. It was a proxy fight in 07 and a much better management team installed. And they were improving the business. We're not much for investing in turnarounds, but we were able to visit them frequently, watch what they were doing. They had a strategy to sell off assets that weren't core that the founder who had passed away had diversified over time into and to focus instead on the core automation business, which was the gem. So you had this remarkable situation where the results are getting better. It was a little bit of noise in the financials. And then the GFC hit. And the stock went from in the double digits to in January.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“The companies are still the same companies, and this is providing us an opportunity to improve upon that buy and hold. And they wouldn't be as high if there hadn't been a COVID crash. And so I think if you're able to take that long view and having done the fundamental work, then you just let everything else wash over you over time.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“I think it applies to lots of things in life. And I guess it's partly don't let the current share prices beat you up. I mean, yesterday was thinking about some of the companies in the portfolio, and it's human nature to think, you know, it's been kind of, hasn't, like, what would make it go up? And then inflation was low today and the market ripped and some of our stocks are up 10, 12 percent. And if you let yourself worry about that, then I think for us that would be a problem. So I like it when things go up. Don't get me wrong. But I think partly we have the temperament to hit the reset button. So in the summertime, our universe is an all-time high. And I'm thinking, this is great. I'm glad that we're at an all-time high. And then August came and then September and then October. But we have the ability to hit the reset button and say, okay.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Our holiday party dinner last year or the year before. You know, it's funny because I said that I knew when we started Turtle Creek that we'd had decent returns. I mean, my two partners are remarkable and together we're pretty good investors. But I hadn't thought about the firm we would build and the culture that we would have. And that part wasn't, I guess maybe on the day one strategy, but I'm quite proud of what we've built. And I think that extends to lots of other parts of life. You know, you take, we do have turtle in our name. So, you know, the slow and steady endurance model, you know, compounding is one of the greatest forces in the universe. And it doesn't have to be that much more when you see the percentage returns if you can do it for a long time. So, yeah.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Company was just taken private this year at $45 a share. So it was a terrific experience and watching the way that they operate, it is what we've always heard in terms of their investment approach. It was quick and highly principled. But I can tell you that Ted Weschler, the fellow who did the deal with Warren, he told the lawyers, he said, well, you know, we're going to close on Thursday. We're going to commit on Thursday. And the lawyers said, but what about due diligence? And he said, no, I mean, we've looked at 25 years of audited financials. We're comfortable. But he told me, I think he woke up in the middle of the night on Tuesday night and just said, well, what if there's a problem inside the company? Because again, they had to act really quickly. And I told him, I said, well, we're not on the inside purely, but I think you're fine. And they ultimately were. So, you know, it's one of those classic doing it.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Of capital, what they needed was the good house geek being seal of approval, and it was shockingly effective. It just changed the conversation and the dynamic. And then actually two years later, a year and a half later, actually, so the first second tranche was turned down by the shareholders. And then because it wasn't strategic, the company bought back, made an offer to everyone, but essentially it allowed Berkshire to sell their shares. They bought in at 12. They sold at something like 17 a year and a half later. And so it was fine for them because it wasn't strategic going forward. They were simply a 20% shareholder of a smallish Canadian bank. But I told the company after that, I said, that's the best trade I've seen a company ever do sell stock to Buffett at 12 and then buy it back from at 17 a year and a half later. And in fact, the”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Canada. And so Buffett actually wanted to buy about 50% of the company. He viewed it as a long-term strategic holding. But the way the laws work in Canada, a board can issue only 25% shares out of Treasury without shareholder approval. So the transaction was in two steps. So very quickly, he invested to own 25 out of Treasury means he was a 20% shareholder, which dropped us down, which then gave us freedom to buy more stock to get back up to 20% because that is the limit if you're an investment fund in Canada. But the second tranche was turned down by the shareholders, which I was really impressed with, they didn't try to lobby us because they kind of understood they didn't, we didn't, the company didn't even need his first trunk.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“And it's not very common for us to go inside the tent with our companies, but given that they were in crisis mode, we agreed to do that. I will say I was just, and it won't surprise your listeners to hear this, but just the clarity of thought and the intelligence of Berkshire and Warren just looking at the company, recognizing that it was call it irrational, think of it the bank run and it's a wonderful life. You've got valid assets. And as I say, the company had survived, but we were supportive. We thought taking money from Buffett that they didn't need was such an impact on the tone and the way depositors viewed the company and the market.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Sure, and it was actually Warren and one of his members in his team who did the transaction because they had to act really quickly. So this is a company that think of it as a niche bank. We have five, six very large banks in Canada. It's different than the US. But then there are some smaller niche banks. This is a very good deposit-taking institution that got about five years ago hit with just a confluence of events that I won't go into in detail, but essentially there was a classic run on the bank, but because they were essentially other than a small percentage, match funded, they survived the crisis. But the stock had fallen a lot. And as you say, we were the largest shareholder at about 20% at that point at the lower share price.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“To that is, you know, that hundredth company that we don't own any of and haven't had for a few years, but we think it's equally as good as the 30 we own, that's an equal high conviction. The way I like to think all of our 100 companies, we have a high conviction on. And then we just turn to the market and say, well, this is what we think it's worth or what the long-term return will be from here. And as I mentioned earlier, some of them today are trading above our estimate of intrinsic value. In other words, way to think about it, a buy and hold might earn you 5% returns over the next five to ten years. It's a great company, but we are not anywhere close to owning it. And so that's why the number in the flagship fund has crept up to 30, but I've had to promise some of our longtime investors that I'm going to let them know if it ever goes above.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Capital inefficiency to us, but strong balance sheets. So again, think of the credit crisis. None of our companies hit a wall back then. None of our companies hit a wall in the COVID crash. So we came at it from those two sides. Sufficient diversification because sure, 25 companies, but they're not equal weight. You can have 10% as we have had at times in one company of the portfolio. So that's how we got that number. And it's in the main fund, it has drifted up over time to 30 because, as I mentioned earlier, we have a deep following or deep knowledge on over 100 companies. So it's been interesting talking to some investors where they don't like that, where that it's gone from 25 to 30 because they're taught to think you want to just own your high conviction holdings. And my response.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Well, I can't mathematically justify or explain it. What I can tell you is when we started, we came at it two ways. It was, well, there were three of us. I mean, seriously, how many companies can three people know well? And we came to a number of 25. Because the other side was, since we've committed and remain committed to have 100% of our own wealth, our family's wealth in Turtle Creek, how many companies do you need to own to be sufficiently diversified? So we don't own any other asset classes. And we're comfortable that if you own 25 of the type of companies that we've been talking about and they happen to be in different industries and they happen to have strong balance sheets, although I wouldn't, I stress not fortress balance sheets. We hate it when people, companies talk about fortress balance sheets. That just screams.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“the marginal share price on a bunch of our companies. And so you want both. You want inefficiencies, but you want a quick reaction to whatever they're doing. So I think to a large extent in the stock market, there are lots of very smart people focused on, I don't want to say the wrong things, but not focused on the things that we are focused on.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Was a long North America bounce back really quickly after the great financial crisis, Europe not so much. And I remember saying to people coming back to ATS automation, because so much of their operations are in Europe and they're part of their model is buying quality engineering shops that have hit the ceiling in terms of what the founders can do with the business, a softer economy can actually be a great environment for them. But if you think about the impact on value in those companies, if you take a long view, then we end up owning a lot more of those companies. But what's nice is there is enough efficiency in the mark and enough people focused on, okay, the Fed looks like they may be done. Wow, looks like inflation is not so bad anymore. And that has a remarkable effect on”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Market if it was a completely inefficient market, then even if you own value, it could take a long time for it to show up. So you want to mix. You want short-termism, which I think of as an inefficiency. Maybe other people think not, but some of the companies we own because of the concern of a recession in the U.S. or in North America have been absolutely crushed in the last year or so. Our long-term view in the company hasn't changed. And in fact, in many cases, as we tend to own the leading company in their industry, they actually can benefit from a recession from an economic slowdown because the competitors are weakened or maybe they're over debt burdened. So you can build a case that a recession is good for the company back in the euro crisis.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“I mean, it's not like I can see it in the returns, actually. Inefficient as things are right now and as pockets of froth have occurred and been in the market in the last few years, especially during the pandemic. And we all know about those pockets, the inefficiencies in the dot-com where we have yet to see something like that again in terms of how broad-based it was. So it's hard to claim, oh, things are definitely a better environment for us than they were in the dot-com. I think the dot-com was a remarkably attractive environment for us because back to the thought, we are not a static buy and hold. But I do think, and you see it, the amount of information that is out there for people and how distracting it can be. And you combine that with the increase of index funds, which I think, again, for most people, it's the right thing to do. You're going to have inefficiencies, but you don't want to completely inefficiency.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Think about the stock market and the stock price as to where it's going to go. We just literally are lots of examples of companies that we haven't done much in their share price for years. We've never worried about it. The U.S. companies I've mentioned that we added to portfolio five, six years ago. And here it is five, six years later and the share price is the same price. It doesn't bother us. It would bother us if the company's not doing well. What we do is we own a lot more of those companies today than we did five, five to six years ago. And at some point someday the share price will go up. And that being our experience for 25 years, I think it'll be the case in the next 25 years.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Aside, we have another longtime holding that is Canadian that listed two years ago in New York in anticipation and knowing that if he wanted proper following in the US, it probably made sense to do an offering. He bought back a lot of stock leading up to that so that he could just, in effect, reissue it. But otherwise, think about our companies. They simply don't good companies, great companies, very few of them have so much use for capital that they can't supply that capital through their own cash earnings and they're increasing debt capacity, senior debt capacity as they become bigger. And so if you own companies like that that then are opportunistic and rational about when they will buy back their own shares, we don't.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Hear us say, Well, I know it's cheap, but what's the catalyst that's going to make it go up? Because we own direct operating companies. We don't own holding companies that have a bunch of pieces of other public companies where people try to do the math of some of the parts. If there are different parts, we'll value each of them separately in our own discounted cash flow model. So it's a bottom-up operating owning operating businesses. And companies that do not issue equity that don't need to issue equity. Now, to be fair, ATS did an equity offering, but that was part of the New York listing. Apparently, you need to pay the investment dealers in the U.S. if you're going to get coverage. And so they did an equity offering. But to be fair, they have big, big opportunity set for acquisitions. And they've actually pulled the trigger on a number of them. But setting that unique model.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“They're very thoughtful as to where they operate. And so when I look at how they're executing and then you think about automation, you think about labor costs, you think about the whole trend toward onshoring, both in Europe and in North America, there is lots of tailwinds. And then you start thinking about, well, the market's going to love that. It's a great story. And they're listing in New York. And American investors don't know about them. And now they're going to know about them. And the stock is going to go up. And actually, it did go up. But then out of the blue this fall, it fell from Canadian dollar 65 down to $45 in a fairly short period of time. It ran out of steam. And again, like I said, one of the, I think, strengths for us is that we don't try to predict that. We just let that wash over us. And so you'll never.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“It's taking the market or the mind of the market out of the discussion. So if you think of all of our holdings and all of the other companies that we're closely following, we have a view at the current share price. What is our long-term buy and hold buy and hold? And I want to stress buy and hold. It isn't about trading. It's just this point, what is the long-term five to 10 year return? Is it each company has a risk adjusted expected return? doesn't bring the market into the discussion. And so when I look at ATS and I think, wow, like onshoring and they are very focused, whether it's battery pack assembly, for GM, they've won massive contract with GM who are desperately trying to catch up in the electrification of vehicles or in radio pharmaceuticals or in food processing.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Equally, when we're derating a company, it's not an aha moment where we say we thought they were great and now we realize they're not. It's this continuous changing of views in both directions.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Us, it's a dynamic process. You think of the two components. One is constantly from a new information, what's happened is it a transitory, is it negative? Is it net positive? My partners and other members of the team at dinner tonight with one of our companies, they will learn things and they will come back and that will be part of the process of should we take our long-term view up a bit? Should we take it down a bit? And I would also stress that some of the younger people on the investment team probably think that the partners are a little slow to react because we don't want to get whipsawed when there's a bad quarter or something exciting happens because we've seen it too many times in the past that you let emotion perhaps come too much into the process. So we're kind of, if we are raising our view, it's been in a bunch of steps.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Then the risk that, and we're trying not to miss things on the upside, if you will, then we haven't seen where something where we just look back and say, darn it, we never should have sold it. I want to come back to your comment. You're right about those examples of the company themselves are compounders. And then we've been able to add a bit on top of that if they were all that our returns would be higher, right? We've got plenty of examples of companies that have not generated those kind of returns at least yet. for their shareholders, but at least even in those cases we've managed to offset that. So we've got a number of examples where, you know, a U.S. company that we added five, six years ago sitting here today, it's the same share price as when we added it. And yet when I look at how much we've increased our intrinsic value, it's a bigger holding today than it was five or six years ago when we added to the portfolio.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Zero because the price approached or actually went through our estimate of intrinsic. I haven't yet seen a time where I look and say, darn it, our intrinsic value, our forecast was way too low and we missed it or we sold it too early. So far, they always come back at some point. They always fall back to Earth. And so I think that's the way to think about it is if you're, it's back to my comment, if you're giving the company trying to give it full credit for all”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Right. So if you think of the COVID crash, we had to pick our spots in the crash of March of 2020 because if everything falls by 20%, there's really nothing to do. And so what really makes a difference for us is when half the stocks are down and half the stocks are up. But I want to come back to the point that we're long-term owners of ATS. I could see a scenario where the stock because it's such a cool story gets captured up in an enthusiasm and we trim and trim and trim and possibly it could go to zero, but it would be temporary. I mean, one way to think of it is I can't think of a situation in which we have at times, but I mentioned how there's three buckets, that middle bucket of 25 or so companies that we owned at a point in time, then we trimmed all the way to”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“In the mid 60s. Now I'm thinking Canadian dollars, so it'd be somewhat less in US, but it's the same percentage change. And then as of a couple of weeks ago, it had drifted down into the 40s. I don't know why. You know, they had their first investor day in September in New York, so their first U.S. investor day. And like I said, it's a very well-run company. It's sexy. It's a good story. And so we're just anchored on the return that you will make a few years ago when the stock was at 20 versus the return you will make looking forward when the stock is 65 when it's the same company we're just going to own less at 65 and a lot more at 20 and then as the stock drifted down into the 40s for whatever reason in the last you know weeks ago we bought back stock that we had sold at higher prices and it's relative”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Because we have a feel for where the stock's going. We have no idea where the stock is going. I'm comfortable and given enough time, the stock will be higher. And I did have a large family out of the US say to me a couple of years ago as we first met, he said, you know, we've got some really good managers that we like a lot. But every time they try to trade around one of their positions, they take away from a buy and hold. But you clearly have done the opposite. And how do you explain it? And I said, well, if you'd let me, and actually I used ATS automation tooling systems as an example, I said, if you had let me pick when I would buy shares and sell shares, guarantee I would have taken away from a buy and hold over all of that time. Because then you're trying to read the mind of the market. And I'll give you a more recent example of the stock hit all-time high.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, it's, so you're right. When we first met them, we loved the business. This is today a remarkable company, a global automation company helping think of Fortune 1,000 companies around in North America and Europe improve and automate their processes. The current CEO, he's been running the company for six years. He's an ex-danah executive. They listed on the New York Stock Exchange, so they're co-listed now. They listed earlier this year. It's gone from being a company that didn't meet our criteria in 2004 to 2009 with new management where it absolutely met our criteria. But now with current management as just elevated their game to be just a remarkable, remarkable company. And one thing that's important to understand, we are not trading”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“I just think of it as it's simply icing on the cake. It's the maybe it's because we come from private equity and you didn't have that lever. I just thought, how terrific is it in the public market that you can take a long-term buy and hold mentality with really good companies and then tweak around it? And it's interesting as our longtime holdings and our companies get to know us better and better, it won't surprise you to hear they'll say us sometimes I get what you're doing and it's actually really logical. I just wish you own us and never sell a share because of course that's what a good company wants. They want shareholders that are like that, but they don't argue with the logic of it.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Next five to ten years, it's going to be good. And then if the price goes down from where we added it, common sense to us would say, well, if nothing's changed, you should own more. And I think we all agree with that, but we've just applied a symmetrical approach and said, but equally, if the price goes up enough and nothing's really changed and you thought you owned the right amount at that lower price, you should not own as much. But we're talking about little changes in both directions. And that the core part of our approach is the bulk of our returns, that fundamental approach, those investors that you mentioned.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Allowed us to own less when the market gets really excited and own a lot more when the market gets disappointed with it. They actually released this morning and the market's disappointed. So despite the fact that this was a really good day in the stock market, that stock was down. And we were buying more stock, the stock that we'd sold at higher prices. So I'm not disagreeing that a buy and hold if you find a great company is of course you don't sell it just because the price goes up. But we've layered in, you know, I think of it as simply an additive. Most of our returns come from that fundamental step of finding the kind of companies that we spoke about, but having the discipline to wait to add it to the portfolio where we say, boy, at this price, a buy and hold over the”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“It's expensive. And if, again, back to what I'd said earlier, if you're not willing to give them credit for being that platform company, and I'm going to say, which I know nothing about, so I probably shouldn't, but like a Teledyne, like a company that is very good at acquisitions, obviously as a Canadian constellation software and Mark Leonard that's very good in creates value through acquisitions. If you're not willing to give that company credit ahead of time looking at what they've done and what they tell you they're going to do when you look at the industry and you then know you probably won't own it. And so I don't like the distinction between value and growth that this is the company I'm describing is both our high organic grower and also a grower through acquisitions. But like I said, we've owned it for 16 years continuously. We've just owned it in varying amounts, which has”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Would have a 20% compound return. That is, as we know, that's really good. And we've earned a 30% compound of return because we have flexed how much we own. But it's always been a holding in the fund. And I can't imagine it's possible it won't be a holding at some point. But it's because we work hard to embrace if we think it's real, their opportunity set. And I think this company is a classic platform company that is very good at making a creative acquisitions, bringing smaller food companies into their ecosystem, making them part of the family, as it were, adding value. And I have had other investment managers over the years because we've been a big shareholder and it's a varying amount. Say to me, you know, it's impressive manager.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“I mean, the way I think about it, I just think this idea of continuous portfolio optimization, it's an enhancement of a permanent buy and hold approach. So I can't speak to Amazon because we weren't around then. Of course, I can't speak to Geico. But what I would say is that we have owned companies in our portfolio for 20 plus years now. And we have always so far, and these are really good companies. We have always so far improved upon a buy and hold return. So some of the buy and hold returns have been terrific. We've owned a Canadian specialty food company that's actually, I think it's the best in North America. It's very, they have big operations in the US. They're based in Vancouver. And if you have simply bought and held that company in the last 16 years from we first invested,”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“But as I say, everyone's doing that. They don't even know they're doing it when they stick a simple price earnings multiple on current earnings. And we just want to make it explicit and force ourselves to think about all of the different drivers of the business.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Well, it's interesting, right? Because if you think about what an investor does, they're even just sticking a price earnings multiple on the current earnings, they are making a long-term forecast. And then all that we're doing in our financial models is once you get to there is no better assumption than standard assumptions, standard margins, standard growth rates at that time, then we stop. But even then, like any model, you're putting a terminal value on it. And I always say to my team, just make sure the methodology is the same as if you forecast it out on static assumptions for the next hundred years and discount it back. So I think when people say, well, how can you forecast more than five years? You can, but that's why you use a discount rate. And we use a pretty high discount rate around 9%. It's a small range. And so that means even if you're wrong in 12 years, doesn't really have a huge impact on the present value of the cash flows.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“When other investors will say it's really expensive because it's training a 25 times earnings or 30 times earnings and will say, yeah, but they're requisitive and there's a lot of amortization in the earnings number. So you have to take that out because that's a non-cash number. And then they have a lot of growth, whether it's through acquisitions or through organic growth. And the work that we do causes us to conclude It's actually pretty cheap and we want to own it. So I think it's that process of trying to be balanced deals with that valuation risk, i.e. just paying too much for a really good company.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Embrace the organic growth or the inorganic growth, the ability to create value through acquisitions. We own a lot of what I call platform companies, not roll-ups, but platform companies. And if you're not willing to consider that in the forecast, you're going to sell your shares too early. So I think at least we try to do a good job of being balanced. And recognize that some companies have a remarkable opportunity set for many years to come. And if you don't see that or aren't willing to acknowledge it in your financial model and your forecast, you're going to look at it and say, well, it's a great company, but it's really expensive and I don't want to own it. And many times we'll look at companies and when we factor in that long-term growth and the inorganic growth, the platform companies, we'll conclude that a stock is cheap.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“I'm not sure I'm willing to underwrite that assumption. And I say, we're not an insurance company. We're trying to get it right. We are trying to, if a company has big organic growth and we believe they have big organic growth, then I want to see that in the forecast. I want it to be balanced. I want to look at the end of the year and look back and say, it's okay. Some of our forecasts turned out to be maybe a bit too high. We've taken our long-term numbers down. That's okay. If I saw that we never did that, then I'd conclude we're being too conservative because one of the risks, yes, there's valuation risk in terms of paying too high a price for an investment and owning a great company and then looking at it 10 years later and saying, wow, they've really done well. And the share price is the same price because of the price you paid at the beginning. But there's equally a risk that you didn't recognize.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, our approach, that second step where we, so we found a company, we think it's our kind of company, then the problem is you don't know if it's cheap or not. In our view, you can't look at a PE multiple. There are so many accounting irregularities, whether it's IFRS or U.S. GAAP. And so you need to do a lot of work. You need to build a financial model because it also forces you to explicitly think about all the assumptions. And it creates a lot of back and forth and dialogue with management of the company over time. And one of the key differentiators, back to that idea of a different kind of value investing in that process, and this is one of the things that I'm frankly constantly doing with the people on the investment team, is trying to make sure they don't, they're not conservative. Last year, a term crept into the investment team. It was something like, you know, underwrite. Well, I'm.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“That there were only two investments that we lost money on. And the aggregate amount was really quite small. In other words, it had an immaterial impact. If we hadn't had them, you almost wouldn't have noticed because it just didn't have an impact on the aggregate return. So I think as you hear, the first rule of investment is don't lose money. And the second rule is the same as the first. So, yeah, I think that's part of the approach, but it's not like we're not trying to be timid. And I'll talk about that in the second step when we talk about our valuation process. So it's just the reality that we have. And it isn't like we're afraid of losing money. We fully expect to in some investments to make the investment and not get it right and to lose money.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT
“And the five happens to line up with a different 85 number, but it's true that's shortening the time period and saying, not in the last 25 years since we started, but just looking at sense of credit crisis and saying in that period we've owned 87 or 85 companies. And then, of course, 30 today. And you're right. jumped out at me and we were asked to do this work by some large US groups investors where did the returns come from? And because I try to explain to people we don't hit home runs. We're the group that we're trying to hit singles. We're sacrifice flies. We're bunting to get on. We'll even let ourselves get hit by a pitch to get on base. We're trying to manufacture runs. And when we get to the last steps of our investment process, I think that will make it clear. But I was frankly surprised looking back to see.”
2023-12-08 · We Study Billionaires · TIP592: Outperforming the Market since 1998 w/ Andrew Brenton · IDENTIFIED FROM THE TRANSCRIPT