Thread by @MnkeDaniel

Nick Sleep’s Investing Approach based on his Nomad Letters from 2001-2014

13 Years of Nick Sleep’s Investment Philosophy summarized in 13 Tweets.

Here we Go 👇🏼

1. Long-Term Focus

Wall Street means noise. Quarterly estimates are the primary focus of most investors.

To succeed in investing, you need to ignore that noise.

Long-term investors focus on the destination, not the latest earnings report.

2. Patience

Investing requires patience.

Sometimes opportunities are scarce. It’s better not to invest than to lower your standards.

Agreeing with Seth Klarman, being always invested is not important to Nick Sleep.

3. Focus on the Business

Keeping a long-term focus also requires you to look at the individual business, not macroeconomics.

Like Howard Marks, Nick Sleep cares about the market's sentiment (Euphoria or Depression) , but investment decisions are not dependent on that.

What Nick Sleep looks for in a business?

- Price

We’ll see a change of opinions here later, but in his early investing career, Sleep focused on companies that he could buy for $0.50 on the $1.

- Moats

Every Investment needs a competitive advantage of some kind.

- Owner Oriented Managements

Managements, preferably founder-led, that focus on shareholder's long-term wealth.

- Efficiency

Is the business run efficient? Are there parts of the company that are more of a burden?

4. Investing Rules

Nick Sleep never uses leverage, shorts, or financial derivatives.

No investment is made without a thorough analysis, Fear of Missing Out never influences decisions.

Every investment has to offer a Margin of Safety.

5. Never Stop Learning / Evolving

Nick Sleep used to buy businesses for $0,50 on the dollar.
The classic cigar butt approach.

That changed over the years. He now focuses on Spawners.

Companies that operate in multiple businesses.

One business is the primary source of revenue and earnings.

Simultaneously, it invests in a number of small operations.
These operations are long shots.

Most of them will fail, but if one succeeds, the potential is huge.

Great investments offer those long shots for free.

You only pay for the primary business. Wall Street and investors ignore the small operations.

If you want to read more on Spawners, this might be of interest.

Summary:

- Ignore noise and focus on the long-term.

- Be patient; long-term value creation takes time.

- Invest in Spawner where you get the Upside Potential for free.

- Do not gamble with leverage, shorts, or derivatives.

Thanks for reading. I hope you learned something new today.

If you enjoyed this little Deep Dive into Nick Sleep’s investing approach, I would appreciate your support by

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