An inside view of a $30 billion hedge fund that you might not have even heard of: Select Equity

In this thread I’ll go over the fund’s story, their investment strategy, historical returns, couple of their actual stock pitches, and the current holdings in their portfolio 👇
1/ George Loening was interested in investing at a young age and bought his first stock Mary Kay Cosmetics at the age of 12. In high school, he ran an equity market newsletter with more than 100 paying subscribers
2/ George founded Select Equity Group (SEG) in 1990 at the age of 23. His mother gave him the original $70,000 that got him started, and he further supported SEG in the early days by selling research on a small number of stocks that he knew well
3/ SEG’s research was well regarded and by 1995, 20 of the industry's largest 35 asset managers in the US were research clients! In 2000, they shut down the research business since it was no longer needed to support the asset management business
4/ So how has the asset management business done? Their original strategy from 1991 has compounded at 15.3% net returns annualized.

This means that his mother’s original $75,000 investment has turned into $5.4 million (70x+ return)!
5/ So what has SEG's investment strategy been? There are 3 parts to their investment philosophy:

1. Great Businesses
2. Rigorous Research
3. Disciplined Investing

Let's dive into each of these...
6/ SEG focuses on a small subset of great companies which they call “SEG Pedigree” businesses.

They have a very useful framework for thinking about great businesses which they call the 5 Ps
1. Pie
2. Piece of the Pie
3. Pricing Power
4. Predictability
5. People
7/ SEG is unique for their research process, which isn’t surprising given how they got their start by selling research to other asset management firms. Some unique aspects:
1. Don’t read sell-side research
2. Don’t talk to other funds
3. Internal team of investigative journalists
8/ Here is an overview of their investment process
9/ And as promised, a few of their stock pitches! The first is Compass Group $CPG
10/ ASML Holding $ASML
11/Edendred $EDEN
12/ Here are SEG's latest reported holdings. You can easily track the holdings of 1000s of funds on @theTIKR. We go beyond just 13Fs and also track shareholder reports, UK registrars, Japanese filings, etc. to give you a much more holistic, global view of an investor’s holdings
13/ Definitely check out TIKR.com We built TIKR to empower individuals to make better investing decisions. We felt that it was unfair how large institutions could afford to pay $20k+/year for a Bloomberg Terminal while others were stuck using Yahoo Finance
14/ TIKR is a powerful investment research platform with coverage of 100,000+ stocks globally. We have detailed financials, estimates, valuation metrics, transcripts, filings, ownership, news, screener, and more!
End/ If you found this thread helpful, please do like and retweet the first tweet to help others find it.

I’ll also be putting out more threads on investing and entrepreneurship, so be sure to follow me @skhetpal
Side note: Really impressed by the quality of the research that many of you put out here on FinTwit. Huge thank you to y'all and hopefully this story about Select Equity is inspiring! @borrowed_ideas @InvestmentTalkk @StockJabber @Finding_Moats
@scuttleblurb & so many more

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More from @skhetpal

11 Oct
Curious to learn about the inner workings of some of the most secretive private equity, venture capital, and hedge funds?

A quick thread on one interesting method to get an inside view and a few examples:
1/ You can sometimes find helpful content on even the most secretive funds thanks to LP due diligence reports. Many of the cities’ retirement systems publish their diligence on funds publicly in an investment memo
2/ For example, some info on The Children’s Investment Fund (TCI). TCI had compounded at an annualized return of 18.2% since inception vs. 7.0% for the MSCI World Index as of the date of the memo. A nice summary of their investment strategy below too psers.pa.gov/About/Board/Re…
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One helpful way to structure your thinking when investing:
1/ Very early in my career, I had an embarrassing meeting at work where I was cold called to give my opinion on a stock that one of the analysts was pitching. My face turned red and I rambled on and on about all of the pros and cons that I could think of...
2/ After the meeting, the analyst who was pitching pulled me aside, politely thanked me for sharing my thoughts, but then told me that I needed to learn how to structure my thinking
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Been lurking on Twitter for ~5 years and thought it was time to finally join the amazing community here!

Previously worked at Aravt Global with @yliownyc . Now I’m building @theTIKR with my friend and co-founder Bobby.

My quick background & what I plan to tweet about below:
1/ First of all, very grateful for this community. Have learned a ton from @honam, @Sanjay__Bakshi, @DennisHong17, @iancassel, @borrowed_ideas, @JohnHuber72, @HaydenCapital, @AltaFoxCapital, @joshtarasoff, @alluvialcapital, @1MainCapital, @_ram_ & so many more incredible people!
2/ Brief background. Owe everything to my parents who came to the US with not much but gave their kids a better life. Studied at Wharton, worked at Blackstone in restructuring (quickly realized distressed wasn’t for me), and then 5+ years as a senior analyst at Aravt Global (AG)
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