About Titanium Strategy
1. We look to the underlying business to ascertain its value, not the stock price. Wall Street obsesses over short-to-medium-term price oscillations. Momentum traders seek stocks at the upper end of a 52-week range, while contrarians will only buy at the lower end of said range. Academics desire low price volatility because they use beta (a security’s price volatility in relation to the general market) as a risk gauge. Whichever their perspective, the key factor in their buy-sell decision is Mr. Market’s recent mood swings. BlackBird, in contrast, does not heed price fluctuations. Instead, we focus exclusively on the underlying business, and we demand a significant discount to intrinsic value.
2. We hold a concentrated portfolio. Fund managers have come to believe that the more widely you spread your investment capital, the lower your risk. In reality, this approach results in a diminished understanding of each position, which elevates risk! Additionally, investing capital in your fiftieth best idea instead of adding to your first is not an intelligent practice. In contrast, BlackBird is extremely selective in our acquisitions. We find owning a handful of superb businesses preferable to 100 commodity-type, mediocre businesses.
3. We take a long-term approach to investing. Here is an example to illustrate the distinction: “Headline risk” is a term often used by Wall Street analysts. Traders are concerned that headlines in the near future will adversely impact stock prices. To demonstrate what a fallacious mindset this is, let us imagine you were offered a pristine apartment complex in a safe, growing community with strict limits on new supply, providing current annual income of $25 million, all for a meager $100 million. You would work very hard to quickly consummate such a transaction. Certainly, one would need to be an ignoramus to turn down the offer simply because there may be a critical headline next week! Why, then, should businesses be any different? Maintaining a long-term view enables us to concentrate on the underlying business without being distracted by the ample noise found on Wall Street.
These three points can be summarized as a businesslike approach. As Ben Graham writes in Chapter 20 of the Intelligent Investor, “Investing is most intelligent when it is most businesslike.” That is at the very foundation of BlackBird. We will never waiver.