“If you want to do truly extraordinary things in your life, you need to have a very high win rate. Genghis Khan only fought unfair fights… For most of the fights that he picked, his people weren't even within eyesight of the people they were conquering. Their bows literally had 30 to 50 yards more length to them. They didn't fight hand-to-hand… His number one general died on a farm at the age of seventy-three after conquering Western Europe… He didn't lose a single battle… The only way you do that with capital is you exclusively focus on unfair fights.”
- Yen Liow, Aravt Global
Fielder recently hosted a discussion with Yen Liow, founder and portfolio manager of Aravt Global, a New York based hedge fund. (The name Aravt refers to Genghis Khan’s army units.) Yen shared his strategy of investing in what he calls “compounders” or “horses”, which are great businesses led by great people that have long runways of growth ahead of them.
One thing that Yen said resonated in particular . . .
“I think this is by far the most important financial concept -- frankly, life concept -- that underpins the entire strategy. Which is we're really all here to compound our wealth, compound our knowledge, compound our friendships, compound our life experience. Compounding is the core essence of investing. It's by far the most powerful law. And if you get on the right side of it, you'll live a very, very good life. And if you live on the wrong side of it, it's not so pretty.”
You can watch our full discussion here:
Highlights from the Call:
Game selection is critical. Choose your game wisely. You want a game with high prediction, high performance outcomes. For him, it’s investing in compounders, companies that can compound capital at exceptionally high rates over long periods of time (“horses”).
Horses are rare. Only 3% of stocks have been able to compound earnings at 20% annually for a decade or longer.
Monopolies and oligopolies improve your odds. “You can sleep well at night.” He shares how he screens for them.
Lifecycle stage matters. There are multiple stages to a company's lifecycle. Only the replication stage is a high prediction environment. Yen explains what this stage is and why it matters.
Some horses become mules. “There are plenty of great businesses that are poorly run that don't scale.”
Price follows earnings. Earnings and dividends drive the vast majority of long-term returns. Over time, earnings power and price of the stock converge. (Which lowers the risk/benefit of buying a stock at a high/low valuation.)
Growth is not always good. It’s the business model and competitive barriers that matter. Many growth stocks he would not touch. Think the dot com bust.
People matter. “We want to align with very strong jockeys that know what they're doing -- that are hungry, capable, aligned and ethical.”
“You don't need to do crazy things. You need to be able to do consistent things for long periods of time. And that's what creates tremendous wealth.”
To learn more, watch the full discussion by clicking above.
Game selection is more critical than ever. The Federal Reserve and Washington are changing the rules to the game that investors have been used to playing. Reach out if you’d like our help in rethinking your own game plan.
Yours in the Field,
Frank Byrd, CFA Steve Korn, CFA
DISCLAIMER RE ARAVT GLOBAL: The above information was prepared in good faith by Fielder for general education purposes. Nothing herein constitutes an offer to sell or the solicitation of an offer to purchase any fund or account managed by Aravt Global. Any such offer or solicitation may be made only by means of the delivery of a confidential offering memorandum or other offering materials (the “Offering Documents”), which you can request directly from Aravt Global at (212) 599-8218.
DISCLAIMER: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.