As I reflect on my experiences as a parent, I’m reminded of the valuable lessons my eight-year-old daughter, Alina, has taught me. Her innocence and curiosity often lead to profound insights that resonate far beyond childhood. One such moment occurred when she was creating a necklace for a friend. With meticulous care, she selected each bead, crafting a pattern that she believed was perfect. However, halfway through, she realized she had missed a few crucial beads, and her disappointment was palpable.
In that instant, I was struck by the parallels between Alina’s necklace and the world of investing. Just as she focused on the individual beads, carefully selecting each one to create something meaningful, we as investors must concentrate on the fundamental components that drive value. It’s easy to get distracted by the noise of macroeconomic debates, political shifts, or market trends, but it’s the attention to detail that truly matters.
At Oakmark, we believe that true value is built detail by detail. We focus on the key components that will have a direct, day-to-day impact on our investments, rather than trying to predict political outcomes or macroeconomic trends. We assess the management teams that lead the companies we invest in, seeking strong leaders who can deliver consistent results driven by long-term strategic vision.
We also delve into the fundamentals of each business, understanding that company cash flows, returns on projects, and individual management teams generate consistent, significant value growth. By making careful, deliberate decisions based on these fundamentals, we can create something meaningful and distinctive, just like Alina’s necklace.
In today’s uncertain environment, with the looming U.S. election and escalating crises in the Middle East and Asia, it’s natural to wonder how political outcomes will shape the market. However, trying to predict how various results will impact long-term business value is largely a guessing game. Instead, we focus on the key details that drive value, recognizing that these fundamentals will ultimately create the value in the whole.
By concentrating on fundamentals and maintaining a margin of safety, we seek to manage risk effectively, avoiding the pitfalls of chasing lower volatility or reacting to market sentiment. We believe that true value is built detail by detail, and it’s the attention to these details that sets us apart and enables us to create value, one bead – or one investment – at a time.
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