This point is about buying and selling stakes in companies as well as position sizing. Thus it relates primarily to our decision-making process.
We deal with this aspect of value investing as follows:
- Spending significant time and effort on understanding and quantifying risk - knowing that there will always be negative surprises
- A hurdle rate of 30% p.a. for the expected IRR of new investments and a corresponding discount from intrinsic value
- Mental discipline to follow our analysis, both individually and as a group.
When we tackle these decisions we spend a lot of time in meetings exchanging different views as this helps to bring out all risks and contributes to counterbalancing mental biases.
As an associate you participate in these meetings on a regular basis to develop the required mental discipline over time.
