Learning from our investment mistakes resulted in the creation of our investment universe. The majority of our investment mistakes have been rooted in prioritising value at the expense of the Quality. What does this mean? In short, we were attracted to the cheap valuation of a business at the expense of its quality characteristics. In these instances, share price weakness can perpetuate because the company lacks the levers to turn around its fortunes.
To prevent us from repeating past mistakes we developed:
Our investment universe. We screen all listed companies in the UK and developed markets for our quality characteristics. We then analyse the qualitative factors of those businesses. The majority of the companies listed in the UK do not meet our high quality characteristics and so the universe allows us to focus our resources on the few that do.
Investment checklists. Mental models are helpful when it comes to assessing large amounts of data and can help protect us from our own inherent biases. Our check lists include key questions we ask ourselves before we invest and include our past mistakes to help prevent us repeating them.