August 12, 2021

Doing Your Who Diligence

I spend a considerable amount of time reading and learning, often about investments. I appreciate the human nature of it; as well as finding out what makes certain businesses special, understanding how important great leadership is in each, and discovering what gives them the competitive, durable and sustainable market advantage. I’m not an expert in all of the industries where I invest, and I’m not usually involved in what happens with the operations at these companies.

In my own public equity selections, I’ve made a lot of mistakes with investments, and I’ve learned more from those mistakes than from my successes. My biggest mistake has been value traps; low quality companies that were a deep value. But I also did not do particularly well with high quality companies that had little to no growth. I like to invest in businesses that have high quality and significant growth at reasonable valuations.

I am not passionate about golf, sports, hunting or fishing, but I am about investing. Even if you’re a passive investor, and not an expert in what you’re investing in, if you invest with The Right Who you can significantly improve your outcomes. I once shared with my dear friend Stewart Kohl, Co-CEO of Riverside, that I wasn’t very good at due diligence. What he shared with me is that what I am good at is ‘Who Diligence’. You can do all the due diligence that you want, but the Who diligence is the most important.

When investing with the right investment partner, or Who, I have three primary criteria.

  1. It’s always about the Who. Are they trustworthy? Do they have impeccable integrity?
  2. Do they have the knowledge, experience, team, processes, contacts and resources?
  3. Do they have an outstanding track record of consistent outstanding performance?

This brings us to the question of; how do you find the right Who? How do you find an investment fund manager with high integrity who has an alignment of interest that will deliver results? When partnering with the right Who, I look for the three Ps: PeopleProcess and Performance. Most people don’t spend much time studying investments, which is why enlisting the right experienced fund manager, who meets these three criteria, is essential. Partnering with the right Who and doing your Who diligence is a good start in formulating a successful passive investment strategy.

In future articles I will share our various investment strategies (banking strategy, wide moat, durable growth, and income growth capital appreciation), the categories, the investment criteria and the investment processes we use in picking each of our public equities.

If the Who isn’t right, the what doesn’t matter.

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