Uncertainty always exists...

When young European entrepreneurs are expanding profit making businesses, they pay litte attention to whether a war in Libya will affect the value of their company.

And quite rightly so, in our opinion.

Their principal concern is having access to capital, using that capital to generate a return greater than the cost of the capital, and using the surplus cash flow to meet liabilities and re invest in the company to generate further profits whilst the return on capital is greater than its cost.

It is a shame the financial securities of publically traded companies are not priced in the same way.

Actually, we try and make a business out of this fact: as long as this occurs, the longer we can work. Long live the short term orientated "macro market timer" who wishes to make "easy profits" from trading the market on contemporary news or the current quarters business developments.

We take the approach of viewing a companies financial securities as if we were the owner of the business: How can I grow my business (investment, in our case) so that over the entire business cycle the company can develop in an optimal manner. If we can find good companies with good management who ask this question everyday, and the market structure is positive, we would shy away from obscene portfolio diversification for diversifications sake and simply hold a few companies in our portfolio.

The reality is these companies are hard to find, and indeed, very few exist. This will not stop us, of course, from looking....

This rather long introduction we feel is necessary to cement home our approach to investing (indeed, life in general). It is in times that the world seems more uncertain that you must most remember the above mentioned concepts. Do you really think life was less uncertain yesterday? We don´t think so. You just had the illusion it was. This may be due to media influence or a lack of experience, which allows one to temporarily believe that event is predictable. Just as when you flip three coins in a row and you correctly guess all three outcomes you start to feel you may have a special ability to judge how a coin will drop; on the fourth attempt you are reminded that it was an illusion, you had no special gift.

In life, as in investing, one must continuously remain humble. We feel it helps us make profits: indeed, we feel this is a strong competitive advantage for us. Investing is as much about the stomach as the head, and when one continuously judges risk as being there, as uncertainty existing, one is better able to spot what is cheap or expensive, and hence act decisively when one must.