Actual investors think in decades. Not quarters.

We have no idea what stock markets will do in the next six months. Prices are blown around by shifting sentiment and over-reactions to news flow as speculators try to anticipate the actions of others. We have limited insight into such human behaviour so we don’t spend time trying to anticipate it, either in the form of behavioural analysis or stock price charts.

What we can do with far more confidence is identify changes that we think are inevitable on a decade-long horizon. We use our network of relationships with academics, scientists and entrepreneurs to gain insights into what is becoming possible, thanks to technological advancements or business model changes. This allows us to focus our company research on the areas that we believe have the greatest potential for outsize returns.

Thinking decades ahead means accepting uncertainty. We know that new approaches to healthcare are both necessary and possible. We know that artificial intelligence will revolutionise business processes and potentially even complex decision-making. We know that financial systems are antiquated and expensive and that they will be replaced by far more efficient digital approaches. Each of these things will happen, but precisely how they will unfold is unknowable.

Embracing uncertainty, but paying attention to detail

Investing for decades is difficult, but when things turn out well, we can make 10, 20 or even 100 times our initial investment. This crucially gives us the scope to make mistakes – in the long term the winners in our portfolios can create far more returns than the losses from those that don’t work out. Thinking in decades allows us to invest early in growth opportunities and accept the uncertainty that comes with it.

Long-termism is not an excuse for inattention to detail. Even the biggest opportunities can be missed through poor business planning and execution. Pricing power and competitive advantage are crucial to financial strength and long-term growth. Every investment we make is based on rigorous analysis of the individual company and our view of whether it will be able to capitalise on the opportunity that we have identified. Big opportunities attract a lot of capital, and profitability can be hard to achieve. So, though we think in decades, we spend a lot of time identifying whether or not there’s a credible pathway to success. If there is, and the firm is executing well on that pathway, we are likely to stay investors for a long period.

A partnership for the long term

Of course, we won’t own every company for decades. Sometimes the market catches up with our view and the share price rises dramatically. Sometimes we find even more compelling ideas and choose to recycle capital into them. Sometimes things don’t work out as hoped and anticipated. Though our focus is always on company fundamentals, it’s important to be pragmatic and recognise when our view no longer differs from that of our peers.

We try to be completely clear with our clients that this is our approach. It’s crucial that those who entrust their money to us are on the same journey. Every good fund has periods when things aren’t going well, and investors consistently reduce their returns by selling after poor periods and buying after strong periods. This can be particularly pronounced for long-term growth portfolios. To achieve good outcomes, we welcome investors who share our long horizons.