Steven Romick’s Q4 Letter

Our success, such as it may be, is dictated primarily by two factors: 1) A rigorous and replicable process by which we analyze businesses and assets that offer what we believe are superior prospective returns as well as the safety cushion of a discounted price; and 2) Patience. Our willingness to wait for opportunity -- and when found, to wait for that investment to succeed -- means that our trading department sometimes gets a tad bored, and some clients get anxious. We are neither. We occupy ourselves by continuing to learn new businesses that may or may not end up in the portfolio. We know there will be more bad news, and with it more volatility and investment opportunity, but we never know when. That means our results will lag at times, as they have in the past and will in the future. But it also means we will lead at other times, and we’ve done that in the past and hope to do so in the future. We are in the arbitrage business, but not in the traditional merger-arbitrage sense of the term. We engage in time arbitrage. We tend to buy early, average down, and then wait until our thesis is proven correct, and then we exit. This can happen quickly, or it may take years. While a quick success is easy for investors to digest, one that takes longer can be tough for clients to stomach.