In short, Long Lake Capital Management, LLC "Long Lake" aims to balance the risk of losing money with the risk of missing out on capital appreciation. We utilize a value-based investment process focused on generating superior long-term results. We work to accomplish this via discipline, patience, and the application of a longer time horizon. We aim to avoid short-term performance chasing that can often work against investors.
Long Lake believes superior investment results can be achieved by viewing stocks as fractional ownership stakes in the underlying business. This ownership mentality allows Long Lake to maintain its focus on the company’s long-term outlook, and avoids the trading/renting dynamic that can lead to overreaction to short-term developments.
The following diagram summarizes four key areas of Long Lake's investment methodology.
Long Lake believes superior investment results can be achieved by viewing stocks as fractional ownership stakes in the underlying business. This ownership mentality allows Long Lake to maintain its focus on the company’s long-term outlook, and avoids the trading/renting dynamic that can lead to overreaction to short-term developments.
The following diagram summarizes four key areas of Long Lake's investment methodology.
While we believe individual stocks gravitate toward their intrinsic value over time, reflecting fundamental developments involving the underlying business, they periodically trade at significant deviations from intrinsic value. Stock prices can fluctuate more than the true underlying value of a company for a variety of reasons, including:
We seek to be opportunistic when such deviations exist by taking positions in companies we believe are significantly misvalued by the market. Instead of going with the herd and seeking the comfort that comes with being in the consensus, Long Lake will look for a variant viewpoint to that expressed by the market. This variant viewpoint, based on our assessment of the business’s long-term outlook, is key in identifying potential investment opportunities.
Long Lake emphasizes risk as well as return with a keen focus on preservation of capital. We believe the risk of a particular investment is always relative to the price paid. For example, if a company’s stock declines in price while its underlying business prospects remain unchanged, it has become less risky. A temporary downward fluctuation in price may not be a source of concern, and could be the source of opportunity.
We seek investments we believe have deviated from their intrinsic value, have a substantial margin for error, and are within our circle of competence. We have no interest in allocating capital to businesses that are overly complex or extremely difficult to understand. We typically invest in companies with the ability to generate substantial free cash flows, possessing attractive returns on capital, and a track record of sensible capital allocation.
- People tend to invest with their emotions, and are susceptible to bouts of greed/fear
- Markets are set up to encourage trading, and Wall Street incentives are aligned with increased activity and a short-term focus on results
- Investors often seek the comfort that accompanies “going with the crowd” and choose to avoid the discomfort of standing apart
We seek to be opportunistic when such deviations exist by taking positions in companies we believe are significantly misvalued by the market. Instead of going with the herd and seeking the comfort that comes with being in the consensus, Long Lake will look for a variant viewpoint to that expressed by the market. This variant viewpoint, based on our assessment of the business’s long-term outlook, is key in identifying potential investment opportunities.
Long Lake emphasizes risk as well as return with a keen focus on preservation of capital. We believe the risk of a particular investment is always relative to the price paid. For example, if a company’s stock declines in price while its underlying business prospects remain unchanged, it has become less risky. A temporary downward fluctuation in price may not be a source of concern, and could be the source of opportunity.
We seek investments we believe have deviated from their intrinsic value, have a substantial margin for error, and are within our circle of competence. We have no interest in allocating capital to businesses that are overly complex or extremely difficult to understand. We typically invest in companies with the ability to generate substantial free cash flows, possessing attractive returns on capital, and a track record of sensible capital allocation.