STREET DOGS

From Ruane, Cunniff & Goldfarb letter to Sequoia shareholders:

In this environment, it is more important than ever to remain mindful of the crucial distinction between the price of a stock and the value of a business.

During periods of relative calm Benjamin Graham’s metaphorical Mr Market does a generally good job of assessing the values of individual companies. But like most people he becomes less discerning when he’s panicked, creating pockets of opportunity for investors with the equanimity to ground their judgments in facts rather than emotions.

Our aim is to exploit these opportunities where we see them, reducing holdings that Mr Market continues to view with relative optimism and increasing those where we think he has become excessively sceptical.

As we debate these shifts, we try to balance opportunism with humility. While Mr Market becomes more mistake prone when he’s nervous, he still tends to get it right much more often than he gets it wrong, and he retains a highly developed capacity for punishing complacency and stubborn thinking.

One stock does not become a better value than another simply because it declines more in value, and “cheap” valuations can turn out to be far more expensive than they appear - especially at inflection points when past patterns of behaviour can undergo permanent shifts.

In recognition of these realities, we are intently focused on revising our thesis and assumptions with as open a mind as possible. While we have no more insight than anyone else as to how events will unfold over the coming months our goal is to own an assemblage of outstanding businesses that can both survive and thrive in any scenario we can imagine. If the facts of our assessments of them change, we will not hesitate to change our minds, even if it means crystallising losses.