Between 2001 and 2013, a dollar invested with Nicholas Sleep and Qais Zakaria has grown to $10.10 while a dollar invested in the MSCI World index net of fees has grown to $3.60.
Nicholas said they don’t deserve the real credit for these amazing results because all they did was ride the wave of companies like Amazon, Berkshire Hathaway and Costco. Therefore, the employees and more importantly the CEOs of these companies deserve the real credit.
A new regulating body has made it harder to run a small investment partnership due to the UK government's response to Bernie Madoff. The new regulation treats Nomad as a leveraged, long/short hedge fund that constantly trades complex securities even though it isn’t anything like this. Nicholas suggests taxing short-term investing to change investment behavior for the better instead of overregulation.
Nomad sold their Zimbabwe investments for between 3 and 8 times more than they paid for them. They owned a cement company, brewery and construction/engineering firm because the economy was so bad there that industrial assets with monopoly or near monopoly operations could be bought for less than what it cost to build the assets. Even after the large gains, Nicholas says he wouldn’t rush to do it again because of the stress and because compounding businesses (Costco, Amazon, Berkshire) are better investments.
Barry Schwartz wrote a psychology book about the paradox of choice.
Western societies tend to believe that choice is a good thing so the more choices the better but having too many choices isn’t good for our minds. Barry Schwartz found no correlation with increased happiness and too many choices.
Nicholas mentions the incredibly large choices of companies one can buy in the stock market and all the different combinations of profit and loss possibilities that could occur. It creates the possible anxiety of worrying that there will always be someone who did better.
He then mentions a Ferrari 250 GTO (which he writes about in a previous shareholder letter) that was just sold for $52 million, resulting in an annual return of over 20% for 50 years and jokingly compares it to Nomad's returns that have been below 20% per year but have beat their relative benchmark, the MSCI World Index, by 12% after fees.
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