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20% Growth Per Annum over 20 Years+

April 21, 2024
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Turtle Creek Asset Management has managed to compound their investments at 20% per year since 1998. A $1000 have turned into $68,846.

Interestingly, the fund is relatively unknown and one of the co-founders, Andrew Brenton, is definitely not a household name like Warren Buffett or Peter Lynch.

Yet their investment strategy is way easier to implement than Buffett and Lynch, in a practical sense. The problem with trying to follow Buffett and Lynch is that there's thousands of quotes floating around.

Buffett normally preaches a buy and hold strategy eventhough he use to buy very cheap companies and sell them for a profit known as cigar butt investing. If he had a lot less money to work with, he probably would have still followed such an approach.

Lynch advocates buying companies you understand or companies which have a good product or companies that sell products you use on a daily basis. However, when he managed the Fidelity Magellan Fund, he use to own a lot of companies (more than a 1000 stocks at the same time). It's quite difficult to understand so many companies.

Turtle Creek's strategy is pretty simple:

1. Buy Mid-Sized Quality Companies
2. Invest in 20-30 Companies
3. Value Stocks by taking a Business Owner approach
4. Use a constant discount rate when valuing a company 
5. Buy more stocks when the price drops and trim/sell when prices increase

Their investing strategy mantra is "a different kind of value investing" which, I believe, gives them an edge over the rest. They are willing to hold companies over the long term by trimming/buying/selling as the market gyrates. In the YouTube video, they give an example of an company that would've generated a return of 22% for investors per year by following a buy and hold strategy. However, using their approach, they improved the 22% to 30% a year by trimming when the stock became expensive and buying again when the stock became cheap.

On their website, they have a document showing a similar example for the company Open Text.

https://www.turtlecreek.ca/wp-content/uploads/2020/09/TCAM-Thought-Piece-Investment-Edges-A-Case-Study-June-2013.pdf

I also suggest reading their thought pieces as I found them extremely valuable.

https://www.turtlecreek.ca/the-tao-of-the-turtle/

The only thing I would mention that would be difficult to implement in terms of their approach, is to speak with the management of companies. This is part of their investment strategy, assessing management via in-person meetings. As a retail investor, this would be unrealistic to do especially with large companies. However, the general strategy, is still possible to implement by everyday investors and, on top of this, they've not really changed their strategy since starting in 1998.
 


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