* Track Record 2H 2012 - 2016 Benchmark Acacia VMx: IPC

* Track Record 2H 2012 - 2016 Benchmark Acacia VMx: IPC
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This website is a summary of our investment philosophy.

L O N G  T E R M
I N V E S T M E N T S

Any investment implies the exchange of an asset between two players with different circumstances and expectations regarding its future performance, cost of opportunity, and risk-return ratio. For investors to obtain higher returns consistently over time, they must have some competitive advantage over their counterparts.

Advantages that an investor
aspires to get:

Operating Advantages

Active Investments (financial restructuring, synergy generation, etc.)

Talent Advantages

Passive Investments (access to information, execution, knowledge, investment philosophy-discipline, psychological framework etc...)

Technological advances and regulatory improvements in financial markets:

i) Have turned information into a commodity to which everyone has, practically, the same access.

ii) Have spread the automation of execution relying far less on human talent, and more on machines.

However, the automation of investments has opened a window of opportunity for investors with a long-term philosophy.

We believe it is very important to begin our communication with any limited partner based on an objective analysis of the advantages we can obtain in a highly competitive world with an extraordinary supply of talent available.

LONG TERM
INVESTMENTS

Short-termism is currently
the norm in the market:

The most traded asset worldwide in the stock exchanges is the S&P 500 ETF (SPDR), which has an approximate turnover of 7,000%. Which means that:

Each title of the SPDR changes ownership 70 times per year

Or that every 5 days it has changed all of its shareholders.

*In the US market, after WWII, the average holdingperiod in a company was 4 years.

In 2000, it was 8 months
In 2008, it was 2 months
And in 2011, it was only 22 SECONDS.
Scott Patterson: Dark Pools."The rise of the Machine Traders and the Rigging of the US Stock Market



A company needs longer-term investors or partners.

Several market players, especially mutual funds, should take this role of long-term investor. However, according to Morningstar the average holding period of these funds is less than one year.






The rise of passive and indexed funds, ETFs, and high-frequency trading has led the largest share-holders of publicly traded companies to be software programs.

This can only play in favor of investors focused on looking for well positioned companies to generate value, and who are willing to keep an investment throughout the development of the business.





Our idea of investing in the long term doesn’t imply a commitment to an asset just because we bought it.

An important part of our job is:

  • To keep revising our initial thesis
  • Surveying changes in the industries and/or business into which we invest
  • And doing a continuous analysis of the opportunity cost of holding an investment

    In sum, the decisions to buy or sell must be based on the constant revision of our investment thesis, and of the difference between the market value and the intrinsic value.

    C O M P O U N D
    I N T E R E S T

    Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn’t, pays it.

    - Albert Einstein

    We firmly believe that the only way to preserve and increase wealth consistently is through long-term investments that will make it possible to profit from the effect of the compound interest.

    SPECIFIC
    KNOWLEDGE

    A deeper investment focus drives the accumulation of a knowledge-based talent advantage.

    For instance:

    • Specific geographic area (Mexican companies)
    • Assets (consumer goods companies)

    Acacia VMx focuses only on companies trading in the Mexican Stock Exchange.

    C O M P A N I E S

    Investing in companies has several advantages when compared to other assets:

    They generate cash flow, which makes it possible to calculate their economic value.

    They represent an efficient way to benefit from the power of compound interest (developed previously); the explanation is simple: contrary to assets like commodities and others, companies generate a return on their activities, and the earnings from these activities can be reinvested at the same rate of return throughout the development of the business.

    This generates value for shareholders, compounded during the investment period.

    Therefore, we must not be surprised by the higher historical yields registered by the stock markets compared to other types of assets.

    STOCK
    MARKET

    Price variations in stock markets open windows of opportunity that allow us to find assets that are often sold at a discount to the intrinsic value of their underlying business. Buying good assets at a discount is, in our opinion, the best way to minimize risk and maximize return.

    Many investors confuse action with adding value; we believe that, in many situations, we add more value by avoiding overtrading. Some good reasons (broadly omitted) for inactivity are: high valuations, transaction costs, taxes, time required to develop the business, patience, and self-control during fluctuations and the fact that good ideas are scarce, by definition.



    We follow a strategy of patient opportunism where we maintain an intensive follow-up on the companies with businesses we like, and wait for an entry opportunity compared to the asset’s intrinsic value.

    RISK

    We define risk as: the probability of a permanent loss of capital.

    Contrary to the financial academia and the overall market, we do not consider volatility as a reliable parameter to gauge risk; on the contrary, we believe that the greatest advantage of stock market investments is the price volatility of companies with good businesses and steady cash flow.