Lugarno Bluechips
Warren Buffett and Charlie Munger have said time and again, investing is simple but it isn’t easy.
Lugarno Bluechips is a reliable stock portfolio, with a structure that attempts to solve for the more difficult parts of investing.
Lugarno Bluechips has three primary characteristics:
- The world’s great companies
- Bought at a reasonable price
- Held indefinitely
Great businesses generate reliable profits and have quality reinvestment options to grow those profits over time. Businesses who don’t have quality reinvestment options can also be great so long as they make the rational decision to return spare capital to shareholders.
Great business led by great leaders are very effective compounding engines to build peoples wealth. Half the difficulty is choosing the right business to purchase, the other half is holding on!
Lugarno Bluechips sits somewhere between an index fund and a managed fund. The strategy enjoys the low costs and simplicity of an ETF but with transparency and tax efficiency. Bluechip investors personally own shares in a collection of companies they understand. This familiarity builds the important confidence required to hold through all cycles.
We try to think like business owners. The portfolio has fewer holdings, it rarely changes, and our time horizon is long-term. As long as we don’t pay a silly price, we are confident we will do well overtime.
Lugarno Bluechips is designed to defeat investors worst instincts and biases via its sensibility, its simplicity, its transparency, and our regular communication to our fellow investors.
What we are looking for:
- Demonstrated record of strong profitability and large returns on capital.
- Strong balance sheet.
- A leadership team with demonstrated talent, integrity, and shareholder friendly investment decisions.
- An identifiable moat protecting their competitive advantage.
- Track record of disciplined capital allocation.
Please contact Simon Harradence for more information.
Network Effects
Counter positioning
Switching costs
Branding
Cornered Resource
Process power
Management & culture
Scale economies
As the user base grows,
the product’s value increases.
A business adopts a new, superior business model that incumbents cannot mimic due to the anticipated cannibalization of their existing business.
One-time expenses or inconveniences a customer would have to incur to move away or switch to a competitor.
Where extreme brand loyalty and legacy allow a company to enjoy enhanced returns.
Preferential access or ownership of a coveted resource that independently enhances value.
A business that’s systems and skill enables lower costs, or a superior product, that can only be matched by extended commitment.
Sometimes a company’s leadership and the culture they permeate will be so exceptional they are a competitive advantage. Its rare and most commonly identified in founder-led businesses.
A business that has grown to such a scale that its costs per unit decline as volume increases. Significant investments are required, but this widens the moat over time.
What makes a moat? Its the unique feature of a business that gives it an advantage (and higher returns) against its peers. We classify moats into 8 different categories (shown above). Seven of are credited to Hamilton Helmers’s 7 Powers.
Our favourite holding period is forever.
— Warren Buffet