Over long periods of time, investment results have a high correlation with growth in the cash earnings generated by a business. This leads us to focus our efforts on growing companies that we believe are well positioned inside an existing or budding niche, allowing earnings to advance disproportionately to the amount of capital required to do so.

Our investments in Moody’s and Microsoft demonstrate the type of capital efficient growth we search for. In some instances, growth can be neatly plotted in a linear fashion. In others, strategic investments require patience but can yield similar results over time.