Our Approach

We believe in transparency, and it matters most at the beginning of a relationship. We therefore send this letter to prospective investors before we engage in a deeper conversation, so that anyone considering Tsai Capital can assess how we think and how we invest before committing capital.

Our only objectives are the preservation and long-term growth of capital. We pursue them by owning a relatively small number of high-quality growth businesses, identified through the Tsai Q-System™ and purchased only when we believe the market offers a meaningful discount to our estimate of intrinsic value.

Historically, the S&P 500 Index has outperformed the great majority of money managers and most other indices. We believe this index is a suitable alternative to Tsai Capital, and we therefore propose it as a long-term benchmark for assessing our results.

One point requires emphasis. Because our portfolios are deliberately differentiated, our results over shorter periods may diverge substantially from that benchmark, in either direction. We ask investors to judge our performance over periods of five years or more—the same period over which we judge the businesses we own. Anything shorter is far too brief a time frame to evaluate a long-term compounding process.

Finally, let us be clear that volatility is not the same as risk. Volatility is price fluctuation; risk is the potential for permanent loss of capital. Unlike many others, we regard volatility as a friend, because it occasionally allows us to buy shares in high-quality growth businesses at large discounts to intrinsic value. We focus on preserving capital so that we are in a strong position to act when those rare opportunities arise. Over time, this patient and disciplined approach allows compounding to do its work.

Important Disclosures

Past performance is no indication or guarantee of future performance and no representation or guarantee is being made as to the future investment performance of Tsai Capital’s separately managed accounts or any entity.

References herein to Tsai Capital’s efforts to minimize losses and seek a margin of safety should not be construed to imply an absence of risk in any investment. All investments carry risk, including the risk of loss of investment principal. Additionally, short-term market volatility may present increased risks for investors who have shorter investment horizons due to impending or current liquidity needs.